For a PT PMDN (local-PT) whose shares are partly owned by PT PMA, does its business activity have to follow the rules regarding PMA or PMDN?
In Article 1 number 1 of Law Number 25 of 2007 concerning Investments (“Investment Law”), what is referred to as investment are:
All forms of investment activities, both by domestic investors and foreign investors to conduct business in the territory of the Republic of Indonesia.
Investors are people or business entities that make investments which can be in the form of domestic investors and foreign investors.
As mentioned above, that investment is divided into two. First, the definition of domestic investment (“PMDN”) can be found in Article 1 number 2 of the Investment Law as follows:
PMDN is an investment activity to conduct business in the territory of the Republic of Indonesia carried out by domestic investors using domestic capital.
Meanwhile, foreign investment (“PMA”) is defined in Article 1 point 3 of the Investment Law as follows:
PMA is an investment activity to conduct business in the territory of the Republic of Indonesia carried out by foreign investors, both those who use fully foreign capital and those in joint ventures with domestic investors.
Answering your question regarding a PT PMDN whose shares are partly owned by PT PMA. Well basically, PMDN cannot be partially owned by PMA because PMDN was established using domestic capital, this is also related to the definition of foreign capital in Article 1 point 8 of the Investment Law, that foreign capital is capital owned by a foreign country, individual foreign citizen, foreign business entity, foreign legal entity, and/or Indonesian legal entity whose capital is partly or wholly owned by a foreign party.
Thus, the capital originating from PT PMA to PT PMDN in your case is said to be foreign capital. The implication is that PT PMDN is no longer able to meet the definition of PMDN in the Investment Law and must also follow the rules that are specific to PMA.
Unless the PT PMA owns shares in PT PMDN indirectly or by indirect investment (portfolio). This can be done by buying shares of a PT through the stock/stock exchange.
Article 2 of the Investment Law states that the Law covers all direct investment activities in all sectors, both for PMDN and PMA. Furthermore, in the Elucidation of Article 2 of the Investment Law, it is explained:
What is meant by “investment in all sectors within the territory of the Republic of Indonesia” is a direct investment and does not include indirect or portfolio investment.
If PT PMDN is partly owned by PT PMA through indirect investment, then the PT PMDN will not automatically change its status to PMA. Because to change the status of PT PMDN to PT PMA, you must go through the procedure for obtaining PMA status, namely through BKPM (Investment Coordinating Board).
