The Indonesian “GmbH”

Foreign investment in Indonesia requires a legal entity incorporated under Indonesian law. This legal entity can either be established as a legally independent subsidiary of the foreign company or as a joint venture between the foreign investor and an Indonesian company.

A so-called Perseroan Terbatas (PT) is a limited liability company comprising of elements also found in the German Gesellschaft mit beschränkter Haftung (GmbH) and the German Aktiengesellschaft (AG). It has three corporate organs, namely the General Shareholders Meeting, the Board of Directors and The Board of Commissioners. A PT is obliged to pay corporate income tax in Indonesia. The rates vary depending on the income of the company. The foreign investor, however, is limited to the legal form of a Perseroan Terbatas (PT), more specific a Penanaman Modal Asing (PMA), a limited liability company incorporated under Indonesian law.

There are two ways to set up a PMA; either the foreign investor can establish a company that is a) completely 100 percent owned by him or b) form a joint venture with an Indonesian company as partner.

There is one requirement that has to be fulfilled by foreign sole owner; the PMA must divest an unspecified portion of shares to an Indonesian party within a period of 15 years. The exact percentage of the so-called sebagian is not fixed by law; this is why the BKPM determines the rate depending on each case.

The other possibility to establish a PMA is by means of a joint venture with an Indonesian partner. Eligible as Indonesian partner to a joint venture with a foreign investor are natural persons as well as legal entities.

To set up a PT at least two founders are needed. The founders can be either natural persons or legal entities regardless to their nationality. For PMA companies it is stated by law, that the required amount is decided by the BKPM for each company individually depending on its activities and a business calculation to be submitted to the BKPM. Therefore, the assigned capital required tends to be a lot more than the amount determined by law. In general, for production companies, the assigned capital required can be framed at around 200,000 US$, for non-production companies it amounts at about 100,000 US$.

The shareholders of a PT are not personally liable for the obligations of the company because the PT is a separate legal body and independent with regard to its shareholders. Therefore the foreign investors or the foreign company are only liable with the capital they invested into the PT, but not with their personal assets. This is applicable even if the losses of the PT exceed its assets. There is only one exception to this limited liability when the company has not been incorporated properly.

The foreign investment by incorporating a PT PMA has to be approved by the Investment Coordinating B…