With the growth of the business, and the financial requirement of the Company, General Meeting of Shareholders (“GMS”) can decide to increase the paid-up capital of a Company, to increase the equity and value of the Company itself. The process to increase the paid-up capital includes several steps, especially if the Company is a foreign direct investment company (PT PMA or “PMA Company”).
It is important to understand that the increase of paid-up capital have implications to the PMA Company. Not only that such increase must be approved by the GMS, but the change in paid-up capital from the previous amount also needs to be approved by the Indonesia Investment Coordinating Board (“BKPM”) before it can finally be approved by the Minister of Law and Human Rights.
Therefore, there are 3 (three) steps of procedure in increasing the paid-up capital of PMA Company:
APPROVAL FROM GENERAL MEETING OF SHAREHOLDERS (GMS)
Increase of paid-up capital of the Company must be approved by the GMS, either through a voting process in the Extraordinary General Meeting of Shareholders, stated in its minutes of meeting, or in a Shareholders’ Resolution unanimously agreed and signed by the GMS.
It is important to ensure that the increase of paid-up capital agreed by the GMS does not exceed the amount of authorized capital of the Company. In the event it does, the GMS must also agree to increase the amount of authorized capital of the Company to facilitate such increase of paid-up capital.
APPROVAL FROM BKPM (ALTERATION OF PRINCIPLE LICENSE)
After the GMS has agreed to increase the paid-up capital, the minutes of GMS meeting or the Shareholders’ Resolution which has been signed and registered at the Public Notary is submitted to the BKPM to apply for BKPM approval of such increase.
Pursuant to Head of BKPM Regulation No. 14 of 2015, the BKPM approval of the increase of paid-up capital is issued in an Alteration of the PMA Company Principle License (Izin Prinsip Perubahan). The application for such license includes the details regarding how much the increase, and the new composition of shareholders after the increase. Of course, the composition of shareholders after the increase of paid-up capital must comply with the Investment Negative List (Daftar Negatif Investasi or “DNI”).
Pursuant to Article 21 (3) of Law No. 40 of 2007 concerning Limited Liability Company (“Company Law”), the increase of Paid-Up Capital must be notified to the Minister of Law and Human Rights to commence effectively. Such notification must be stated in a Notary Deed made within 30 (thirty) days after the GMS signed their minutes of meeting or Shareholders’ Resolution approving the increase of paid-up capital, and must be notified to the Minister of Law and Human Rights within 30 (thirty) days of the date of Notary Deed.
The notification to the Minister of Law and Human Rights must be enclosed with the deposit slip evidencing the increase of capital in the Company Bank Account.
In the event that the authorized capital of the Company is increased, the Company must obtain approval from the Minister of Law and Human Rights.
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