🇮🇩 Indonesia

Navigating Corporate The Corporate Law in Indonesia (Law No. 40 of 2007)

Governs how companies are formed, managed and dissolved in Indonesia.

Key Provisions of Indonesia’s Corporate Law

Ensure legal certainty, protection of shareholders, transparency, and promote good governance in your business entity in Indonesia.

Company Formation & Operation

Outlines the legal requirements to incorporate a limited liability company. This includes specific criteria and type of business structure.

Requirements for Incorporation

2 shareholders both (individuals or legal entities both local and foreign)
IDR 2.5 billion (approx. USD 150,000) minimum capital requirements as of October 2025.
1 director and 1 commissioner. The director must be domiciled in Indonesia with an NPWP.
Must have a name, domicile, and full address within Indonesia
Planned business activities

Types of Companies

Primarily governs limited liability companies (Perseroan Terbatas or PT), including locally owned and foreign investment companies (PT PMA).

Corporate Governance

Corporate governance is structured around a mandatory two-tiered system and defines the roles and responsibilities of the Board of Directors (BOD), Board of Commissioners (BOC), and General Meeting of Shareholders (GMS).

Board of Directors (BOD)

Responsible for managing the company and representing it legally.

Board of Commissioners (BOC)

Supervises and advises the directors.

General Meeting of Shareholders (GMS)

Holds ultimate decision-making authority for major company decisions every 6 months. This includes amending articles, appointing directors, approving mergers, or approving sale of significant assets.

The Board of Directors must seek GMS approval for certain transactions like selling or encumbering assets exceeding 50% of net assets or mergers.

Shareholder Rights

Shareholders have voting rights and are generally not personally liable beyond their shareholding unless involved in illegal acts or misuse of company assets causing insolvency. Shareholders’ rights to information and participation are upheld to foster transparency and active governance.

Capital Structure

The company’s capital structure is clearly defined, with a required minimum authorized capital and provisions for share subscription and payment. The law allows for shares with or without nominal value depending on capital market regulations. If you don’t pay up all that capital, the remaining amount must be recorded as the Accounts receivable in the balance sheet and your tax reports.

Articles of Association (AoA)

The AoA serve as the company’s governance document, detailing internal governance mechanisms, limits on directors’ authority, decision-making processes at corporate meetings, and provisions such as director terms and dissolution procedures. The establishment, amendments to articles of association, and related ministerial decrees must be publicly announced in the State Gazette within 14 days of issuance or notification.

Why this Law Matters

The Corporate Law provides the essential legal framework for establishing, managing, and operating a company in Indonesia. Here are key reasons why you this law is important:

Ensuring Legal Entity & Protection

Provides a clear and robust legal framework for establishing and operating your for operating your business.
Defines your rights, clarifies your limited liabilities as a shareholder, and outlines the precise operational rules for your corporate entity.
This certainty is vital for mitigating legal risks and building a secure foundation for your investment in a new market.

Facilitating & Streamlining Investment

Standardized corporate structures simplifies your investment journey together with the OSS system.
Provides a recognized and efficient legal vehicle for foreign capital.

Promoting Good Corporate Governance

Encourages transparency, accountability, and ethical business practices by outlining the roles of the BOD, BOC, and GMS.
Adhering to these principles helps build investor confidence and attract further capital.
Mitigate risks associated with mismanagement to align operations with international best practices.

Foundation for Broader Compliance

Serves as the fundamental legal basis for many commercial and labor regulations.
A solid understanding of this law is essential for navigating other related business requirements.

Stay compliant with Corporate Law in Indonesia

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How We Can Help

We provide a comprehensive set of corporate services to help you get started with your business. Together with our team of experts in the country, we can help you comply with Corporate Law (Law No. 40 of 2007) in Indonesia.

Company Registration & Incorporation

We handle all aspects of company setup from business name registration to securing a Business Registration Certificate (NIB). This includes incorporation of private limited liability companies and foreign-owned companies (PT PMA).

Tax & Accounting Services

We help you manage monthly tax reporting, payroll income tax reporting, and annual corporate income tax filing, ensuring compliance with Indonesian tax laws and regulations.

Licenses & Permits

We can assist in securing necessary business licenses and industry-specific permits, including registrations with BPOM for regulated industries, Halal Certification, and other relevant permits.

Trademark Registration

Importer of Record

Legal tax obligation detailing income, expenses, and tax liabilities of the previous year.

Virtual Office

We provide virtual office addresses in Jakarta for business registration and legal compliance.

Visas & Work Permits

We can help obtain long-term and short-term business visas and work permits for company owners and employees.

FAQs About The Corporate Law for Companies in Indonesia

The primary objective of Law No. 40 of 2007 is to provide a comprehensive legal framework for the establishment, operation, and dissolution of Limited Liability Companies (Perseroan Terbatas or PT) in Indonesia. For your company, this means it sets the foundational rules for your legal existence, aiming to create legal certainty for your business activities, promote good corporate governance, and protect the interests of your shareholders and other stakeholders.

Under Law No. 40 of 2007, the concept of “limited liability” for your company’s shareholders means they are generally not personally liable for the company’s debts beyond the amount of their subscribed shares. This crucial protection separates your company’s legal obligations from the personal assets of its owners, fostering a more secure investment environment. However, this limited liability can be lifted in specific cases, such as if a shareholder acts in bad faith or misuses company assets.

The law mandates three core corporate organs for your company: BOD, BOC, and GMS. The GMS is the supreme authority, making major decisions affecting your company. The BOD is responsible for the daily management and representation of your company. The BOC provides supervision and advice to your BOD, ensuring adherence to corporate objectives and good governance principles within your organization.

Law No. 40 of 2007 provides detailed procedures and requirements for corporate actions such as mergers (penggabungan), consolidations (peleburan), acquisitions (pengambilalihan), and dissolutions (pembubaran) that your company might undertake. These provisions ensure transparency, protect the rights of your shareholders and creditors, and define the legal consequences of such actions, including the transfer of assets and liabilities, ensuring a clear process for significant corporate changes.