The Steps to Establishing a Private Limited Company in Indonesia

Starting a private limited company in Indonesia is a promising and strategic decision. However, it requires a thorough understanding of legal frameworks, regulatory requirements, and corporate structures to navigate the complex business setup process in this dynamic Southeast Asian nation.

A Closer Look at Private Limited Companies

Both locals and foreigners commonly utilize Indonesian private limited companies to conduct business there. They serve as separate legal entities, independent from their shareholders and directors, ensuring the protection of personal assets. 

Depending on ownership, Indonesia has two types of private limited companies.

Foreign Company (PT PMA)

A Foreign Limited Liability Company, commonly referred to as PT Penanaman Modal Asing (PT PMA), is a favored choice for foreign investors looking to invest in Indonesia. Moreover, PT PMA is a legal entity that allows foreign individuals or businesses to own shares and engage in commercial activities in Indonesia. 

It is similar to a limited liability company (LLC) in the Western context and can be fully or partially foreign-owned, subject to certain restrictions in specific sectors. Additionally, investors from ASEAN member states have higher foreign share ownership percentages in specific business fields.

Local Company (PT)

A local Indonesian Limited Liability Company (PT) has complete Indonesian ownership without restrictions on business activities. Compared to a foreign-owned limited company, it has significantly lower paid-up capital requirements.

READ MORE:

• How To Meet PT PMA Minimum Capital Requirements In Indonesia
• How To Register A Foreign-Owned Company As PT PMA In Indonesia
• A Complete Guide For Registering A Company As Foreigners

Private and Public Limited Companies: A Comparison

The table below illustrates the differences between a Public Ltd and a Private Ltd.

Aspects	Private Ltd	Public Ltd
Number of Shareholders	Require a minimum of two shareholders with a minimum paid-up capital of Rp50 million.	The minimum number of shareholders is 300, and the minimum paid-up capital is IDR 3 billion, or an amount agreed upon by all shareholders.
Location of Annual General Meeting of Shareholders (AGM)	They can conduct AGMs at their registered office or where they operate their business. The regulations regarding the location of AGMs are further stipulated in Article 76 of the Company Law.	Can hold AGMs in three areas: where the company conducts operational activities, its registered office, or the stock exchange where the company registers its shares.
Notice for AGM	Must provide notice at least 14 days before the AGM date, which can be done through registered mail or newspaper advertisements.	As per Article 83 of the Company Law, Public Ltd companies must announce the AGM in advance, with a mandatory announcement to all shareholders 14 days before the meeting. Moreover, the official notice must be issued 21 days before the AGM date and can be done through a national newspaper in Indonesian, the stock exchange website, and the company’s website in both Indonesian and at least one foreign language, typically English.
Chair of AGM	There are no specific requirements for the chair of the AGM.	Must be chaired by a member of the Board of Commissioners, predetermined by the Board. If all Commissioners are absent, the AGM of an open company can be chaired by a member of the Board of Directors or a shareholder chosen by the meeting attendees. Furthermore, the appointed shareholder to chair the meeting must be present at the AGM and designated by all participants. Additionally, open companies are obliged to submit the minutes of the meeting to the Financial Services Authority (OJK) within 30 days after the AGM.

Opening a Private Limited Company: Advantages and Disadvantages

Before establishing or joining a private limited company, it’s important to consider the advantages and disadvantages that come with it.

Advantages

• Limited Liability: Owners have restricted personal responsibility for company debts.
• Continuity: PT ensures operational continuity despite changes in ownership.
• Capital Accumulation: Easier fundraising through share sales and potential capital from an IPO.
• Professionalism and Trust: PT implies professionalism and adherence to legal regulations, instilling trust in business relationships.

Disadvantages

• Cost and Complexity: Higher establishment costs and a more complex process than other business forms.
• Ownership Division: Complex ownership structure leading to potential disagreements and loss of direct control.
• Regulation and Disclosure: Compliance with government regulations, financial reporting, and tax laws can be resource-intensive.
• Limited Flexibility: PT is subject to legal restrictions, potentially hindering quick adaptation to market changes.

Requirements to Set Up A Private Limited Company in Indonesia

Here are the requirements for establishing a limited company in Indonesia:

1. Minimum of Two Shareholders

Shareholders can be natural or juristic persons. For a local company, both must be Indonesian shareholders. In the case of a foreign company, at least one shareholder must be a foreign individual.

2. Minimum of One Director

Directors can be local or foreign individuals but must reside in Indonesia.

3. One Commissioner

A commissioner can be a local or foreign non-resident.

4. Paid-up Capital

To proceed, foreign companies must submit a total investment plan of IDR 10,000,000,000, with a payment of IDR 2,500,000,000.

How To Set Up A Private Limited Company in Indonesia

If you’re planning to set up a private limited company, there are several important steps that you’ll need to follow to ensure a smooth and successful establishment.

• Obtain principal and business licenses from the Indonesia Investment Coordinating Board (BKPM).
• Draft a Deed of Establishment, approved by a public notary, outlining shareholders, the Board of Directors, the Board of Commissioners, and the capital structure.
• Attain legal entity status for the PT PMA from the Ministry of Law and Human Rights.
• Obtain a domicile letter from the district authority in the local area if the company is outside Jakarta.
• Obtain a tax identification number (NPWP) and taxable entrepreneur confirmation (PKP).
• Acquire a business identification number and license through an online submission.
• Submit annual workforce and company welfare reports to the Ministry of Manpower.

Setup Your Company with InCorp

InCorp Indonesia (an Ascentium Company) is dedicated to simplifying the process of establishing your business in Indonesia, aiming to alleviate legal complexities and streamline the setup procedure. 

By providing comprehensive business license and company registration services, we ensure a smooth and hassle-free experience for entrepreneurs looking to start their ventures in the country.