Q52. I would like to know about the types of foreign direct investment in Indonesia.

There are two ways to make a direct investment: establishing a new company and investing in it, and investing in it by acquiring all or part of the shares of an existing company.

When investing by establishing a new company, you must obtain all new licenses related to the industry you wish to invest in. However, when acquiring shares of an existing company, existing licenses can be used as is, so it is necessary to obtain a license for the business.

It has the advantage of shortening the processing time. However, under Indonesian law, if there is a change in control of the company due to the acquisition of shares of an existing company, the merger and acquisition procedures must be followed, which may take more time than establishing a new company. In this regard, prior review and investigation are essential.

In addition, there is no legal risk of contingent liabilities arising when choosing the method of establishing a new company, but when acquiring shares of an existing company, there is a possibility of contingent liabilities, especially tax-related ones, so legal due diligence is required when acquiring shares ( There is a need to carry out Legal Due Diligence. Considering that under Indonesian tax law, the statute of limitations for tax-related claims is 5 years, it is advisable to request a local accounting expert to conduct an accounting audit and review the results before deciding whether to acquire the company.

The types of foreign companies entering Indonesia are based on the investment entity and management entity: joint investment and joint management, where foreigners and locals jointly invest and jointly manage a local corporation, and joint investment and sole management, where foreigners jointly invest but are managed solely by foreigners. There is a type of management called sole investment, in which a foreigner independently invests and manages the business independently without local participation.

go. Type of joint investment and joint management

Indonesia's investment-related laws and individual laws do not allow independent investment by foreigners and require the participation of local partners in some industries (e.g. construction, agriculture, horticulture, mining, power generation, etc.). A foreigner who is not familiar with the local situation may benefit from the participation of a local partner in the early stages of entering the local domestic market, but there are cases where conflicts with business partners occur during the company's management process due to differences in standards and management methods between foreigners and locals. there is. There is a possibility that the management of a local corporation may not be smooth due to differences in decisions on important matters such as capital increase and addition of industries and in work handling methods.

me. Joint investment and sole management type

Local investment is received in industries where foreign ownership is restricted under local investment laws, but in order to increase the efficiency of local corporation operation, local partners are not involved in management and are managed solely by Koreans. Local people hold a percentage of the total stock. It is important to have it. Locals spend at least 25%

If they hold shares, they can prevent dissolution, merger or integration at a shareholders' meeting, and if local people hold at least one-third of the shares, they can block revision of the articles of incorporation. If local people object, important matters in the articles of incorporation, such as company name amendment, capital increase, addition of business, or change of location, cannot be amended. If locals own at least 50% of the shares, foreign shareholders, who are minority shareholders, will not be able to pass any agenda submitted to the general shareholders' meeting without the consent of local shareholders, who are majority shareholders.

all. Sole investment, sole management type

Although this is only possible in industries that allow 100% foreign ownership under the Investment Act, in reality, most Korean companies operating in Indonesia are operated through sole investment and sole management. Due to the regulations of the Investment Act, there is only a formal local partner, and in reality, the Korean company makes a sole investment and is managed solely by the Korean company without the local partner's participation in management. This is a form in which foreigners can put all their effort into management without interference from local partners. A company that has all the necessary requirements for overseas expansion, such as funds, technology, and markets, can be said to have an advantageous local situation in entering the market through sole investment and sole management.

If you want to engage in sole investment and sole management in a field that requires joint ventures with local people under the Investment Act, it is essential to have safety measures in place to receive legal protection under local law with the help of local experts.

Q53. Can transactions only be made in local currency (Rupiah) within Indonesia? Yes, it is. Bank of Indonesia (BI) has announced central bank regulations mandating the use of the rupiah for domestic transactions. 2015

It has already been implemented limited to cash transactions since March 31, and in accordance with the above regulations, its application has been expanded to include non-cash transactions such as bank transactions from July 1 of the same year. According to the above BI regulations, the use of rupiah is mandatory in most areas related to transactions such as credit cards, debit cards, ATM cards, electronic money, and fund transfers, and all product and service prices must be expressed in rupiah. Any individual who violates the above BI regulations will be subject to imprisonment of up to 1 year or a fine of up to 200 million rupees.

However, there are exceptions in the BI regulations. Representatively, in relation to the contract period, contracts concluded in foreign currency before July 1, 2015 are

It is valid even if no Rupiah is used until the end (if the transaction is non-cash). Additionally, non-rupee transactions, such as dollar transactions, are permitted with separate approval from the central bank.

Q54. Is it possible to check basic information with the Indonesian government before establishing a partnership with a company in Indonesia?

In the case of Indonesia, it is also possible to view and understand the company's articles of incorporation through the central department, the Ministry of Justice and Human Rights. Matters that must be entered in the Articles of Incorporation under Indonesian Company Law include the company's name and address, purpose and significance of establishment, period of existence, capital, stock-related information such as total stock, and the number and personal information of directors and auditors. It is operated for a fee and can be processed through an agent, but administration and agency fees of around $300 are usually required. Meanwhile, in the case of financial information of unlisted companies, it is impossible to obtain data if the company does not disclose it.

If you need to check the company's credit rating, you can do so through the Korea Trade Insurance Corporation's Jakarta branch, which has these functions and authority.

Below is the contact information for the Korea Trade Insurance Corporation Jakarta Branch.

Trade Insurance Corporation Jakarta Branch

- 주소 : Wisma GKBI 21st. Fl., Suite2104, Jl. Jendral Sudirman Kav.28, Jakarta 10210 Indonesia

- Tel  : +62-21-570-5565

- Fax : +62-21-574-1470

Q55. Is it possible to purchase real estate in the name of a local corporation/branch or in the name of a foreign individual?

Foreigners holding a residence permit are only allowed to purchase real estate built on land with a use right (Hak Pakai). If a foreigner establishes a local corporation with foreign investment, he or she is permitted to purchase and hold land for business purposes (building rights, cultivation rights, etc., not ownership rights). Even if it is a foreign investment corporation, the types of rights that can be acquired vary depending on the entity that owns the rights and the purpose. For example, in the case of a manufacturing corporation, building rights (HGB) for building a factory are granted.

The right to hold is given, and in the case of agricultural corporations, they can hold cultivation rights (HGU).

In the case of borrowed-name investment made in the name of a local person, the borrowed-name investment contract itself is invalid as it is prohibited by Indonesian laws. If a local person who has lent his/her name claims that property such as real estate is registered in his/her name, there are not many ways for the investor who has borrowed his/her name to be protected. In the case of investment using borrowed names, such as holding company stocks in the name of a local person, safety measures must be established to protect actual shareholders.

Indonesian land law includes rights to land such as ownership (Hak Milik/HM), building rights (Hak Guna Bangunan/HGB), cultivation rights (Hak Guna Usaha/HGU), use rights (Hak Pakai/HP), and development rights (Hak Ekspoitasi/HE). Different rights to land are allowed depending on the legal entity that holds the rights to the land and the purpose of ownership.

go. Ownership (Hak Milik/HM)

Ownership is an indefinite, inherited right to land and can only be held by Indonesian citizens and statutory special public corporations.

me. Building Rights (Hak Guna Bangunan/HGB)

This is the right to the land to construct a building or structure on the land. Most of the land rights held by Korean companies operating in the local area, such as factories, warehouses, office buildings, houses, and apartments, are this construction right. Building rights are only permitted to be held by Indonesian nationals and corporations established under Indonesian law and having a legal address within Indonesian territory.

The building right is initially granted for a maximum of 30 years, can be extended for up to 20 years after 30 years, and can be renewed for up to 30 years after 20 years. In the case of a construction right for investment purposes, the initial term of 30 years, extension of 20 years, and renewal of 30 years can be granted at once for a total of 80 years.

Construction rights are subject to sale, exchange, contribution in kind, gift, and inheritance, and can be subject to mortgage rights.

All rights changes must be registered to take effect.

all. Right to cultivate (Hak Guna Usaha/HGU)

This is the right to engage in farming, fishing and livestock farming on land owned by others and is only allowed to be held by Indonesian citizens or Indonesian corporations with an address in Indonesia. To receive cultivation rights, the land area must be at least 5 hectares, and for 25 hectares, the latest technology must be used and an appropriate amount of investment must be made.

The validity period of the cultivation right is up to 35 years, extended for up to 25 years, and up to 35 years for renewal. In case of large-scale investment, it can be given for up to 95 years, including the initial up to 35 years, extension up to 25 years, and renewal 35 years. .

Cultivation rights are subject to sale, exchange, contribution in kind, gift, and inheritance; mortgages can be established; and all changes in rights must be registered to take effect.

la. License (Hak Pakai)

The right to use is the right to use land owned by the state or another person or to collect crops from the land, and can be used by Indonesian citizens, foreigners residing in Indonesia, Indonesian corporations with addresses in Indonesia, representative offices established by foreign corporations in Indonesia, and foreign countries. It may be held by a representative, representative of an international organization, government agency, or local agency.

The right to use national land is initially granted for a maximum of 25 years, can be extended for up to 20 years after 25 years, and can be renewed for up to 25 years. In the case of an investment use right, the initial 25 years, extension 20 years, and renewal 25 years can be granted at once for a total of 70 years.

Construction rights are subject to sale, exchange, contribution in kind, gift, and inheritance, and mortgages can be established, and all changes in rights must be registered to take effect.

Unlike Korea, Indonesia's real estate system is very complex. For more detailed information on the real estate system, please refer to the materials below.

Related website http://haninpost.com/archives/29272

Q56. What are the procedures for establishing a local corporation?

It takes 1 month to establish a new foreign capital corporation (PMA: Penanaman Modal Asing) through direct investment, and for actual work, the CEO's employment and residence permit and personal tax registration certificate are required after establishment, so it takes an additional 1 to 1.5 months. For manufacturing corporations, it may take an additional six months to obtain an environmental impact assessment, although there are slight differences depending on the region.



When establishing a corporation, using a lawyer or a professional consulting firm that is familiar with local laws can effectively resolve any problems that arise after establishment. Costs may vary depending on the professional company and the case, so it is recommended to meet in person. Although it varies depending on the industry, the foreign investment licensing procedures, including corporation establishment, are as follows.

1. Establishment of local corporation (preparation of articles of incorporation)
2. Ministry of Justice approval letter for establishment of local corporation
3. Apply for business name
4. Taxpayer registration certificate (corporate tax registration number NPWP)
5. Business number registration (NIB *company registration certificate, importer license, Korea Customs Service registration number)
6. 사업허가서(Unverified Standard Certificate, 기존의 Business License)
7. 사무실 사용허가서 (PKKPR-Approval of Suitability of Space Utilization Activities)
8. Tax office electronic filing number (process is possible after the CEO’s personal NPWP is issued)
9. Value-added tax business designation letter
10. Approval of tariff reduction for imported capital goods
11. Approval of tariff reduction for imported raw materials
12. Investment implementation report
13. Upload the results of company commitments to the OSS system and reissue the business license (Standar Sertifikat yang sudah terfikasi)
14. Approval of employment plan for foreign workers
15. Foreign Employment Permit Notice
16. Visa issuance instruction cable
17. Temporary residence permit (KITAS)

 

1. Foreigner Accommodation Police Report
2. Certificate of temporary residence for foreigners
3. Foreign employment report

main documents

go. Shareholder composition (Indonesian joint stock company law: there are two or more shareholders, both individuals and corporations are possible) and share ratio composition details

1. Required documents if the shareholder is a corporation:
   
   1. English copy of corporate business registration certificate
   2. Copy of the corporation's articles of incorporation (translated and notarized)
   3. Copy of passport of corporate representative
   4. English home address of the corporation representative
   5. Corporate e-mail address
2. Required documents if the shareholder is an individual:
   
   1. Copy of passport (front of passport: photo/signature page)
   2. English home address
   3. e-mail address / cell phone number
3. Total investment amount/paid-in capital and share ratio composition (minimum investment: 10 billion rupiah)

me. Composition of the Board of Directors/Supervisory Board (Indonesian Corporation Act: minimum composition is 1 director and 1 auditor)

When there is more than one director/auditor, one of them is appointed as representative.

- required documents:

1. Copy of member's passport
2. Member’s home English address
3. e-mail address / cell phone number

Confirmation of capital payment, address confirmation, power of attorney to sign articles of incorporation

Company name (must be at least 3 words with at least 3 characters)

Eg. PT. ABC NETWORK INDONESIA

Business site (office or factory) sales/lease agreement, phone number/fax number
Local business details (some industries)

1. English process chart (production-related industries)
2. Annual production (production-related industries)
3. Product sales price (production-related industry: FOB standard)
4. Detailed import/export items and estimated annual export/import amount (trading business)

 

Q57. Are there any regulations or prohibited words regarding the establishment of a corporate name?

When you want to establish a corporation, you must check the corporation name with the Ministry of Justice and Human Rights and apply for a business name. Things to keep in mind are as follows. According to Executive Decree No. 43 of 2011 on Application and Use of Business Names (PP No 43 Tahun 2011 tentang Tata Cara Pengajuan dan Pemakaian Nama PT):

1. The corporate name you wish to use must not overlap with the business name of another company or organization that is already registered.
2. The corporate name must not contain vulgar words.
3. The business name must have at least 3 words (suku kata) or more.
4. Numbers or letters should not be used in the corporate name
5. Only Roman/Latin alphabets are allowed for corporate names (e.g. legal names in Arabic and Chinese are prohibited).
6. The corporate name must not be the same or similar to the name of a government agency.
7. The corporate name must not use words reminiscent of a company, corporation, or labor union. (e.g. Inc, , Associaton, Incorporated, etc.)

Q58. How do I remit the initial investment cost when establishing a new corporation? Types of foreign direct investment under Korea's Foreign Exchange Management Act include acquisition of foreign currency securities, lending of money, private business, participation in joint business, and establishment of overseas branches. already invested

Reasons for lending general money other than lending money with a repayment period of more than one year to a foreign corporation do not fall under the reasons for reporting direct overseas investment.


The most common method of overseas investment is the acquisition of foreign currency securities. One way to acquire foreign currency securities is to acquire shares of an existing corporation, and the other is to establish a new corporation. In the case of acquiring shares of an existing corporation, that is, if the seller of the shares is a natural person of Indonesian nationality or an Indonesian corporation,


If you go to a foreign exchange bank and fill out a foreign direct investment report, the report will be immediately received, and you can immediately send money directly to an individual or Indonesian corporation.


When establishing a new corporation, it is not possible to send money to that corporation because the corporation has not yet been established. In this case as well, the report is received at the same time as the foreign direct investment is reported, and the transfer can be made to the personal account opened in an Indonesian bank of the CEO, director or employee of the company to be established. In the future, after the corporation is established, you can obtain a bank certificate or confirmation from a local accounting firm that the relevant funds were deposited into the company and submit a follow-up management report within 6 months from the reporting date.

Q59. How do I pay the minimum capital after establishing a corporation, and by when should I pay it? Are there any disadvantages if I fail to pay within the specified period?

Once a company is established and the articles of incorporation are published, it applies for corporate status to the Minister of Justice through a notary public under the joint names of the founders. The Minister of Justice conditionally grants corporate status. Documents certifying investment to the Minister of Justice within 60 days of receiving corporate status (bank account certificate where shareholders have paid the investment into the company's account, financial statements listing the investment, investment-related documents signed by all shareholders, board members, and auditors) check

You must submit one of the memorandums). If you do not submit documents proving your investment within 60 days, the licensing service will be suspended by the Ministry of Justice.


If you establish a local corporation in Indonesia and receive formal investment approval from the Indonesian government, you can transfer money to the local corporation account within the permitted investment amount. You must establish a local corporation and transfer the capital to the bank account of the local corporation established locally. There is a regular capital activity reporting obligation (LKPM) to the competent tax office and the Investment Coordination Board (BKPM). Previously, there was no problem in obtaining approval for the establishment of a corporation by first paying only 25% or more of the authorized capital. However, after the revision of Indonesian investment-related laws according to the Omnibus Act, the company invested more than 10 billion rupiah from the time of establishment. Payment is mandatory. Unlike before, the requirements for capital that must be invested in the initial stage of establishing a company have been strengthened, which has become one of the major burdens when establishing a company.

Q60. Even if I withdraw and re-deposit part of the 10 billion rupiah capital, which is the minimum capital required for establishing a corporation, is it recognized as the minimum capital?

yes. it's possible. In order to meet the requirement to fully pay the minimum capital of 10 billion rupees for incorporation, the funds currently held by shareholders are paid as capital, and the company established thereafter withdraws money in the form of a loan to the shareholder. If you do this and then repay it to the company later, there is room to believe that such a method is not prohibited from a legal perspective. In this case, the newly established corporation lends money to shareholders, and such money lending to shareholders must not only be recorded in the accounting books, but also comply with the procedural matters set forth in the company's articles of incorporation. . The act of lending all or part of the capital to shareholders is an unusual act in that it results in a material erosion of the company's capital. Therefore, normal and All actions must be carried out through legal procedures. In addition, in order to be considered a normal transaction between the company and the shareholders, it must be accompanied by the payment of interest at a fair and appropriate level on the principal amount of the shareholders' borrowings, so the company recognizes that it may be subject to income tax on interest income in the future. There must be.

Q61. I would like to know the detailed permitting procedures for factory construction, including land purchase and environmental impact assessment, after establishment of a corporation.

① Establishment of a corporation

② Land purchase (preparation of sales contract [articles of incorporation]) and land registration (change of land register name)

1. Licensing authority: Local land authority (BPN)
2. required documents
   
   • Notarization of Sale (AJB)
   • Land Director (SertifikatTanah)
   • Proof of payment of transfer tax (PPH) / acquisition tax (BPHTB)
   • Proof of payment of land and building property tax (PBB) (Bukti Bayar PBB)

The above licensing requirements do not apply to rental factories. After searching for and selecting land suitable for the business, purchase and registration are carried out through a land deed preparation official (PPAT, who has the qualifications of a notary public) in charge of the land. Before purchasing land, it is necessary to check whether the land is an industrial zone and can be used to establish a factory.

Regarding this, the integrated licensing service department of the relevant city/county office (Badan

 

Penanaman Modal & Pelayanan Terpadu Satu Pintu).

③ Factory location permit (Izin Lokasi)

1. Licensing Office: County Office Integrated Licensing Service Department

(One Stop Investment & Integrated Service Agency)

1. Time required: 14 to 30 days

1. required documents
   
   • Articles of incorporation of the company
   • Taxpayer Number (NPWP)
   • A drawing showing the shape of the land
   • A memorandum of intent to pay for the use of the land in question.
   • A description of the purpose for which the land is used;
   • Investment Office Approval
   • Approval documents from city planning department
   • Statement of size and ownership of land
   • Land owner's letter of intent to sell the land in question
   • Other documents deemed necessary

④ Building approval (PBG) and technical advice (SARAN TEKNIS): Not applicable to leased factories.

1. Licensing office

County Office Integrated Licensing Services Department (Badan Penanaman Modal & Pelayanan Terpadu Satu Pintu) & Department of Public Works and National Housing (Dinas Kementrian PUPR)

1. Days required: 21 days
2. required documents
   
   • application
   • Articles of Incorporation
   • Copy of CEO's passport
   • Copy of taxpayer registration number
   • Notarized copy of land register or AJB
   • Copy of land tax and corporate tax payment certificate (most recent)
   • Affidavit: About the building

All technical conditions are met, construction plans and facts, designation of the number of floors of a building by the local government, and matters related to the line of agreement (after inspection).

• Drawing related to the building (location map, before and after drawing, drawing)

 

• Blueprints and construction design calculations (storied buildings, steel buildings, buildings subject to special inspection or offices)
• A copy of the local land use recommendation for local standards. Building permits for commercial and other non-residential businesses require prior approval of the factory site plan at the same time as the factory design.

⑤ Factory construction

⑥ Other factory permits (pollution permit, environmental impact assessment, environmental permit, building use permit)

1. Pollution permit, business site permit (UUG/HO)
   
   1. Licensing office

County Office Integrated Licensing Services Department (Badan Penanaman Modal & Pelaya nan Terpadu Satu Pintu)

1. Days required: 15 days
2. required documents
   
   • Application (FC KTPPemohon)
   • 2 photos of the CEO (4×6)
   • Copy of land register (FC, Surat Tanah)
   • Proof of payment of land and building property tax (last year) (FC, Tanda lunas PBB tahun terakhir)
   • NPWP copy
   • Building diagram, site plan and local terrain diagram
   • Confirmation from the owner that there is no dispute regarding the location of the owner's business
   • Articles of Incorporation
   • warrant
   • List of machines used and production process chart
   • Copy of business site rental agreement
   • Presentation on environmental information RKL/RPL/AMDAL
   • DSP/DNI related business department recommendation letter
   • In case of foreign investment and domestic investment, SPT issued by BKPM or non-facility SPP received from the Ministry of Trade, Industry and Energy
   • Copy of request for land rights (FC. Surat permohonan hak atas tanah)
   • Building approval (PBG)

 

1. Environmental impact assessment (within RKL/RPL complex, UKL/UPL complex, etc.) and environmental permit (Izin Lingkungan)

In order to operate a manufacturing business in Indonesia, all manufacturers must obtain an environmental assessment/environmental inspection report (UKL-UPL/AMDAL) from the Ministry of Environment, and then submit (upload) the issued environmental assessment/environmental inspection report through the OSS system to obtain a final environmental permit. (Izin Lingkungn). Below are Indonesian environmental laws.

• Law of the Republic of Indonesia Number 32 year 2009
• Government Regulation Number 27 year 2012
• Minister Environment Regulation Number 16 year 2012

Environmental permits in Indonesia include the general environmental impact assessment (UKL/UPL) and the one level above, AMDAL, depending on the size and industry of the plant. In the case of environmental permits, it is common to proceed through related professional environmental consultants. For companies located within the corporation, permits are processed through the corporation, and an RKL-RPL (Environmental Impact Management Plan) is issued and the final environmental permit (Izin) is issued through the OSS system. You can do this by acquiring Lingkungan. Required documents include corporate licenses and a questionnaire that fills in basic environmental information according to the company's production facilities and equipment. The process is conducted by measuring/inspecting soil, water, air, etc. collected from the factory site. . The period usually takes about 2-3 months and a report is required every 6 months after the permit is issued. It is still a formal procedure and there is no significant government management or control over the environment.

1. licensing office

Competent city/county environmental office (Walikota/Kabupaten Badan Lingkungan Hidup)

1. Time required: 1 to 2 months
2. Old secretary
   
   • Investment approval letter
   • Articles of Incorporation (Akta Pendirian)
   • Articles of Incorporation and Registration with the Ministry of Justice (Pengesahan Akta Pendirian)
   • Location certificate (Domisili)
   • Tax payment registration certificate (NPWP)
   • Business Number (NIB)

 

• Pollution Permit/Business Permit (UUG/HO)
• Site Plan
• process chart
• Corporation Confirmation (Surat Keterangan DariKawasan)
• Land Tax Bill (PBB)
• Architecture Layout
• Emergency escape map (JalurEvakuasi)
• Company Profile
• 토지대장(Land Certificate)
• Building approval (PBG)
• Lease contract/Notarization of sale (AJB)/HGB (Land ledger: Right to use) (Sewa-Menyewa/AJB/HGB)

 

1. 환경허가(Environmental Permit)
   
   1. Licensing Office: County Office Integrated Licensing Service Department (Badan Penanaman Modal & Pelayanan Terpadu Satu Pintu)
   2. Time required: 3 to 4 weeks
   3. required documents
      
      • Copy of investment approval letter
      • Copy of Articles of Incorporation (Akta pendirian)
      • Copy of the Articles of Incorporation and Registration with the Ministry of Justice (Pengesahan Akta Pendirian)
      • Copy of location certificate (Domisili)
      • Tax payment registration certificate (NPWP) and taxpayer number (NIB)
      • Copy of environmental assessment report (TDP)
      • RKL-RPL (within industrial complex) UKL-UPL Matrix data outside of industrial complex
      • Copy of land tax bill (PBB)
      • Copy of Building Approval (PBG)
      • Copy of land register/copy of lease agreement (Sertifikat Tanah / Sewa-Menyewa)
   4. Environmental impact assessment process within the industrial complex

(The contents of the procedure table on the right are general cases, and the actual content may vary depending on the position of the competent administrative office for each industrial complex and region. In particular, in the case of Delta Silicon V and Lipo Cikarang Industrial Complexes, it takes a long time and costs a lot. It is known that there are many cases.)
<Procedures for environmental impact assessment within the complex>

(Note: This is a general case and may differ depending on the region and/or industrial complex)

1. Building use permit (Izin penggunaanbangunan)
   
   1. Licensing office

County Office Integrated Licensing Services Department (Badan Penanaman Modal & Pelayanan Terpadu Satu Pintu)

1. Days required: 10 days
2. Required documents
   
   • Company documents
   • Copy of Building Approval (PBG)
   • Copy of land documents
   • Business site permit, pollution permit

 

Q62. When establishing a manufacturing corporation, can a corporation operate a distribution or trading business that is different from the manufacturing industry?

The sale/distribution of self-manufactured items is legal. There is no need to register your distribution business separately. If you receive a manufacturing license, you are allowed to distribute your products even if you do not have a separate distribution license. However, if you want to distribute products from other companies, you must obtain a separate distribution license. However, since a new industry is being added, an investment of more than 10 billion rupiah must be realized. Meanwhile, one way to do business is to establish a new distribution company separate from the existing manufacturing company.

Q63. Are there any major problems in remitting the fruits?

Indonesia does not have any special restrictions on the inflow and outflow of foreign funds, and Article 7, Paragraph 3 of the Indonesian Investment Act guarantees the free remittance of investment profits. However, for foreign exchange remittances exceeding a certain amount, the bank may be required to report the purpose of the remittance, including the use of funds, counterparty, and transaction purpose.

According to Article 8, Paragraph 3 of the Indonesian Investment Act, investors have the right to remit foreign currency for the investment principal or fruits in the following forms.

Capital

Profits, interest, dividends and other income

Funds exceeding those required for investment, including the amount required to replace raw materials, semi-finished products, finished products, and capital goods to continue the business.

Debt repayment

Matters obligated to pay, such as royalties Salaries for foreign workers

Compensation for loss of income from sale of company or liquidation

Acquisition price

Technical support fees, technical consulting service fees, management consulting service fees, payments based on project contracts, payments related to intellectual property rights, etc.

Sale proceeds of owned assets



Q64. How do I prepare the investment activity report and how many times a year should I prepare it? The investment activity report is Laporan Kegiatan Penanaman Modal, often abbreviated as LKPM, and is regularly submitted online to the Investment Office by a private business or corporation regarding investment realization, human resource employment realization, production realization including export value, partnership obligations, and other obligations related to investment performance. This means a report reported as . An explanation of how to write and fill out the LKPM report can be found at https://ekonomi.bisnis.com/read/20220629/9/1549311/update-cara-isi-laporan-kegiatan-pena-naman-modal-melalui-ossgoid there is.



You can report through the OSS RBA system, and you must report quarterly four times a year. Reports for the first quarter are due by April 10th of the current year, reports for the second quarter are due by July 10th, reports for the third quarter are due by October 10th of the same year, and reports for the fourth quarter are due by October 10th of the following year.

Must be completed by January 10th.

Q65. Please tell me about the liquidation process and time required for local corporation liquidation.

Reasons for a company to be reorganized include dissolution, expiration of the company's existence period, absorption and merger, new merger, declaration of bankruptcy, and cancellation of business license.

1. dissolution

go. The reasons for dissolution are as follows:

• Resolution of dissolution at general shareholders' meeting
• Expiration of the company's existence period stipulated in the Articles of Incorporation
• court order of dissolution

a) When the prosecution applies for the dissolution of the company on the grounds that the company violated the public interest or committed an illegal act.

B) If there is a defect in the company's articles of incorporation, upon application for dissolution by the parties

c) When shareholders, directors or auditors apply for dissolution on the grounds that the company cannot continue

D) When the commercial court's bankruptcy declaration is canceled due to the inability to pay bankruptcy expenses due to insufficient bankruptcy assets.

e) If the bankruptcy property enters a state of insolvency according to the Bankruptcy Act f) The company's business license is canceled and the company must be dissolved in accordance with relevant laws and regulations

Once dissolution is decided, liquidation must be carried out by a liquidator or trustee, and any work other than those related to liquidation is prohibited. If this prohibition is violated and work other than liquidation is performed, the directors, auditors, and the company will be held jointly and severally liable.

If liquidation is completed after the resolution of dissolution and the liquidator's liquidation report is approved by the general meeting of shareholders or the court, the corporate personality of the company is completely extinguished. If the above liquidation report is not approved, the company's corporate personality is still maintained. . Within 30 days at the latest from the date of the decision on dissolution, all creditors must be notified through newspapers and official gazettes that the company is in a state of dissolution, and at the same time, the Minister of Justice must be notified. The contents announced in newspapers and official gazettes are as follows:

• Dissolution and basis for decision to dissolve
• Name and address of liquidator
• Bond reporting method and reporting period

- The bond reporting period is 60 days from the date of announcement.



Liquidator's duties

If the liquidator determines that the company's liabilities are greater than its assets, the liquidator must request the court to declare the company bankrupt. However, an exception is made if it is separately stipulated by law and all creditors whose addresses and identities are known agree to proceed with liquidation procedures without a declaration of bankruptcy.

Dissolution method

• Dissolution by resolution of general shareholders' meeting

The Board of Directors, the Board of Supervisors, and one or more shareholders representing more than 10% of the shares may propose a general shareholders' meeting and the dissolution of the company. It is supported by the attendance of more than 3/4 of the total issued shares with voting rights at the general shareholders' meeting, and decisions are made with the approval of more than 3/4 of the shareholders present. If the first general meeting of shareholders does not have enough members, a second general meeting of shareholders can be convened, and the membership requirement for the second general meeting of shareholders is the attendance of at least 2/3 of the total issued shares.



It is decided with the approval of more than 3/4 of shareholders. A liquidator is appointed at the general shareholders' meeting. If a liquidator is not appointed, the board of directors performs the liquidation duties. After the resolution of dissolution at the general shareholders' meeting, business activities are prohibited and only liquidation procedures must be followed. After liquidation, the liquidator reports the liquidation results to the general shareholders' meeting. As soon as the liquidator's liquidation report is approved at the general shareholders' meeting, the company loses its corporate status. The liquidator publishes the resolutions of the general shareholders' meeting in the daily newspaper and notifies the Minister of Justice. The liquidator must notify all creditors of the dissolution, request registration of claims, and notify the Minister of Justice of the dissolution by publishing a notice in major daily newspapers and official gazettes within 30 days from the date of the liquidation resolution. If the liquidator fails to make public announcements in newspapers and official gazettes or to notify the Minister of Justice, the liquidator will be held jointly and severally liable for damages suffered by third parties. If an effort is made to register claims within 60 days from the date of public announcement, but the liquidator refuses to register the claims, the creditor whose claim registration was rejected may file a lawsuit in court within 60 days.

• Dissolution due to expiration of the company’s existence period

Dissolution and liquidation procedures are similar to paragraph 1) above.

• Dissolution due to court order

The local court may issue an order for dissolution of the company upon the petition of the following persons:

a) Prosecutors can petition the local court for an order to dissolve a company that harms the public interest or engages in illegal activities.

b) If there is a defect in the company's articles of incorporation, interested parties may petition the local court for an order to dissolve the company.

c) In cases where the general shareholders' meeting cannot be held because the business has been closed for three years based on the business suspension report submitted to the tax office or the whereabouts of most shareholders are unknown, the holding ratio between the two major shareholders is 50:50 and resolution can be made at the general shareholders' meeting. In circumstances where this is not possible, if normal management is no longer possible due to a decline in the company's assets, shareholders, directors or auditors may petition the local court for an order to dissolve the company. A liquidator is appointed upon the court's order of dissolution, and the liquidator is responsible to the court. What follows is similar to paragraph 1) above.

1. Dissolution due to declaration of bankruptcy

go. Those eligible to claim bankruptcy are as follows:

• creditor
• If the debtor has run away, if the debtor has embezzled property, if the debtor has a debt related to money raised from many people, if the debtor is uncooperative or does not act in good faith in resolving the expired debt, the public interest will be judged by the prosecution's judgment. If it harms you, the prosecution can request a declaration of bankruptcy.
• If the debtor is a bank, the central bank
• If the debtor is a securities market company, securities company, or collection and guarantee agency, the Securities Market Supervisory Service.
• Minister of Finance if the debtor is an insurance company, reinsurance company, pension management institution, or state-owned enterprise in the public utility industry.

me. Bankruptcy declaration conditions and time period

• In order to be declared bankrupt, you must have two or more creditors and one of them must be due. This applies to all debts that have already occurred and are due, such as unpaid wages, unpaid taxes, overdue loans, overdue rent, unpaid credit purchases, unpaid service fees, and unpaid construction costs.
• The length of time required for a bankruptcy trial is as follows:
  
  • Commercial Court: Up to 180 days
  • Supreme Court: Up to 60 days

all. The effects of declaring bankruptcy are as follows.

• As soon as bankruptcy is declared, all current and future property rights of the company are automatically transferred to the bankruptcy trustee.
• The right to file a lawsuit is also transferred to the bankruptcy trustee, and the parties to the ongoing lawsuit also change to the bankruptcy trustee.
• Shareholders' property rights to the company are frozen.
• Execution of security rights that have already been established will be suspended for up to 90 days from the date of bankruptcy declaration. Within two months after the expiration of the stay of enforcement period, the security interest holder must enforce the security interest. If it is not executed within two months, the right to execute it will automatically be transferred to the bankruptcy trustee. bankruptcy

If the court issues a final judgment canceling the bankruptcy declaration because the assets are not sufficient to pay the bankruptcy costs, or if the bankruptcy assets become insolvent according to the Bankruptcy Act, the company must be dissolved. In this case, the trustee performs the liquidation duties.

1. Dissolution due to cancellation of business license

Companies that cannot engage in other business once their business license is revoked, such as banks or insurance companies, must be dissolved when their business license is revoked.

1. Liquidation time and cost

It usually takes about two years from the time the company decides to dissolve to the completion of liquidation. However, the above 2-year period is based on the assumption that only general cases do not occur, and if the company has been in existence for a long time, it may take more than 2 years until the liquidation process is completed.



In particular, in order to complete liquidation, cancellation of the tax payment registration certificate is essential. In order to cancel the company's tax registration certificate, a tax audit by the tax authorities must be conducted first, so the completion of liquidation may be delayed depending on the period of the tax audit. Be careful.

Q66. What are the auction and sale procedures in Indonesia?

If a lien has already been established under Indonesian law, there is no problem with local auctions. As a unique right held only by first-priority secured creditors, as part of exercising their unique and independent rights, they can proceed with the auction process by applying for the mortgaged object to the Indonesian National Auction Department. Additionally, you can apply to initiate the auction process by submitting a certificate of mortgage to the chief judge of the district court having jurisdiction over the object of collateral. Furthermore, in the case of a mortgage on land, settlement by privately disposing of the mortgaged object is permitted under a private agreement between the mortgagee and the debtor, subject to the satisfaction of certain requirements.



The auction process is: appraisal of the auction item or real estate → application for auction → newspaper announcement → disclosure of auction item → payment of deposit → auction → announcement of successful bidder → payment of balance → auction deed → Transfer to the security interest holder’s account → Settlement of claims → Notification of settlement results to the debtor.


If you are serious about participating in Indonesian auctions and sales, it is advisable to seek help from local experts.

Q67. Can I add trade or sales functions after advancing into a manufacturing (production) corporation? I wonder what the process is if it is possible to add more?

If the product you wish to trade or sell is a product created through the activities of an existing manufacturing corporation, there is no need to add a separate trade or sales function. This is because when obtaining a manufacturing permit, it must be considered that it already includes sales and trade permits. However, if you want to sell or export other company's products rather than products made through existing manufacturing licenses, you can do so by adding a business type and realizing the minimum investment (capital increase is also considered as part of realizing the investment). In this case, there may be issues such as restrictions on the maximum foreign shareholding in the field due to sales and trade, and in this case, a situation may arise where some of the shares of the production corporation must be sold to local people or a local corporation.


If you want to add a trading business to the manufacturing industry, the process to proceed is:

1. After changing the articles of incorporation to add the trading industry and increase the capital by at least 10 billion rupiah
2. In addition, the business number NIB and Sertifika Standar data corresponding to the existing business license were modified.
3. If an existing manufacturing company is located in an industrial complex, it must proceed with an environmental impact assessment and RKL-RPL related to environmental permits.

 

Q68. What is the difference between a branch and a corporation? I'm also curious about the difference between a branch and a representative office.

In order for a foreign company to enter a host country, it must first decide what legal form it will use to enter the country. There are two ways to enter the Indonesian market: establishing an independent corporation or representative office.

1. corporation

(Corporation) refers to a company that is independent from the headquarters and established in accordance with the local laws of the country in which it plans to enter the market. Independent sales activities are possible. The form of a corporation is largely divided into foreign investment (PMA: Penanaman Modal Asing) and domestic investment (PMDN: Penanaman Modal Dalam Negeri) depending on the shareholders.

If a foreigner or overseas corporation owns even one share of a local company, it becomes a Foreign Investment Corporation (PMA), and if a local person holds 100% of the stock of a local company, it becomes a Domestic Investment Corporation (PMDN).

• Foreign Investment Corporation (PMA)

To establish a foreign investment corporation, the minimum investment amount must be more than 10 billion rupees, and the industry must also comply with the regulations pursuant to the Presidential Decree on banning foreign investment or allowing conditional investment. The minimum realized investment amount is 10 billion rupiah for each business corresponding to one Indonesian Standard Industrial Classification (KBLI) number. For example, if there are two business sectors, the minimum investment realized amount is 20 billion rupiah, and there are three. If so, the minimum investment amount must be 30 billion rupees. There must be at least two shareholders. If two individuals, an individual to a corporation, or a corporation to a corporation become shareholders or more than one shareholder, the requirements for establishing a corporation are met.

Before the Omnibus Act, which came into effect in the second half of 2020, it was allowed to establish a corporation by paying only 25% of the authorized capital as capital, but after the enactment of the Omnibus Act and related laws, the minimum capital was explicitly stipulated to be 10 billion rupees or more. Therefore, 10 billion rupiah must be paid as capital from the time of establishment of a new corporation. Even if it is realistically difficult to invest 10 billion rupiah at once, temporary approval for incorporation can be obtained. However, even in this case, the total investment amount must be paid as capital within at least 6 months from the date of establishment. In addition, since the investment status report (LKPM: Laporan Kegiatan Penanaman Modal) must be prepared and submitted online to the Investment Office every quarter after the corporation is established, the tax office will request an explanation if investment payment is not made or is delayed.

• Domestic investment corporation

Depending on the investment size, domestic investment corporations can be divided into domestic capital investment corporations (PMDN: Penanaman Modal Dalam Negeri), private corporations (SN: Swasta Nasional), and CV (Commanditaire Vennootschap). In the case of domestic investment corporations, the business industry can be freely selected regardless of type or number. Although the minimum investment amount is not set by law, a corporation can be established if the PMDN is at least 1 billion rupiah, the SN is at least 500 million rupiah, and the CV is at least 50 million rupiah.

1. representative office

Representative offices (KP: Kantor Perwakilan / RO: Representative Office) or general liaison offices in Indonesia cannot engage in any commercial or for-profit activities, except for construction representative offices. Only market research, information collection, public relations, and contact with the head office are permitted; business activities such as ordering, bidding, contracting, import/export, and distribution are not permitted. Please note that if this is violated or business profits are suspected, the National Tax Service may conduct an investigation or issue a tax payment notice.


Representative offices or liaison offices can be divided into three types depending on the industry. If you are in a general business, you can get a foreign company representative office activity permit (KPPA: Izin Kegiatan Kantor Perwakilan Perusahan Asing), and if you are an export/import/distribution agent in Indonesia, you can get a foreign commercial company representative office activity permit (KP3A: Izin Kegiatan Kantor Perwakilan Perusahan Perusahan). Perdagangan Asing), and for the construction and engineering industries, there is a foreign construction industry representative office permit (IPBUJKA: Izin Perwakilan Badan Usaha Jasa Konstruksi Asing). However, according to the 2006 Ministry of Commerce Regulations (10/M-DAG/PER/3/2006), KP3A prohibits any activities such as commerce or sales, signing contracts or making claims.