The New Head of BKPM Regulation

April 8th, 2013. The head of the Indonesian Investment Coordinating Board (Badan Koordnasi Penanaman Modal/BKPM) issue a new regulation concerning the Guidelines and Procedure for Investment Permits and Non-Permits. The regulation, which named the Perka BKPM number 5 tahun 2013 (“Perka BKPM 5/2013”), revokes Perka BKPM number 12 tahun 2009, which survives only for 4 years. Unlike its predecessor which require an Investor to pass ‘Registration’ stage prior to the establishment of the Company, Perka BKPM no. 5/2013 eliminates this stage and require the investor to directly apply Principal License in starting their investment. The following are some new policy stipulated under this new Perka BKPM 5/2013.

1. Minimum Ownership by one Shareholder

Differs from other countries, Indonesian Company Law (Law No. 40 year 2007 concerning Limited Liabilities Company) require a limit liability company to be owned by more than one shareholders. In some cases, this requirement makes one of the shareholders holds an un-significant ownership over the company’s shares.

This practice, however, has been restricted under the Perka BKPM 5/2013. The Article 22 subsection (3) point c of the Perka 5/2013 requires one shareholder to hold a minimum IDR 10,000,000 ownership over the Company (or its equivalent to US Dollars).

2. Change of Status from PMDN to Become PMA

The Law 25 of the year 2007 concerning Investment (Law 25/2007) define foreign capital as capital originated from foreign government, foreign citizen, foreign entity, Indonesian entity established by foreign investment. Based on such definition, it can be concluded that the subsidiary of foreign invested company (“PMA”) shall also be classified as a PMA company.

Although the previous regime stipulates a Local Investment Company (“PMDN”) which selling its shares to foreign investor shall become a PMA, no clear provision requiring subsidiary of the changing status PMDN to also become PMA. This, however, has been clearly stipulated under the Article 28 subsection (8) and (9) of the Perka BKPM 5/2013. The Article 28 subsection (8) and (9) requires a PMDN which change its status becoming PMA to provide a list of its subsidiaries, and within a year those subsidiaries are required to also change its status to become a PMA.

3. No SIUP is required for PMA

One of the problems faced by the investors when they invest in Indonesia is numerous permits and licenses they have to obtain. The numerous permits and licenses required by various sectoral regulations invite investors’ confusion.

The classic example of this confusion is the obtaining of Surat Izin Usaha Perdagangan/Trade Business License (“SIUP”) by a PMA. The basic understanding is that PMA shall obtain its Business License from BKPM and therefore, SIUP from municipal/regency government shall not be required. Although most government official understand that PMA is not required to obtain SIUP, no specific regulation in place confirming this understanding. Article 31 subsection (12) of the Perka BKPM 5/2013 has clearly state that a PMA holding investment permits from the BKPM, shall not be required to obtain SIUP from the municipal/regency government.

The Perka 5/2013 will start to be effective and implemented at the national BKPM office 30 working days after its enactment, or on 27 May 2013 (its enactment was on 12 April 2013) and 90 working days for the provincial or municipal/regency level BKPM. Therefore, you have to read-through this regulation, if you  wish to invest in this remarkable Indonesia .

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