The Indonesian Ministry of Finance recently revised its regulation on
venture capital companies (VCC) through its regulation No. 18 of 2012,
under which a VCC is defined as a business entity that conducts
financing activities/capital participation in company that receives such
financial support for a certain time period, in the form of equity
participation, convertible bonds, and/or profit/revenue sharing.
In the event the investee company becomes a publicly-listed company,
the VCC must sell its shares in that company within 36 months after the
issuance of the permit from the Capital Market and Financial Institution
Supervisory Board (known as Bapepam-LK) to offer the investee company's
shares on a stock exchange.
A VCC may take the legal form of a limited liability company or a
cooperative. Moreover, the shares of a VCC formed as a limited liability
company can be held by Indonesians, Indonesian business entities,
foreign business entities, the Indonesian government, or local
government. A foreign investor may own up to 85% of a VCC's paid-in
capital. The minimum capital requirement for a VCC formed as a
cooperative is Rp5 billion ($545,000), and Rp10 billion for a limited
liability company. The VCC must obtain a permit from the Minister of
Finance before it can conduct business
The financing business activity of a VCC may include equity
participation, convertible bonds, and profit/revenue sharing. Equity
participation has to be conducted by way of direct capital participation
in the investee company (which is a limited liability company), for a
specific period of time.
VCCs are prohibited from withdrawing funds directly from the public
in the form of giros or savings. Since VCC are allowed to receive loans,
however, they can issue promissory notes, if the board of commissioners
and the general shareholders meeting approves the issuance. In
addition, the promissory notes must be a notarial deed. The VCC must
submit a monthly report, a semester report, and an annual report to the
Minister of Finance.
Oene Marseille and Freddy Karyadi