Establishing a Local PT (Perseroan Terbatas)

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WHAT IS LOCAL PT?

Local PT (Perseroan Terbatas) is a limited liabiity company established under the laws of Indonesia. In a Local PT, only Indonesian citizens and Indonesian legal entities are allowed to hold shares directly as registered shareholders. 

WHO CAN ESTABLISH LOCAL PT?

Minimum 2 (two) or more Indonesian individuals and Indonesian legal entities. Indonesian legal entities can be in the form of PT, Cooperative (Koperasi) or Foundation (Yayasan).

WHY SHOULD YOU ESTABLISH LOCAL PT?

Local PT is established by entrepreneurs so they can conduct the following activities in Indonesia:

  1. Start doing business in Indonesia as a secure legal entity (Badan Hukum), which is considered more professional and bonafide in terms of business responsibility compared to personal or group business entities. As a legal entity, PT is allowed to conduct several business activities limited to legal entities, such as providing banking, hospital, or education services.
  1. Establish a small to medium scale corporate business presence in Indonesia for an unlimited amount of time, especially for newly established entrepreneurs and startups, with options to expand or cooperate with foreign entities pursuant to the prevailing laws and regulations.
  1. Apply for business licenses in order to conduct their business directly in Indonesia, such as import, construction, manufacture and industry, consultancy, and other services.
  1. Join and participate directly in all tenders in Indonesia.
  1. Secure a limited liability company, which limits the liability of each shareholder involved to only the capital they deposit in the PT.
  1. Provide direct sponsorship for Business Visa, Expatriate Work Permit (IMTA) and Stay Permit (KITAS) in Indonesia for foreign Executives and Employees assigned in Indonesia.

 

WHERE TO ESTABLISH LOCAL PT?

PT can have its office in all over Indonesia. Keep in mind that administration and license applications for PT are conducted in each Regional Government office. The requirement may vary for each region.

THINGS YOU NEED TO KNOW ABOUT LOCAL PT

Local PT have several characteristics that separates it from other business entities, which are:

  1. ORGANIZATIONAL STRUCTURE

Local PT must be composed of minimum (2) Shareholders, which can be individuals or companies, all Indonesian. To represent the company in performing all transactions and activities, there must be at least (1) Director in PT, whose actions are supervised by at least (1) Commissioner.

If there are more than (1) Director or (1) Commissioner, they will comprise to be a Board of Directors or Board of Commissioners, with one of them acting as the President Director or President Commissioner.

It is common for Foreigners to hold position as Directors in a Local PT. However, Foreigners are not allowed to become Commissioner (Komisaris) in a PT. All Foreigners employed in a Local PT must have Working Permit (IMTA) and Stay Permit (KITAS).

  1. 100% INDONESIAN SHARES OWNERSHIP

Only by Indonesian individuals and/or legal entities can be shareholders of a Local PT. Pursuant to the current Negative Investment List, only Local PT can conduct business activities of retail, e-Commerce, public transportation, survey, real estate brokers, etc.

When Foreigners, whether foreign individuals or foreign entities want to be registered as shareholders in a Local PT, they have to apply for Principle License, to change to Local PT to become PT PMA (Perseroan Terbatas Penanaman Modal Asing or Foreign Direct Investment Company). The change of status must comply with the requirements of the establishment of PT PMA.

  1. COOPERATION WITH FOREIGN ENTITIES AND FOREIGN DIRECT INVESTMENT COMPANIES (PT PMA)

The prevailing laws and regulations in Indonesia limits several business activities so that they can only be conducted by 100% Indonesian-owned PT. Therefore, having a PT opens up business opportunities in the form of cooperation with foreign investors, from serving as distributor in the trading business, to working together with a foreign online web portal to reach larger market in Indonesia for your retail business.

  1. CAPITAL REQUIREMENT

The minimum Authorized Capital Requirement for PT is IDR 50,000,000 (around USD 3800, depending on exchange rates). 25% of Authorized Capital must be deposited as Paid-Up capital. However, if you are planning to hire expatriates to work as the Director or Expert in your PT, it is required to deposit a Paid-Up capital of at least IDR 1,000,000,000 or equal to USD 76,000 to USD 80,000 depending on exchange rates.

  1. LICENSE REQUIREMENT

License Requirement is specific for each selected industry. For example, Local PT working in the trading business require SIUP (Surat  Izin Usaha Perdagangan or Business License), while Local PT working in the construction business require SIUJK (Surat Izin Usaha Jasa Konstruksi or Construction Permit).

Some business activities require special licenses or technical recommendations before the PT can commence operations. Others may commence select operational activities immediately after incorporation.

 

HOW CAN SMART LEGAL CONSULTING HELP YOU?

SMART Legal Consulting is an Indonesian Corporate Legal Services firm. We assist investors in establishing their business in Indonesia through various forms of investment, including setting up Perseroan Terbatas (PT), both local PT and PT PMA. Our knowledge, experience, and connections makes us the law firm to be your legal partner in Jakarta, managing your investments in Indonesia.

If you have any questions about PT or require further consultation and assistance, you can arrange a meeting with SMART Legal Consulting at:

E:  info@smartcolaw.com

H: +62821-1234-1235

 

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