The document summarizes different types of business organizational forms that can be established under Indonesian law, including sole proprietorships, cooperatives, corporations, private partnerships, general partnerships, and limited partnerships. It provides details on the legal requirements and processes for forming each type of business entity, such as registration and governance structures. Key distinctions are drawn between incorporated entities that have legal entity status versus unincorporated partnerships and between limited and unlimited liability for partners.

1. 1
BUSINESS ORGANIZATIONAL FORMS IN INDONESIA
Overview of Business Organizational Form in Indonesia
When a businessperson wishes to establish a business firm under Indonesian law127, the basic
choices are:
a sole proprietorship,
a private partnership (persekutuanperdata/maatschap),
a general partnership (firma/vennootschaponder firma),
a limited partnership (persekutuankomanditer/commanditairevennootschap),
a cooperative (koperasi)
or a corporation (perseroanterbatas).
Sole proprietorships appear to dominate the informal sector. As the consequences, many of these
businesses are not officially registered with Indonesian authorities because of the nature and
activities of the informal sector.
The formal business sector is primarily comprised of incorporated entities (cooperative and
corporation) and unincorporated entities (private partnership, general partnership and limited
partnership)
The incorporated entities are given the status of “legal entity” by the operation of law, while the
unincorporated entities are considered as “non-legal entity”.
The distinction between legal entity and non-legal entity is, of course, unsurprising. This concept
can be traced back to the nineteenth century where corporation was the only business vehicle that
has “entity” status through special charter from the state
The overview of each business organizational forms is explained below.
Certain businesses, for example bank, insurance, financial institution or business firms owned by
non-Indonesian individuals or entities, must be established in form of corporation.
Cooperative in Indonesia is a business vehicle that has distinct features with other business
organization forms. Primarily, it is based on specific cooperative values of “self-help, self-
responsibility, democracy and equality, equity and solidarity”.

2. 2
Two or more individuals or cooperatives may form a cooperative. A cooperative has legal entity
status, hence allow its members to partition their personal assets from the cooperative‟s assets.
The management of a cooperative consists of two-tiers board, a board of management and a
board of supervisory. Unlike a shareholder in a corporation, a member of cooperative can only
have a participation unit and one voting right. Cooperatives may engage in any business as
determined in its by-laws. Any profit resulting from business activities of the cooperative shall
be distributed on pro-rata basis to its members.
Private Partnership
Private partnership can be defined as a contract between two or more individuals to cooperate in
order to make profit.
The partners must be contributing cash, property or labour to the partnership. Due to its
consensual nature, the Indonesia Civil Code does not require the contract to establish private
partnership to be made in written form. However, in practice, partners of a private partnership
prefer to have the establishment agreement in writing for the purpose of signalling the
information about the private partnership to third parties.
From practical perspective, a written establishment agreement is also beneficial for the private
partnership in conducting its day-to-day activities such as registering for tax identification
number or opening bank account. Moreover, having a written agreement will be most beneficial
for evidentiary examination purposes before the court in the event there is a dispute, either an
internal dispute between the partners with regard to their relationship within the private
partnership or external dispute with third party.
Each partner in a private partnership may directly exercise control over business and assets of the
partnership as well as enter into agreement with third parties, unless the partners agree that such
representation duties shall be delegated to a centralized management structure or manager.
With regard to relationship with third party, unlike the liability principle in general partnership,
an individual partner will not be jointly and severally liable with the other partners for the whole
debts and obligations of the private partnership. She will be personally liable only for the debts
and obligations that were directly caused by her. Similarly, when an individual partner binds the
private partnership into an agreement with third party, such agreement shall only bind her and
not the other partner(s), unless the other
In order to apply for tax identification number with the tax office, a private partnership is
required to submit its memorandum/deed of establishment or other documents with similar effect
that show the existence of the private partnership.

3. 3
Banks in Indonesia require the submission of memorandum/deed of establishment or other
documents with similar effect for the purpose of opening bank account. This requirement is
mandated by the banking regulations, in particular, concerning the Know-Your-Costumer
principle.
Although under the Indonesian law private partnership can be the business organizational form
for all business firms, it is often used to exercise a profession such as lawyers, accountants and
tax consultants
At the outset private partnership enjoys significant degree of flexibility in term of its formation.
There is no requirement to have its formation document to be made in certain form. However, a
separate set of legislation, imposed additional obligation for all forms of business entities,
including private partnership to be registered in a Register of Companies maintained by the
Ministry of Trade.
The registration shall cover, at least”
the complete identity of the founders,
the name of the private partnership,
the official address of the private partnership,
the commencement date of the private partnership,
the business activities of the private partnership
and the signature of the founder(s) that has the right to represent the private partnership vis-à-vis
third parties.
The registration must be updated at any time as and when there is a change on the data submitted
to the Companies Register.
Pursuant to Article 2 of the Act No. 3/1982, the purpose of the Companies Register is to record
the official, correct and accurate information concerning a business firm as well as to serve as the
official source of information for the interested parties on the identities, data or other information
concerning a business firm registered in the Companies Register to ensure legal certainty in
conducting business activities.
General Partnership
Similar to the private partnership, a general partnership under Indonesian law is based on an
agreement between two or more individuals to organize a business in order to make profit under
a common name139. Partners in general partnership are also required to contribute cash,
property or labour to the partnership. Unlike the private partnership, however, the formation

4. 4
137 Art.of general partnership is subject to certain requirements and formalities. The
establishment of general partnership must be drawn in a notarial deed.
The deed of establishment must also be registered with the registry at the district court having
jurisdiction over the real seat of the general partnership.
Further, certain information from the deed of establishment must be announced in the state
gazette. The information that must be disclosed are
(i) the names and address of the partners,
(ii) description of general partnership‟s objects,
(iii) the names of partners who are excluded to represent the general partnership vis-à-vis
third parties, if any,
(iv) and (iv) the commencement as well as the termination date of the general partnership (if
the general partnership were established for a certain period).
In the absence of proper registration and announcement, third parties may hold all partners
jointly and severally liable for any action performed by any partner on behalf of the general
partnership, whether or not such partner excluded from representative duties or the action falls
within the general partnership's objects.
Consequently, any changes to the disclosed information must be made in notarial deed and
follow the same registration and announcement formalities. The general partnership is also
subject to the requirement of Act No. 3/1982 that it must be registered with the Companies
Register. Therefore, unlike the private partnership, the general partnership is subject to two
different registration obligations that principally serve for the same purposes, namely, providing
official, correct and accurate information concerning a business firm for the benefit and
protection of third parties.
As a default rule, each individual partner in the general partnership partner may directly exercise
control over business and assets of the general partnership as well as enter into agreement with
third parties.
Based on this rule we can infer that it is also permitted to appoint one or more partners to act as
the representative of the general partnership. The partners are jointly and severally liable for all
debts and obligations of the general partnership. Further, an agreement entered into by an
individual partner for and on behalf of the general partnership with third parties will be binding
to all partners.
Similar to the private partnership, the partners in the general partnership enjoy a high degree of
contractual flexibility in relation to their internal relationship. For example, partners in the
general partnership may determine in their agreement on the right and obligations of a partner

5. 5
toward the partnership, the distribution of profit and loss incurred by the general partnership or
even inserting non-competition clause that the partner cannot entered into or involved in other
venture which business may compete with the business of the general partnership.
The general partnership is obliged to maintain annual accounts and records in relation to the
assets and business activities of the company. There are no strict rules for the auditing or format
of the annual accounts and records. The partners may set out such requirements in their internal
governing agreement.
However, the managing partners are required to prepare and sign the annual accounts and
records within 6 (six) months after the closing of the firm‟s financial year. The Commercial
Code does not impose any sanction or penalty for managing partners who are failed to do so.
Limited Partnership
Limited partnership has its trait from the medieval centuriescommenda, a purely speculative
enterprise, confined mainly at first to maritime trade in which one partner provide all or most of
the capital to the firm and the other traded in his own name.
In the commenda, the capitalist partner who must have, as a rule, remained unknown to the
merchants will enjoy a limited liability, where the active partners who conduct the trade will be
personally liable for the firm‟s debts.
Due to its characteristics, under the Indonesian law, a limited partnership is defined as business
firm that similar to those of general partnership but has one or more limited partners. As a
consequence, the law applicable to the general partnership is also applicable to the general
partners in limited partnership. The limited partner is prohibited from engaging herself in
managing the company and, therefore, her liabilities in relation to the obligations and debts of
the firm is limited to the amount of the contribution into the firm. In this respect, the liability of
the limited partner resembles that of a shareholder of corporations. If a limited partner is
involved in management, either directly or by proxy, his liability will be unlimited (even if third
parties know of his status as a limited partner)
The formation of the limited partnership also requires certain formalities, such as the requirement
to have the deed of establishment to be drawn in notarial deed form. The registration
requirements at the court having jurisdiction over the real seat of the limited partnership and
announcement in the state gazette are also applied for the limited partnershipThe limited

6. 6
partnership must also be registered with the Companies Register. The information that must be
submitted with the Companies Register including
(i) the date of establishment of the limited partnership and its establishment period (if it is
established for limited period),
(ii) the name and address of the limited partnership, (iii) the identities of each limited partner and
general partner,
(iv) the value of contribution of each general partner and limited partners and
(v) the signature of the general partner that has the right to represent the private partnership vis-
à-vis third parties.
The limited partnership is obliged to maintain annual accounts and records in relation to the
assets and business activities of the company. There are no strict rules for the auditing or format
of the annual accounts and records. The partners may set out such requirements in their internal
governing agreement. However, the managing partners are required to prepare and sign the
annual accounts and records within 6 (six) months after the closing of the firm‟s financial
year155. The Commercial Code does not impose any sanction or penalty for managing partners
who are failed to do so.
As a general rule, a limited partnership shall be dissolved (i) upon the expiration of the period set
out in the deed of establishment (if any); (ii) upon the resignation, termination, bankruptcy or
passing away of a partner or (iii) by a court‟s final and binding judgment. The partners, however,
may set out in the limited partnership establishment deed that the limited partnership is deemed
to be re-established upon the resignation, termination, bankruptcy or passing away of a partner.
This re-establishment of the limited partnership shall follow the formalities and procedures that
are required for the formation of a new limited partnership.
In relation to the governance of internal relationship within the limited partnership, both the Civil
Code and the Commercial Code do not go into the details and left the partners to agree among
themselves on the governance of their internal relationship such as the distribution of profit and
loss, the procedures for resignation or termination of partners, the calculation of assets in the
event of resignation of termination of partners and the obligations of the managing partners vis-
à-vis the limited partners.
Corporation
Most provisions in the Indonesian company law are mandatory in nature. It can only be deviated
from in the articles if the relevant statutory provisions expressly so determines.

7. 7
Unlike the incorporated forms that are defined as cooperation among individuals, a corporation is
defined as an association of capital, established by virtue of an agreement and its capital divided
into shares.
The formation of corporation is subject to a number of formalities and can relatively time
consuming. A corporation is formed by the execution of a deed of establishment, which has to be
drawn in notarial deed format. Typically, the deed of incorporation contains the articles of
associations. The company law and the articles govern the conduct of corporation in its day-to-
day activities. The articles, however, are subject to and must no be in conflict with mandatory
provision of the company law. he law required that the following subject must be dealt with in
the articles:
(i) the name and the official seat of the corporation;
(ii) the objects of the corporation;
(iii) the amount of mandatory share capital, issued share capital and paid-up share capital;
(iv) the number of shares being issued, the classification of shares being issued (if any),
(v) the rights attached to such class of shares and the nominal amount;
(vi) the number and official title of the member of board of directors and board of
commissioners;
(vii) the procedures for holding general meeting of shareholders; (viii) the procedures for the
appointment, replacement and termination of the member of board of directors and board of
commissioners; and
(viii) the use of profit and the distribution of dividend
The shareholders may state additional legal provisions that apply mandatorily to the corporation,
such as the pre-emptive rights or the rights of refusal relating to the transfer of shares.
The founders or the notary, after the signing of the deed of incorporation, is required to apply for
formal approval from the Minister of Law and Human Rights (“MoLHR”).
The corporation come into existence and obtain its status as “legal entity” upon issuance of
approval from the MoLHR and, therefore, allow the shareholders to have “limited liability”163.
In this regard, the existence of corporation in Indonesia resembles the situation that of in the
earlier development of corporation where the founders of corporation must obtain charter from
the state to obtain the “entity” status. The MoLHR must then register the deed of incorporation
into the company registry maintained by the MoLHR and announce the same in the state gazette.

8. 8
The ICL requires that a corporation must have a minimum of two shareholders at all times. If, for
any reason, it has only one shareholders and it does not remedy this situation within six months,
the sole shareholder shall be personally liable for any liabilities and losses of the corporation.
This requirement effectively makes it impossible to have a single member corporation or wholly
owned subsidiaries.
This provision grounded upon the definition of corporation under the Indonesian Company Law,
and previously under the Indonesian Commercial Code, that is a creature of contract. Thus, it
requires two or more persons to form a corporation. A corporation in Indonesia is required to
have a mandatory legal capital in the amount of IDR 50,000,000 (approx. EUR 4000)166.
At incorporation, at least twenty five per cent of the capital (IDR 12,500,000) must be subscribed
and fully paid167. Any future subscription must be paid in full and cannot partially paid.
Payment for shares can be made in cash or in other forms168. Independent expert must make
assessment of the payment in other forms – such as real or intangible property – to market value.
In relation to shares issued to the shareholders, as general rule, the Indonesian Company Law
stipulates that a share gives rights to its holder to have a vote during general meeting of
shareholder and to receive dividends as well as to receive the remaining assets upon the
dissolution and liquidation of the corporation. However, the Indonesian Company Law gives the
liberty to the shareholders to determine, in the articles, that the corporation may issue different
class of shares that in turn gives its holders different rights compared to ordinary shares such as
shares with or without voting rights, rights to nominate and/or appoint member of the board of
directors and/or board of commissioner, exchangeable shares sand right to receive preferential
allocation of dividend payments. The Indonesian Company Law also stipulates that the
shareholders may, in the articles, determine pre-emptive rights or rights of refusal for issuance of
new shares or transfer of existing shares
The management structure of an Indonesian corporation applies two-tier structures. This consists
of (the board of) directors, which perform executive functions to manage and represent the
company172, and (the board of) commissioners, which advise and supervise (the board of)
directors173. This two-tier system is mandatory for both closely held and public corporation. In
relation to the closely held corporation, the Indonesian Company Law does not specifically
stipulate the minimum number of director and commissioner. Consequently, it is possible for a
closely held company to have only one director and one commissioner. In a public company (or
if the company engages in the business of mobilizing fund from the public or that issue debt
instruments) it is required to have at least 2 persons in the board of directors and board of
commissioners174. If the member of board of directors consists of more than 2 persons, the
company (in its articles or through their internal policy) may stipulate that each member of the
board of directors have different external and internal responsibilities. Unlike the board of
directors, where a company has more than one commissioner, the board of commissioners act as

9. 9
a council. Therefore, no commissioner may act individually175. As a principle, the board of
directors is distinct entity from the board of commissioner and, therefore, a same person cannot
serve on both boards. However, the articles may stipulate that, in specific situation, for example
when all members of the board of directors being unavailable, members of the board of
commissioners temporarily resume the management duties176. The power to appoint, replace or
terminate member of the board of directors and the board of commissioners is vested with the
general meeting of shareholders177. The company law does not specify the procedure as well as
the requirement for the appointment, replacement and termination of directors and
commissioners and left such matter to be regulated by the shareholders in the articles.
The board of directors of a company is obliged to prepare an annual company‟s working plan
prior to the commencement of the coming accounting year which must also contain the annual
budget of the company178. The annual working plan shall be submitted to the board of
commissioners or the general meeting shareholders as stipulated in the articles of association179.
Not later than 6 months after the end of the company‟s accounting year, the Board of Directors is
obliged to submit annual report (after it has been examined by the board of commissioners) to
the general meeting of shareholders180. The annual report must contain among others, financial
report (which consist of balance sheet, profit and loss statements) and remuneration given to
members of the board of directors and the board of commissioner during that accounting
year181.
The financial report must be made in accordance with the applicable Indonesia general accepted
accounting principle. There no obligation to have the financial report to be audited unless the
company is a public company or engaged in certain areas of business such as in banking or
insurance
Generally, the appropriation and distribution of profit in the company is made in proportion to
the capital contribution of the shareholders183. Nonetheless, as discussed above, it is possible
that the shareholders that hold certain class of shares receive higher dividends or have priority
over the dividend payment. The appropriation and distribution of profit shall be decided by the
general meeting of shareholders, provided that the company has a positive profit balance (i.e., no
loss form previous accounting years is carried forward)184. It is also important to note that the
company is obliged to set aside a certain amount of the net profit of each accounting year for the
reserves. This obligation shall remain operate until the reserves have reached at least 20% of the
issued and paid-up capital partnership as provided in the Civil Code and the Commercial Code
are no longer suitable to keep up with the pace of modern economic development.

10. 10
Setting up Business Activities and a Company in Indonesia
Opening a Business
One has to complete the following procedures before being eligible to start a business in
Indonesia:
Firstly, one has to obtain the standard form of the Company Deed, then arrange for a notary
electronically and obtain clearance for the Indonesian company's name at the Ministry of Law
and Human Rights. It will take 4 days. See procedure 3 below, for attendant costs.
Notarize company documents before a notary public. It will take 4 days and will cost Indonesian
rupia IDR 2526816.
Pay the State Treasury for the non-tax state revenue (PNBP) fees for legal services at a bank. It
will take one day. The associated costs are: IDR 200,000 (for checking the name) plus IDR
1,580,000 non-tax state revenue (PNBP) fees for legal services.
Apply to the Ministry of Law and Human Rights for approval of the deed of establishment. It
takes 7 days and details of costs included at procedure 3.
Apply at the One-stop Service for the Permanent Business Trading License (SuratIzin Usaha
Perdagangan, SIUP) and the Company Registration Certificate (TandaDaftar Perusahaan/TDP).
It will take 15 days and will cost IDR 500,000.
Then, register with the Ministry of Manpower. It will take 14 days. But no fee is charged.
Apply for the Workers Social Security Program (locally called Jamsostek Program). It will need
7 days but can be taken up simultaneously with procedure 6.
And finally, obtain a Taxpayer Registration Number (NPWP) and a VAT Collector Number
(NPPKP), which will take 1 or 2 days. But can be taken up simultaneously with the previous
procedure.
To establish a business in Indonesia, if you do not require a local legal entity for the investment
proposed, you could choose to appoint an Agent or Distributor, or set up a Representative Office.
Many foreign investors at the early stage of entering the Indonesia market choose to set up an
Agency Agreement or Representative Office, then later after the business starts to grow they will
apply for a Foreign Direct Investment Company (FDI) status.

11. 11
This is referred to most commonly in Indonesia by its Indonesian acronym PMA, or Penanaman
Modal Asing.
Representative Office
A Representative Office can be established depending upon the line of business and the
necessary licenses issued by the related government department. The limitation of a
Representative Office is that they are not allowed to conduct direct sales and cannot issue Bills
of Lading.
Representative offices are set up primarily for marketing, market research, or as buying or selling
agents. The related government ministries are:
Representative Office from Ministry of Industry & Trade - for bilateral trade
Representative Office from Ministry of Public Work - for consultant or contractor
Representative Office from Ministry of Mining - for mining activities
Representative Office from Ministry of Finance - for banking
Representative Office from Ministry of Trading - for trading
Representative Office from Investment Board (BKPM) - regional representative
Limited Liability Company or Perusahaan Terbatas (PT)
Foreign Direct Investment, most often referred to by its Indonesian abbreviation PMA, is
governed primarily by the Foreign Capital Investment Law No. 25 of 2007. As a legal basis, the
law is fairly accommodative to various deregulatory policies and measures to date, and those that
will be taken by the government in the foreseeable future.
In addition to Investment Law No. 25/2007, PMA companies as well as other companies in their
business operations are still subject to sector/industrial policies as required by corresponding
ministries.
Incorporation of PMA Company
The Investment Coordinating Board (BKPM), the government body which processes and handles
FDI companies, issued an important deregulation package on PMA in 2010 referred to as
Presidential Decree No. 39 year 2014. It was seen as a very significant step toward a much more

12. 12
conducive and attractive investment environment in Indonesia. Some highlights of the new
regulation:
Allows 100% FDI investment in selected areas of business
Limits foreign direct investment to 95%, with a minimum of 5% ownership by an Indonesian
Allows FDI investment with certain conditions
Stipulates the sectors which are closed to FDI investment (Negative List)
You can obtain a copy of the FDI application sin English from Indonesian embassies overseas or
from Investment Coordinating Board office - either from the head office in Jakarta or from
regional offices in the provinces.
The amount of capital to be invested in a foreign-owned company is decided by the investing
parties themselves, and the BKPM approval is based on the economics and scale of the project.
Foreign investment companies are basically free to choose where in Indonesia they will set up
operations, with the proviso that factories must be in areas zoned for industry or in an industrial
estate.
The life of foreign investment companies has been extended by allowing the renewal of the
fixed/permanent operating license (IUT) for an additional 30 years. The process of incorporation
of a new foreign direct investment company:
- Principle License will be valid for 3 years
Step 1:
Obtain the standard form of the company deed; arrange for a notary electronically; obtain
clearance for the Indonesian company's name at the Ministry of Law and Human Rights.
The uniqueness of the company name (should use 3 words) must be checked to ensure that it has
not been used by another Indonesian company, to avoid rejection by the Ministry of Justice and
Human Rights of the company's deed of establishment and articles of association. Because the
process must be done through a computerized processing system, the reservation and clearance
must be done by a notary public (because the new computerized system for non-tax state revenue
payments may be accessed only by a notary public). The reserved name will be blocked for 60
days. If the founding shareholders are confident that the same name has not been used by another
Indonesian company, this procedure is not necessary.
Under Article 16 of Law No. 40 of 2007, Limited Liability Companies Companies may not use
names which:

13. 13
a. have been legally used by another Company or are in principle the same as the name of
another Company;
b. conflict with public order and/or morality.
c. are the same as or similar to names of state institutions, government institutions, or
international institutions, except with the permission of those concerned;
d. are not in accordance with the purpose and objective as well as business activities or only
show the purpose and objective of the Company without its own name;
e. consist of figures or series of figures, characters or series of characters which do not form
words.
f. have the meaning as Company, legal entity, or civil association
(2) The name of the Company must be preceded by the phrase “Perseroan Terbatas” (Limited
Liability Company) or the abbreviation “PT”.
(3) In the case of a Public Company (Perseroan Terbuka), apart from the provisions referred to in
paragraph (2) being applicable, the abbreviation “Tbk” shall be added at the end of the
Company’s name.
(4) Further provisions regarding the procedures for the use of Company names shall be stipulated
by Government Regulation.
The Ministry of Law and Human Rights may reject a name application reservation if the
requested name is, among others, the same as or resembles the name of other companies.
Government Regulation No. 43 of 2011 on Use of Names of Limited Liability Companies also
provides that an application to use a name that is the same as or similar to a well known
trademark shall be rejected unless approval is obtained from the holder of the trademark.
Step 2:
Prepare and send the application with required documentation, compiled according to the
investment plan (production chart for industry or description of the activity for services) and the
planned use of business capital.
Set up a joint venture agreement if you are making the investment with Indonesian partners. For
a consulting services company you are required make a presentation to the leadership of BKPM
before applying for a Principle License.

14. 14
Foreign Investment Regulations in accordance with the Head of BKPM Rule No. 5 year 2013,
unless otherwise specified by legislation, must adhere to the following conditions:
Total investment value greater than Rp 10,000,000,000 (ten billion rupiah) or its equivalent value
in US dollars, excluding land and buildings;
Equity and paid up of shares equal to the value of paid-up capital of at least Rp 2.500.000.000
(two billion five hundred million Rupiah) or its equivalent value in US dollars,inclusion in the
company's capital, for each shareholders at least Rp 10,000,000 (ten million Rupiah) or its
equivalent value in US dollars and percentage shareholding is calculated based on the value of
nominal shares.
Step 3:
Obtain the Principle License (IzinPrinsip), valid a maximum of three (3) years from the date of
issuance of the principle license, except for certain sectors which require a longer project
completion time and may be given an extension in accordance with an applicable period prior to
giving permission.
Step 4: Incorporation of IzinPrinsip BKPM
Establish Articles of Association with a Public Notary detailing proof of capital investment, and
send it to the Ministry of Justice for approval and issuance in the State Gazette
Registration of company address with local council (domicile). It should be in an office building
or business area/district.
President Director's personal Tax Identity Number (NPWP)
Obtain a company taxpayer registration number (NPWP) and a VAT collector number (NPPKP)
Registration with the Department of Industry and Trade (TDP)
Step 5: Apply for the Workers Social Security Program (BPJS Program)
According to legal provisions on workers’ social security (Manpower Minister Regulation
12/MEN/VI/2007), it is mandatory for every company to apply for the Workers Social Security

15. 15
Program (BPJS), operated by the executing agency. This social security program covers
occupational accident security, death security, old age security, and health maintenance.
Minimum Requirement by Company Law
Article 32 of the Company Law sets the minimum amount of authorized capital for a limited
liability company in Indonesia on 50 million rupiahs. The same article also regulates that for
certain sectors the minimum amount may be set higher.
Micro, Small, Medium and Large Limited Liability Company Types
The SME law further defines article 32 of the company law and splits the limited liability
company up in the following company types:
1. Micro Company: a limited liability company will be categorized as micro company if:
a. it has a net capital of maximum 50 million rupiahs, excluding land and buildings; or
b. it has an annual sales turnover of maximum 300 million rupiahs.
2. Small Company: a limited liability company will be categorized as small company if:
a. it has a net capital of between 50 million rupiahs and 500 million rupiahs; or
b. it has an annual sales between 300 million rupiahs and 2.5 billion rupiahs.
3. Medium Company: a limited liability company will be categorized as medium company if:
a. it has a net capital of between 500 million rupiahs and 10 billion rupiahs; or
b. it has an annual sales between 2.5 billion rupiahs and 50 billion rupiahs.
4. Large Company: a limited liability company will be categorized as large company if:
a. it has a net capital of more than 10 billion rupiahs; or
b. it has an annual sales of more than 50 billion rupiahs.

16. 16
Company type for foreign investment limited liability company (PT PMA)
Article 1(4) SME law defines a large company as an economically productive company which is
conducted by business entities with total net assets or annual sales greater than a Medium
Company type, which includes state-owned enterprises or private national company, joint
ventures, and foreign companies conducting economic activities in Indonesia. Based on the
foregoing, foreign investors can only establish a large company type in Indonesia in the form of
a PT PMA. The micro, small and medium company types are business forms which can only be
utilized by domestic investors.
This is recently confirmed by regulation of the head of the Indonesia Investment Coordinating
Board (BKPM), number 5 of 2013 as amended by BKPM regulation number 12 of 2013, which
regulates in article 22, in line with the SME Law, that the authorized capital of a foreign
investment company (PT PMA) must amount at least 10 billion rupiahs.