The Negative Investment List, contains specific business sectors and fields that are entirely closed to foreign investment and those that are conditionally open for foreign investment. This means that if you are a foreign investor who wants to establish a company in a business field that closed to foreign investment, you will need to establish a local company in the form of a PT with 100% local shareholders.
Otherwise, if you want to invest in a business field that is conditionally open for foreign investment, you will have some restrictions, such as regulations on shareholding. In this case, you can invest and establish a PT PMA/PT Penanaman Modal Asing (Foreign Capital Limited Liability Company). These will have certain limitations on foreign shareholders that depend upon the business field you desire to enter.
For instance, if you want to establish a distributor company in Indonesia, as the foreign shareholder you will allowed to hold 67% of the shares. For the remaining 33% of shares, you will have to find a local nominee shareholder.
This has been quite an issue for prospective investors, because some lines of business require a minority share of foreign ownership. This in turn causes concern among the investors regarding rights over the company. As a solution to this matter, you might want to consider a Local Nominee Shareholder service. This legal practice is commonly used in Indonesia when foreign investors wish to invest in sectors that are either closed or conditionally open to foreign investment (see the Negative Investment List).
The concept of the nominee arrangement is that the foreign investor obtains as much control as possible and is put in a position — insofar as it is legally possible — that is comparable to that of a registered shareholder.
The call option agreement is a legally-binding agreement between two parties, the buyer/nominee and the Seller Company, governing the terms of a call option. The buyer/nominee of the call option has the right (but not the obligation) to buy an agreed quantity of a particular commodity or security, for example shares in a company, from the Seller Company of the option within a certain time frame, for a certain price. The Seller Company is obligated to sell the predefined commodities or securities should the buyer/nominee decide to exercise the call option.
This call option agreement covers the standard terms of a call option, for example the option period, quantity and price of shares or security, and consideration for the call option, as well as a number of detailed additional clauses including but not limited to Representation and Warranties, Covenants and Settlement of Disputes. As per the call option agreement:
Letter of Indemnity is a legal binding letter between two parties, Seller Company and the Nominee, whereas the Seller Company pursuant to the execution of the Loan Agreement, cooperation agreement, pledge of share agreement, hereby agrees to indemnify, defend and hold harmless Nominee, his spouse and/or heirs (hereinafter collectively referred to as the “Indemnitees”)
The POA to Vote and Sell is a legal binding agreement between two parties, Nominee and the Seller Company, whereas the Nominee grants an irrevocable Power of Attorney to the Seller Company to Vote and Sell Shares with the right of substitution to:
The Co-operation Agreement is a legal binding agreement between two parties, the Seller Company and the Nominee, whereas the Seller Company and the Nominee agrees and acknowledges to co-operate in running the company, including the cooperation between the Seller Company and the Nominee for the purchase and management and selling of shares. Nominee and the Seller Company agree and acknowledge in the cooperation agreement among others the following key factors:
The Loan Agreement is a legally binding agreement between two parties, the Lender (Seller Company) and the Borrower/ Nominee, whereas the Lender (Seller Company) has made available to the Borrower/nominee a facility of borrowing for the sole purpose of enabling the Borrower to fund the purchase of Shares.
In the agreement both the Lender ( Seller Company) and the borrower/nominee acknowledge 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 here under shall be restricted to (i) net proceeds received by the Borrower/Nominee from the sale of all or any of the Shares, (ii) dividends on the Shares actually received by the Borrower/Nominee and (iii) net proceeds received by the Borrower as a result of the liquidation of the Company.
The Lender (Seller Company) and borrower further acknowledge and agree through this agreement that the Borrower may satisfy the Loan here under by tendering the Shares to the Lender. In such an event, the Lender may accept such tender or to designate a qualified party to do so. All net proceeds of the transfer of the Shares received by the Borrower/Nominee shall be paid over to the Lender upon which the Loan shall be deemed satisfied and the obligations of the Borrower hereunder extinguished.
The Pledge of Share Agreement is a legal binding agreement between two parties, the Pledger (Nominee) and the Pledgee (Seller Company), whereas the Pledger (Nominee) and the Pledgee (Seller Company) have entered into a Loan Agreement pursuant to which the Pledgee has advanced loan to the Pledger for the purpose of acquiring shares. The loan agreement stipulates that the Pledger (Nominee) shall pledge the Shares in favour of the Pledgee (Seller Company) to secure repayment of the Loan and the Pledger’s performance of his other obligations under the Loan Agreement. To secure the due, punctual and complete satisfaction of the Pledger’s ( Nominee’s) obligations to the Pledgee ( Seller Company) under the Loan Agreement, the Pledger Nominee through this Pledge of Share Agreement:
This is an Appointment Letter between the Seller Company and the Nominee Director whereas the Seller Company enumerates through the Letter of Appointment to the Nominee the following key factors among others:
You can download the detailed explanation about each of nominee agreement here.
Those documents can be prepared by the Cekindo legal team and will help you ensure the security of your business in Indonesia, before you decide to use a local nominee shareholder in Indonesia