Authorized Capital of Foreign-Owned Limited Liability Company (PT PMA)

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In principle, foreign investment in Indonesia must be in the form of a Limited Liability Company (“PT”) based on Indonesian law and domiciled within the territory of the Republic of Indonesia, unless the law provides otherwise. Therefore, foreign investment in Indonesia is also subject to the provisions of Law Number 40 of 2007 concerning Limited Liability Companies (“PT Law”).

PT Authorized Capital

M. Yahya Harahap in his book Limited Liability Company Law defines authorized capital as the entire nominal value of the company’s shares as stated in the Articles of Association (“Anggaran Dasar – AD”). In principle, the authorized capital of the company is the total number of shares that can be issued by the company. AD itself determines how many shares are used as authorized capital. The amount specified in the AD is the “pure face value” (p. 233).

Regarding the authorized capital of PT, Article 109 number 3 of Law Number 11 of 2020 concerning Job Creation (“UU Cipta Kerja”) which amends Article 32 of the Limited Liability Company Law stipulates as follows:

  1. The Company is required to have the authorized capital of the Company.
  2. The amount of the authorized capital of the Company as referred to in paragraph (1) is determined based on the decision of the founder of the Company.
  3. Further provisions regarding the authorized capital of the Company are regulated in a Government Regulation.

The same thing is also regulated in Article 3 of Government Regulation Number 8 of 2021 concerning Company’s Authorized Capital and Registration of Establishment, Amendment, and Dissolution of Companies that Meet the Criteria for Micro and Small Businesses (“PP 8/2021”).

So, based on our explanation above, there is no longer any provision for the minimum authorized capital for PT.

Foreign-Owned PT (PT PMA) Capital

Then, what about the authorized capital of the Foreign-Owned Limited Liability Company (“ PT Penanaman Modal Asing – PT PMA”)?

PMA (Foreign-Owned) companies are qualified as large businesses, unless otherwise stipulated by the laws and regulations, must implement the provisions, requirements for investment value, and capital to obtain investment permits.

As for the qualifications of large businesses, namely PMA companies:

  • has a net worth of more than Rp10 billion excluding land and buildings for business premises based on the latest financial statements; or
  • has annual sales of more than IDR 50 billion based on the latest financial statements.

The PMA company, unless otherwise provided for by the laws and regulations, must also comply with the following provisions on investment and capital values:

  1. total investment value is greater than Rp10 billion, excluding land and buildings per line of business, Indonesian Standard Classification of Business Fields (“KBLI”) 5 digits per project location unless otherwise stipulated by laws and regulations;
  2. the value of the issued capital is the same as the paid-up capital, at least Rp. 2.5 billion;
  3. the percentage of share ownership is calculated based on the nominal value of the shares;
  4. the nominal value of the shares as referred to in number 3 above, for each shareholder is at least Rp. 10 million.

Furthermore, the provisions that apply to the total investment value mentioned in the letter an above are:

  • specifically for large trading business activities, greater than Rp. 10 billion excluding land and buildings, per 2 digits of the initial KBLI;
  • specifically for food and beverage service business activities as long as it is open to PMA, greater than Rp10 billion excluding land and buildings in one regency/city; or
  • specifically for construction business activities as long as it is open to PMA, greater than Rp10 billion excluding land and buildings in one activity.

The above investment value must be fulfilled by the company within a maximum period of 1 year from the date the company obtains a business license.

However, based on Presidential Regulation Number 10 of 2021 concerning the Investment Business Sector (“Perpres 10/2021”), there are exceptions where foreign investment in special economic zones in technology-based startups can make investments with an investment value equal to or less of IDR 10 billion excluding the value of land and buildings.

Thus, you need to check the regulations related to the PMA business sector that will be established based on the KBLI.

Then, we also advise you to consult directly with the Investment Coordinating Board (“Badan Koordinasi Penanaman Modal – BKPM”) regarding the unwritten policy of the authorized capital of a PT PMA.

In conclusion:

Foreign investment in Indonesia must be in the form of a Limited Liability Company (“PT”) unless the law provides otherwise.

PT Penanaman Modal Asing (Foreign-Owned Limited Liability Company) is obligated to carry out the provisions on investment and capital value requirements to obtain an investment license, provided that one of the conditions is having a total investment value of more than Rp10 billion.

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