ESTABLISHING COMPANY IN INDONESIA – Mendirikan Perseroan/Perusahaan di Indonesia

INTRODUCTION

Limited liability company (the “Company“) is the most common form of business entities. Indonesia has promulgated Company regulation in 1995 by issuing Law Number 1 of 1995 on Limited Liability Company (“Law No. 1/1995“), which has been replaced by Law Number 40 of 2007 on Limited Liability Company (“Law No. 40/2007/Company Law“).

Under
Company Law, company is defined as a legal entity which constitutes a joint of capital that established pursuant to a contract to running business activities with authorized capital all of which is divided into shares and which fulfils the requirements as stipulated in the Law 40/2007 and its implementing regulations.

DEED OF ESTABLISHMENT

A Company must be established by 2 (two) or more persons (individually or by legal entity) through notarial deed using Indonesian language (Article 7 Law No. 40/2007). In other words, a Company must be established pursuant to a contract, and therefore it must have more than 1 (one) shareholder. However, there are some exemptions of the aforementioned provision, the said provision does not apply to (i) State-owned enterprise company, all of whose shares are owned by the State, or (ii) a company managing stock exchanges, clearing and guarantee houses, central securities depositories, and other institutions regulated in the capital market law.

Furthermore, the deed of establishment must contain the articles of association and other information in relation to the establishment of the Company (Article 8 of Company Law). The deed of establishment shall contain following information:

1. Identity of the founders of the Company

   In case the founders are individuals, they shall provide their full names, places and dates of birth, occupation, residence and nationality. In case the founders are in form of a Company, they shall provide name, domicile, full address and number and date of the Minister of Law decree regarding the ratification of legal entity of the related Company.

2. The composition of the Board of Directors (BOD) and of the Board of Commissioners (BOC) of the Company

   The Board of Directors members and the Board of Commissioners members of the Company shall be provided in the deed of establishment of their full names, places and dates of birth, employments, residences, nationalities.

3. The identity of the shareholders of the Company

   The shareholders of the Company shall be provided in the deed of establishment of their names, details of number of shares, nominal value of shares.

RATIFICATION FROM MINISTER OF JUSTICE AND HUMAN RIGHT

After the deed of establishment has been signed by the founders, the deed of establishment shall be ratified by Minister of Justice and Human Right (the “Minister“) to obtain the status of a legal entity. The ratification from the Minister is the evidence that the Company has obtained status as legal entity.

This ratification application shall be submitted no later than 60 (sixty) days after the deed of establishment has been signed. In the event the application is not submitted in the period of 60 (sixty) days, the deed of establishment will become void and a Company shall be wound up by law and the founders shall settle its affairs. After the ratification, the deed of establishment shall be announced in the state gazette.

CAPITAL STRUCTURE OF LIMITED LIABILITY COMPANY

In the Company Law stipulates that the company capital is divided into 3 (three) capital, as mention below:

1. Authorized Capital, is the total amount of shares that a Company is allowed to issue to the shareholders. The authorized capital can be called as the registered capital because this capital shall be included in the deed of establishment when the Company is established;
2. Issued Capital means the capital that is issued by the Company to the shareholders; and
3. Paid Up Capital means the capital obtained from the shareholders.

According to Article 32 of Company Law, the minimum authorized capital for establishing company is Rp 50,000,000 (fifty million Rupiah). However, the minimum requirement for the authorized capital can be waived for certain business activities such as banking, insurance or freight forwarding business.

Moreover, with regards to the issued and paid up capital, the minimum portion for those capitals are 25% for each capital which will be calculated from the Authorized Capital and shall be paid up in full by the shareholders. Moreover, as the evidence for the issued and paid up capital, according to Article 33 of Company Law, it is stated that those capital shall be proven by lawful evidence of deposit. According to the elucidation of the article, evidence of deposit means, among others, evidence of deposit by the shareholders into a bank account under the name of the Company, data from financial reports audited by an accountant, or the Company’s balance sheet signed by the Board of Directors and Board of Commissioners.

The capital can be paid in the form of money and other forms, such as tangible or intangible goods, which have a monetary value. Moreover, if the shareholders pay its share by immovable property, it must be announced in 1 (one) national newspaper at least 14 (fourteen) days after that the deed of establishment is signed by the shareholders. The purpose of this provision is to provide information to the public and to allow possible objections, for example in the case that the immoveable property does not belong to the person who undertook the payment.

THE CONTENT OF THE DEED OF ESTABLISHMENT/AOA

According to article 15 of Company Law, the deed of establishment/AoA shall contain at least following information:

1. the name and domicile of the Company;

A name is required to identify the Company. The name of the Company must not endanger fair competition; it has to respect regulations about intellectual property and especially marks. Furthermore, a
Company must have its domicile in the territory of Republic of Indonesia, which shall constitutes as its headquarter. This domicile of the Company is stipulated in AoA. The Companies must have an address in accordance with its domicile. This address shall be used for correspondence with other party

1. the purposes and objectives and field of business of the Company;

   It is important to mention the purposes and objectives as well as the field of business of the Company in AoA. The mentioning of the purposes and objectives and the field of business of the Company in AoA held the principle function. In other words, the purposes and objectives and the field of business of the Company are the “legal foundation” for the operator of the Company.

2. the Company’s period of incorporation;

   According to Article 6 of Company Law, a Company is established for a limited or unlimited term as specified in the
   AoA. Furthermore, according to Article 9 paragraph (1) of Company Law, it is stated that to obtain the Decree with regards to the ratification of the Company as a legal entity from the Minister of Law and Human Rights (the “Minister“), the founders of the Company shall jointly submit an application to the Minister electronically via legal entity administration system information technology services, filling in a form that contain the defined period of incorporation of the Company as one of the informations that should be contained in the form.

3. capital of the Company;

the AoA shall contain the amount of the authorised capital, issued capital, and paid up capital.

1. shares of the Company;

   the AoA shall contain the number of shares, classification of shares (if any), including the number of shares for each classification, the rights attaching to each share and the nominal value of each share.

2. Board of Directors (BOD) and Board of Commissioners (BOC) of the Company;

   the AoA shall contain the name and position and number of members, the procedures for the appointment, replacement, and dismissal of members of the BOD and BOC of the Company.

3. General Meeting of Shareholders (“GMS“);

The AoA shall contains the determination of the place and procedure for holding a GMS.

1. dividends of the Company;

   The AoA shall contain the procedure for the use of profits and allocation of the dividends of the Company.