Local laws in Indonesia regulate and restrict the ownership of foreign companies (PT PMA) in Indonesia based on business fields. Some business fields allow 100% foreign ownership, whereas some other restrict the percentage of the ownership. The restrictions are stipulated under the Negative Investment List (Daftar Negatif Investasi). This means that if you are a foreign investor who wants to establish a company in a business field that partially or fully closed to foreign investment, you will need to establish a local company in the form of a PT with 100% local shareholders. This is where local nominee service comes into place and can be beneficial for foreign investors looking to do businesses in Indonesia.
For instance, if you want to establish a distributor company in Indonesia, as the foreign shareholder you will be allowed to hold 67% of the shares. For the remaining 33% of the shares, you will have to find a local nominee shareholder.
In order that the foreign investor can have full control over the company, an effective agreement should be prepared by a reputable local nominee service provider and signed legally between the investor and the local nominee in Indonesia. Depending on the purpose of engaging a local nominee service, nominee agreement can be categorised into the following:
The Call Option Agreement is a legally-binding agreement between two parties, namely the buyer/nominee and the seller company, governing the terms of a call option. The buyer/nominee 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 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.
Letter of Indemnity is a legal binding letter between two parties, namely the seller company and the nominee, where the seller company pursuant to the execution of the Loan Agreement, Cooperation Agreement, Pledge of Shares Agreement, hereby agrees to indemnify, defend and hold harmless nominee, their 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, namely the nominee and the seller company, where the nominee grants an irrevocable Power of Attorney to the seller company to Vote and Sell shares with certain rights.
The Cooperation Agreement is a legal binding agreement between two parties, namely the seller company and the nominee, where both parties agree and acknowledge to cooperate in running the company, including the cooperation between the seller company and the nominee for the purchase and management and selling of shares.
The Loan Agreement is a legally binding agreement between two parties, namely the lender (seller company) and the borrower (nominee), where the lender makes available to the borrower a facility of borrowing for the sole purpose of enabling the borrower to fund the purchase of shares. Both the lender and the borrower 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 under certain restrictions.
The Pledge of Shares Agreement is a legal binding agreement between two parties, namely the pledger (nominee) and the pledgee (seller company), where the pledger and the pledgee have entered into a Loan Agreement for the purpose of acquiring shares. The loan agreement stipulates that the pledger shall pledge the shares in favour 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 and the nominee director, where the seller company enumerates appointment period, remuneration, termination, confidentiality and dispute resolution, among others, through the Letter of Appointment to the Nominee.
You can download a detailed explanation about each nominee agreement here.
Those documents can be prepared by Cekindo’s professional and experienced legal team. We will help you ensure the security of your business in Indonesia before you decide to use a local nominee shareholder in Indonesia.
As a leading consulting firm in Indonesia, Cekindo will assist you in establishing your business in Indonesia. We include safeguards at every step of the process for investors who want to explore the possibility of using the local nominee shareholder service in Indonesia.
Feel free to contact us for a free quotation on the Local Nominee Shareholder Service in Indonesia.