Based on Indonesia’s Positive Investment List, certain business lines are either still fully closed-off to foreign ownership or, see a cap on foreign ownership. In cases such as these, foreign investors will need to consider setting up a Local PT to start operating in Indonesia.
As the name implies, a Local PT is only applicable to Indonesian citizens and 100% local ownership. The general structure to establish a Local PT are as follows:
Investors who are considering setting up a Local PT for this purpose, are encouraged to take extra care around appointing their company Shareholders, Directors, and/or Commissioners. Investors can either perform a background check or appoint these titles through a service provider, such as Cekindo.
A Call Option Agreement is a legally binding agreement between a buyer (i.e.: foreign investor/company) and a seller (i.e.: Local PT), that governs the terms of a Call Option. The buyer has the right (but not the obligation) to buy an agreed quantity of a particular commodity or security, such as shares in a company, within a certain time frame at a certain price. The seller is obligated to sell these predefined commodities or securities, should the buyer decide to exercise the Call Option.
Letter of Indemnity is a legally binding letter between a buyer (i.e.: foreign investor/company) and a seller (i.e.: Local PT), where the seller pursuant to the execution of a Loan Agreement, Cooperation Agreement, and Pledge of Shares Agreement, hereby agrees to indemnify, defend and hold harmless the seller and their Indemnitees.
A Power of Attorney (PoA) to vote and sell is a legally binding agreement between a buyer (i.e.: foreign investor/company) and a seller (i.e.: Local PT), where the seller grants an irrevocable Power of Attorney to the seller to Vote and Sell shares with certain rights.
A Cooperation Agreement is a legally binding agreement between two parties, where both parties agree and acknowledge to cooperate in running the company, including the cooperation of purchasing and selling of company shares.
A Loan Agreement is a legally binding agreement between a lender (i.e.: foreign investor/company) and the borrower (i.e.: local PT), where the lender makes available to the borrower a facility of borrowing, with the sole purpose of enabling the borrower to fund the purchase of shares. Both the lender and the borrower acknowledges and agree that this Loan Agreement shall be a limited recourse loan agreement, under which the lender’s claim in respect of payment of the Loan hereunder shall be under certain restrictions.
A Pledge of Shares Agreement is a legally binding agreement between a pledger (i.e.: local PT) and the pledgee (i.e.: foreign investor/company), for the sole purpose of acquiring its company shares. The loan agreement stipulates that the pledger shall pledge the shares in favor of the pledgee, to secure repayment of the loan and the pledger’s performance of his/her other obligations under the Loan Agreement.
This is an Appointment Letter between the seller company (i.e.: foreign investor/company) and the Company Director, where the seller company enumerates the appointment period, remuneration, termination, confidentiality, and dispute resolution, among others, through the Letter of Appointment to the appointed Company Director.
Download a detailed explanation about each agreement type.
The aforementioned documents together with the search and appointment of these positions are part of Cekindo’s market-entry and company setup services.
As a one-stop market-entry consulting firm with over 10 years of experience operating in Indonesia, we ensure your investment is safeguarded at every step of the process when exploring or tapping into the endless opportunities and possibilities Indonesia offers.
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