Based on national Company Law, every PT PMA in Indonesia should have at least one director, one commissioner, and two shareholders. The appointment of the director(s) and the commissioner(s) is made up in the General Meeting of Shareholders.
To avoid the overlapping roles between the board of directors and the board of commissioners, we need to distinguish their duties and responsibilities clearly.
The directors are responsible for the daily management roles of a PT PMA in Indonesia, such as determining the strategic objectives and policies of the PMA and monitoring the attempts to achieve them, choosing the senior managerial positions, reporting the company’s activities to the shareholders, representing the company, managing the partnership and networking with other companies, as well as performing a decision-maker role in the company’s activities.
On the other hand, the board of commissioners has the monitoring, supervising, and inspecting all the activities of the company so that everything has been done in coherence with the company’s goals.
Particularly in Indonesia, the country has a strict set of rules when it comes to the PMA. A foreigner may be appointed to be a shareholder, commissioner, or director of a company only if he/she meets the requirements set by the Government of Indonesia, based on the law and regulation applied in this country.
Shareholders of a PT PMA
It is clearly stated in the Company Law of Indonesia that to set up a PT PMA in Indonesia, it must have at least 2 shareholders at all times. The shareholders can be individuals and/or legal entities of Indonesia or foreign countries. Every shareholder must have at least Rp. 10 million shares (of approximately US$ 750 to 1,000 depending on the exchange rate) and if after the company obtains its legal entity status and the number of shareholders becomes less than 2 (two) people, then within the period of not later than 6 (six) months, the relevant shareholders are obliged to transfer part of their shares to other persons or the company shall issue new shares to other persons.
However, if the time has exceeded (more than 6 months) and the number of shareholders is still less than 2, so the remaining shareholder shall be personally liable for all agreements/legal relationship as well as the company’s loss. Based on the request sent to the District Court by the interested parties, including the remaining stakeholders such as the shareholders, Board of the Directors, Board of the Commissioners, public prosecutor, creditors, as well as employee, the company can be winded up or terminated.
Different from other countries, all corporate shareholders in Indonesian PT PMA must have Articles of Association, which is approved by a public notary. A PT PMA is not required to have a local shareholder if their industry is not mentioned in the negative investment list, which means that the 100% of the PT PMA capital can be owned by foreigners. If the field of business is listed in the negative investment list, there will be special rules stated that the PT PMA must have a specified percentage of local Indonesian shareholders.
Commissioners of a PT PMA
Like what has been stated earlier, the main duty of the commissioner is to supervise and monitor the work of the management, especially the directors, making sure that every activity is done and decisions made are in coherence with the company’s goal. For PT PMA, it must have at least one commissioner, which can be a local person or a foreigner.
If the PT PMA decides to have more than one commissioner, one of them must be appointed as the president commissioner, whose duty is to lead the board of commissioners.
In addition, especially for foreign commissioners, they are entitled to apply for a residence permit. It is important for any foreigners who plan to stay and work in Indonesia.
With this residence permit, along with a working permit, the person has several advantages, such as being able to open a local bank account, eligible to work legally and receive payment from PT PMA, no need for visa runs or leaving the country, and most importantly is having the change to be a permanent resident after 3 years of staying in Indonesia—only for those with the exclusive job position.
The commissioners in the PT PMA are not obliged to have part of the company shares. However, they can if they want to.
Directors of a PT PMA
The director(s) of the PT PMA is appointed by the General Meeting of the Shareholders. The director’s main duty is to handle the company’s everyday management as well as to build and maintain the relationship with the third parties. Based on the Company Law of Indonesia, every PT PMA must have at least one director.
When there is more than 1 director, one of them will be appointed as a President of Directors who lead the Board of Directors. The directors can be all foreigners. However, if there is a local shareholder in the PT PMA, it is advisable by the BKPM (Indonesia Investment Coordinating Board) that the company should also have at least one local director.
If there is only one director, he/she must have a Tax Card (NPWP). However, if there is more than one director, at least one of them must have a Tax Card (NPWP). All the directors are required to have residence permits (KITAS) or personal domicile letters along with work permits.
The only issue is that the working permit can only be issued once the PT PMA registration is completed. Therefore, obtaining KITAS may come from another company or from an Indonesian spouse.
On the other hand, a personal domicile letter can be obtained from a local apartment management proofing that a foreigner resides in the apartment. If you are renting a house, a letter from a house owner accompanied by a letter signed by the district government is often requested to indicate that a foreigner lives in their community.
When the prerequisite above is somehow difficult to obtain by the PT PMA, a good and legal solution is often made by having a professional non-executive director. This type of director will be replaced by the “real” foreign director once he/she obtained the residence permit.
However, any PT PMA must arrange this option carefully by discussing this matter with a reputable and trusted agency upon registering the PT PMA in Indonesia.
It may be challenging for foreign investors if they want to set up a PT PMA in Indonesia on their own. Whether it is about structural roles or foreign company registration documents, there are many regulations to comprehend.
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