Acquisition of Company in Indonesia

Are you considering acquiring a company in Indonesia? There are two common scenarios which we are going to cover in this article:

• Acquiring a locally owned company (100% of shares are owned by Indonesian nationals and/or companies)
• Acquiring a PT PMA (some or all shares are owned by foreign investors)

Let’s look at both options and go over the process.

Acquiring a local company

This is a scenario where a foreign investor wishes to acquire shares or the entire company from Indonesian shareholders. In such situation there are two main things to consider:

1. Restrictions of foreign shareholding in that particular industry based on the Negative Investment List
2. Minimum capital requirements for the foreign owned company

What if the local company is in an industry that is in negative investment list (DNI)?

This means that the foreign company cannot acquire more shares in the company than allowed by the regulation. E.g. a foreign company cannot take over a local company that is classified as distributor of construction machineries and equipment since the DNI limits foreign ownership to 33%.

If the foreign company wishes to still acquire this company, it has the following options:

1. Only acquire up to 33% of the company and keep the rest of the 67% for the local investors
2. Change the company business classification in order to allow more foreign ownership
3. Acquire 67% of the company with a local nominee

Limited Liability Company must have at least two shareholders. Therefore if the foreign investor acquires 100% of the company it needs to provide more than one shareholder.

Minimum capital requirements for the acquired company

Regardless of how many shares will be owned by foreign investors, the acquired company will become a PT PMA and thus needs to comply with foreign ownership regulations. The minimum paid up capital is at least Rp. 2.5 billion and investment plan Rp. 10 billion.

Read more about the minimum capital requirements

In case the local company had less authorized capital than required for a PT PMA, the capital needs to be increased in order to complete the acquisition.

Acquiring a foreign owned company

This is a scenario where a foreign investor acquires shares in a company that is already a foreign owned company (PT PMA).

Since the company is already a PT PMA, the capital requirements should already be met. But how about foreign ownership restrictions?

The good news for investors is that as long as the acquired PT PMA continues in the same business classification, grandfathering principle applies (Article 6, Negative Investment List).

This is especially useful in cases when the company to be acquired has a classification that used to be not in the Negative Investment List in the past but was added there later on. For example cosmetics retail – it used to be open to foreign investment but now is closed to foreign investment.

If a foreign investor acquires that company, grandfathering principle allows the same ownership percentage as was applied during the setup of the acquired company.

Company acquisition process

• At least 30 days before the General Meeting of the Shareholder, the director of the company to be acquired needs to announce in a public newspaper about the acquisition plans.
• Creditors of the company can file objections within 14 days after the announcement in the newspaper
• If there are no objections, the Director calls the General Meeting of Shareholders at least 15 days in advance
• Minimum of ¾ of the voting members of shareholders need to attend and agree on the acquisition and sign the minutes of the meeting.
• Transfer of Shares is signed between sellers and buyers
• General Meeting of Shareholders minutes are included to the Articles Of Association by a public notary
• AoA is submitted to BKPM for the process of gaining Principal License (if acquiring 100% local company) or changing it (if acquiring PT PMA) to record the change of shareholders.
• Ministry Of Law and Human Rights issues approval in order to finalize the changes to the legal status of the company

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