Pursuant to article 5 (3) of Investment Law, foreign capital investment does not only include investment made directly by foreign investors but also investment made by an Indonesian legal entity whose capital is partially or wholly owned by foreign party in Indonesia.
Foreign investment through acquisition in Indonesia is regulated under Law No. 25 of 2007 on Investment Law (“Investment Law“) in conjunction with Law No. 4 of 2009 on Mineral and Coal Mining (“Mining Law“). Pursuant to the respective provisions of Investment Law the mining business activities are open for foreign investment without any special restriction.
Based on President Regulation of the Republic of Indonesia No. 36 of 2010 on Negative List of Investment, mining business sector is open for foreign investors without any restriction and consequently foreign investors are allowed to have 100% (hundred percent) of share ownership. However, under article 7 of Law No. 40 of 2007 on Company Law, limited liability company in Indonesia shall have minimum 2 (two) shareholders. Therefore event though foreign investment may acquire 100% of mining shares in Indonesia, the ownership shall be divided into two share ownership.
Mining Acquisition Requirements
Under article 93 (2) of the Mining Law relating to sale of shares through capital market, foreign investors are permitted to privately purchase shares in existing national mining company that has (i) reached exploration stages and (ii) has made final report of general survey.
Acquisition under Company Law
Pursuant to article 127 (2) Company Law, the investor that intend acquisition Indonesian company is obligated to announce the acquisition plan in an daily newspaper and notify the employees
Acquisition under Indonesia Antitrust Law
Under Business Competition Supervisory Commission (KPPU) regulation No.1/2009, Investors that intends to acquire Indonesia company is obligated to conduct a pre-notification for acquisition to KPPU.
Pursuant to article 97 of Government Regulation No.23/2010 on Implementation of Mineral and Coal Mining Business Activities, foreign investor/shareholders are subject to a divestment obligation over 5 years as of the commencement of commercial production. In the event the foreign investors/shareholders has acquired the mining acquisition after the mining has reach a commercial production, the divestment obligations shall be made by the foreign investment/shareholder 5 (five) years since the commercial date, this divestment obligations is not calculated since the acquisition date.