Corporate Law at Indonesia
Corporate law in Indonesia is governed by a combination of national legislation, government regulations, and guidelines from the Ministry of Law and Human Rights, along with foreign investment policies managed by the Investment Coordinating Board (BKPM). Below is a clear and structured overview of Indonesia's corporate law framework:
🔷 1. Legal Framework
The core legal instruments include:
Law No. 40 of 2007 on Limited Liability Companies (Company Law) – Primary statute for corporations.
Law No. 25 of 2007 on Investment – Covers foreign and domestic investment.
Capital Market Law (Law No. 8 of 1995) – Regulates public companies and securities.
Omnibus Law on Job Creation (Law No. 11 of 2020) – Introduced reforms in corporate and investment laws.
🔷 2. Types of Business Entities
| Entity Type | Indonesian Term | Key Features |
|---|---|---|
| Sole Proprietorship | Usaha Dagang (UD) | Individual liability |
| Firm | Firma | Partnership, joint liability |
| Limited Partnership | Commanditaire Vennootschap (CV) | Mix of active and silent partners |
| Limited Liability Company | Perseroan Terbatas (PT) | Most common; separate legal entity |
| Foreign Investment Company | PT PMA (Penanaman Modal Asing) | For foreign investors |
| State-Owned Enterprise | BUMN | Owned by the government |
🔷 3. Company Formation: PT (Limited Liability Company)
Minimum Shareholders: 2
Minimum Capital: IDR 50 million (can vary by business classification)
Governing Bodies:
General Meeting of Shareholders (GMS)
Board of Directors (BoD)
Board of Commissioners (BoC)
Foreign-Owned Companies (PT PMA)
Must be registered through BKPM
Allowed sectors based on Positive Investment List (Presidential Regulation No. 10 of 2021)
Typically require higher capital (IDR 10 billion or more)
🔷 4. Corporate Governance
Directors manage the daily business.
Commissioners supervise and advise directors.
Shareholders’ decisions are made in general meetings.
Important:
Indonesian law imposes fiduciary duties on directors and commissioners.
Shareholder agreements are enforceable but must not contradict the articles of association or public order.
🔷 5. Taxation and Compliance
Corporate Income Tax (CIT): 22% (as of 2024)
Additional taxes:
VAT (11%)
Withholding tax (varies)
Regional/local taxes
Companies must:
Submit annual tax returns
Prepare audited financial reports (mandatory for medium-large entities)
Report beneficial ownership
🔷 6. Mergers, Acquisitions & Restructuring
Governed under the Company Law and antitrust regulations.
Must be reported to the Indonesia Competition Commission (KPPU) if thresholds are met.
Shareholder and creditor approvals often required.
🔷 7. Dispute Resolution
Options include:
Civil courts
Arbitration (BANI – Indonesian National Arbitration Board)
Alternative Dispute Resolution (ADR)
🔷 8. Winding Up and Insolvency
Voluntary liquidation via GMS resolution.
Court-supervised bankruptcy regulated under Bankruptcy Law No. 37 of 2004.
Creditors can file for bankruptcy if insolvency criteria are met.
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