This content is from: Local Insights

Indonesia: Capitalisation reforms

Oene MarseilleEmir Nurmansyah

In July 2016, Indonesia's president Joko Widowo issued a new regulation clarifying a previously issued presidential regulation which had set a minimum authorised capital amount of IDR 50 million (approximately $4,000) for the establishment of companies.

The new regulation eliminates this minimum capital requirement. Instead, it allows the founders to agree and set out an amount considered appropriate in the company's articles of association.

The change is stated to be a form of respect for the freedom of contract principle. It is also said to give the public as much flexibility as possible to enter into agreements in the context of incorporation of companies.

In practice however, the minimum capital requirement will likely remain, despite the new regulation. This is because Indonesia's company law takes precedence over the new regulation and requires a minimum authorised capital amount of IDR 50 million.

Additionally, the Capital Investment Coordination Board of Indonesia (Badan Koordinasi Penanaman Modal, or BKPM) requires a much higher level of capitalisation for companies owned by non-Indonesian nationals or entities (a foreign investment company or a so-called PMA company). Currently the minimum paid-in capital amount of a PMA company is set at IDR 2.5 billion.

Finally, the capital requirement could be significantly higher for companies in certain lines of business. For example, companies interested in obtaining a sea transportation licence in Indonesia would need to have an authorised capital of at least IDR 50 billion. Twenty five percent of this must be subscribed and paid into the company at the time of establishment.

Oene Marseille and Emir Nurmansyah

© 2021 Euromoney Institutional Investor PLC. For help please see our FAQs.

Instant access to all of our content. Membership Options | 30 Day Trial