The term of company formation refers to the registering or incorporating process of a company as a limited one. As a result, the business will be a legal entity. When a company is registered or incorporated, it becomes an individual in the law eyes. It is separated from its owner regarding liabilities, finances, contractual agreement, and ownership of property and assets.
So, what kind of requirements for the company formation in Indonesia? In general, the requirements are relatively similar, both for the domestic and foreign investor, in most country. For foreigners who want to form a company in Indonesia, the points that they need to see are:
Any business which foreigners are the shareholders must register as a direct foreign investment (PMA). Some sectors require particular ownership percentage for Indonesians. The regulations, terms, and conditions of business sectors can be found in DNI (Daftar Negatif Investasi) or Negative Investment List. The DNI is maintained by the Indonesian government. A company registration complete after it gets approval from Indonesia Investment Coordination Board or Badan Koordinasi Penanaman Modal. As this process finished, a company must complete other requirements such as series of licensing. What is PMA? PMA is an abbreviation of Penanaman Modal Asing or direct foreign investment (FDI). The basic form is limited liability company (LLC) or also known as Perseroan Terbatas (PT). To start a business operation in Indonesia, a foreign corporation must register as a PT PMA. The legal basis of this activity is in the country regulation Law No.25 of 2007, regarding the Capital Investment, Law No.40 of 2007 that regarding the Limited Liability Company, and also the President Regulation No.39 Year 2014 (had been renewed in 2016) about the List of Business Fields Closed and Open with Condition to Investment which is also known as the Indonesia Investment Negative List. Consider to set up a representative office first In Indonesia, foreigners can establish a representative office (RO) from their parent company, but the government draws some limitations for ROs. They can only do marketing or promote and market research. For the business sectors, trading, service, oil or gas mining, and banking are allowed to set up a representative office. As the RO function suggests, an RO is useful to the parent company in learning the market culture of Indonesia. It is not a compulsory option, but highly recommended because foreign companies will have a chance to introduce their business entity while doing some research before they finally decide to establish an LLC in Indonesia. That is all the brief explanation about company formation in Indonesia. If you are interested in forming a company in Indonesia, make sure to find out more about PT PMA and representative office regulations. If you have any questions about PT PMA or require further consultation and assistance, you can arrange a meeting with SMART Legal Consulting at: E: [email protected] H: +62821-1234-1235
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June 2018
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