Classification of Company Based on Capital
Minggu, 28 Juli 2024
Based on Regulation of the BKPM Number 4 Year 2021, the business scale of legal entities in Indonesia shall be divided into 4 types, as follows:
Micro Business has a business capital up to a maximum of IDR1,000,000,000.00 (one billion rupiahs) excluding land and buildings for business premises;
Small Business has a business capital of more than IDR1,000,000,000.00 (one billion rupiahs) up to a maximum of IDR5,000,000,000.00 (five billion rupiahs) excluding land and buildings for business premises; and
Medium Business has a business capital of more than IDR5,000,000,000.00 (five billion rupiahs) up to a maximum of IDR10,000,000.00 (ten billion rupiahs) excluding land and buildings for business premises.
Large Business has a business capital of more than IDR10,000,000.00 (ten billion rupiahs) excluding land and buildings for business premises.
Business capital is defined as the owner’s equity and loan capital for business activities (Elucidation of PP No. 7/2021).
Specifically for Foreign Investment business entities, based on Regulation of the BKPM Number 4 Year 2021, are included in the category of large-scale business and must follow the minimum investment value provisions, unless otherwise stipulated by laws and regulations.
The investment value provisions for foreign investment companies (Penanaman Modal Asing/PMA) shall be exempted for several business activities:
Specifically for large-scale trading activities, the amount of which is greater than IDR10,000,000,000 (ten billion rupiahs) excluding land and buildings, is per 4 (four) initial digits of the KBLI;
Specifically for food and beverage service business activities, the amount is greater than IDR10,000,000,000 (ten billion rupiahs) excluding land and buildings, is per 2 (two) initial digits of the KBLI per one location point;
Specifically for construction service business activities, the amount is greater than IDR10,000,000,000 (ten billion rupiahs) excluding land and buildings in one activity, is per 4 (four) initial digits of the KBLI;
Specifically for industrial business activities that produce different types of products with 5 (five) different digits of the KBLI in 1 (one) production line, is greater than IDR10,000,000,000 (ten billion rupiahs) excluding land and buildings; or
Specifically for property development and enterprise activities, the following provisions shall apply:
In the form of property taking the form of a building in its entirety or an integrated housing complex, provided that the investment value is greater than IDR10,000,000,000 (ten billion rupiahs) including land and buildings; or
In the form of unit property not in 1 (one) building as a whole or in 1 (one) integrated housing complex, the investment value is higher than IDR 10,000,000,000 (ten billion rupiahs) excluding land and buildings
Paid-Up Capital of Foreign Investment Company
Regulation of the BKPM Number 4 Year 2021 stipulates that the minimum paid-up capital for PMA is at least IDR10,000,000,000 (ten billion rupiahs), unless otherwise stipulated by laws and regulations. For example, the capital requirement for construction works under PP No. 5 Year 2021 is a minimum of IDR25,000,000,000 (twenty-five billion Rupiahs).
Provisions on investment and capital values are exempted for representative offices and foreign business entities.
Divestment Obligation
Prior to the enactment of the Job Creation Law, there are regulations that mandated the divestment of shares from PMA business entities to Indonesian parties for certain sectors, one of the examples is in the mineral and coal mining business field under Law Number 3 Year 2020, it is mentioned that business entities that are holders of Mining Business License (Izin Usaha Pertambangan/IUP) or Special Mining Business License (Izin Usaha Pertambangan Khusus/IUPK) during the Production Operation activity stage are required to divest 51% (fifty-one percent) of their shares in stages to the Central Government, Regional Governments, BUMN, regionally owned enterprises, and/or national private Business Entities.
Furthermore, under Regulation of the BKPM No. 4 Year 2021, the obligation to divest shares of PMA business entities still binds the parties and must be carried out in accordance with the predetermined period. The said divestment of shares may be conducted to individual WNI or to PMDN (Penanaman Modal Dalam Negeri/PMDN) business entities through direct ownership in accordance with the agreement of the parties and/or the domestic capital market.
Direct share ownership for Indonesian citizens (Warga Negara Indonesia/WNI) or PMDN is set at a minimum of IDR10,000,000 for respective shareholder. Meanwhile, ownership in the domestic capital market is regulated in accordance with provisions of laws and regulations in the capital market.
The obligation to divest shares of PMA business entities shall be in accordance with the business field that is carried out based on a deed document which states the agreement of the parties regarding the implementation of the mandatory share divestment. However, this share divestment obligation may not be implemented if the prevailing provisions do not require the share divestment and in the company deed document the shareholders agree on:
The Indonesian party declares that they do not desire/demand the ownership of shares in accordance with the share divestment provisions which are set out in an approval letter and/or business license, for PMA business entities which 100% of the shares are not owned by foreigners; or
The shareholders declare that they have no commitment/agreement with any Indonesian party to sell their shares, for PMA business entities which are 100% owned by foreigners. However, if there are Indonesian parties that demand the implementation of the said divestment obligation in the future, then the shareholders/business entities must be held accountable.
The above mentioned shareholder agreement must be submitted to the BKPM and the BKPM will subsequently evaluate and assess the relevant shareholder agreement. Evaluation and assessment results may be approved or rejected. If approved, the BKPM will declare the divestment obligation is null and if rejected, the BKPM will issue an explanation letter and rejection letter.
After the share divestment deed has been approved by the Minister of Law and Human Rights, the Indonesian parties who already own the shares may resell them to Indonesian individuals/foreign individuals/foreign business entities/Indonesian business entities/foreign business entities while still observing the relevant laws and regulations.
Once the implementation has been conducted and ratified by the Ministry of Law and Human Rights, business actors are required to make changes to the data in the OSS system.
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