There are many types of company existing in Indonesia like; Perseroan Terbatas (PT), Koperasi, Firma (Fa), Commanditaire Vennoostchaap (CV), etc. The first mentioned type, PT Company, is a common type of company registered in Indonesia for doing business.
PT Company is suitable for small, medium-scale business, and large-scale business. Also, this is the only type of company allowed to be registered for the purpose of Foreign Direct Investment/ FDI.
The principles of a PT Company are similar to the term of “Corporation/Limited Liability Company” in the United States. It has the following characteristics: (i) It’s a legal entity; (ii) its ownership is based on shares owned, and (iii) it has a limited liability characteristic (this is a very important factor because it separates the liability of the company from its owners);
PT Company is regulated by the Indonesian Company Law No. 40 of 2007. It is a form of business based on an agreement between the founders. Having said that, the founders of a PT company must be at least two persons (individual and/or legal entity).
Initially, the founders must become also the shareholders, however, they can later sell their share ownership to other persons as long as the shareholders in the company consist of at least two persons. If there is only one shareholder, then the PT Company may lose its limited liability status.
In principle, registering a PT Company for small, medium-scale business and large-scale business will have similar procedures. The only distinction is registering PT for the purpose of FDI. A notary’s assistance is required in registering a PT Company because a notary is a public official that is authorized to create a deed of company incorporation.
The following are the procedures.
The founders are required to enter into a company incorporation agreement. The Ministry and Human Rights/ MLHR as the government ministry in charge of PT Company registration has provided a standard format for the deed of company incorporation agreement. Some items in it are mandatory to be followed, some can be adjusted to suit the needs of the founders and some need to be completed by them. We can consult the notary on those matters.
The following are the most common items that need to be completed by the founders.
- Business Activity;
- Board of Director;
- Board of Commissioners;
- Fiscal year; and
- Shares ownership.
Once the founder provides the above information, then the notary will search the company name in MLHR online system. If it’s available, then the notary will reserve it for the founder which will be valid for 60 days.
Next, the notary will draw up the deed using the information given. Since the deed will contain many legal jargons, it is advised to consult the notary for every unclear items stated in it to avoid any issue that might be raised in the future.
If all of the founders agree with the deed, then they are required to sign it in the presence of the notary. Thereafter, the notary will finalize the deed and submit it through MLHR’s online system for their approval.
Kindly note that for the FDI, the founders are advised to apply for a principal license from the Indonesia Investment Coordination Board (Badan Koordinasi Penanaman Modal/BKPM) before they sign the deed.
The PT Company is fully registered as a legal entity and it will have limited liability status after the MLHR issues the approval. The approval will be sent by the MLHR to the notary in electronic form. Upon receiving the approval, the notary will print and give it to the founders along with the final deed.
After the company is registered as a legal entity, the shareholders are required to hold the first general meeting of shareholders to approve all actions made by the founder before the PT Company is registered.
At this stage, the director of the company will assume the leadership role of the company. From administration law perspective, the director is required to apply for basic license and permit as follows.
- Certificate of Domicile;
- Tax Payer ID;
- Business License; and
- Certificate of Company Registration.
Kindly note that the above items are only basic requirements for the company to legally operate and run its business activity. The list will go up based on the type of PT Company (Local/FDI), business activity, location, etc.
Reference (downloadable via Google Drive)