Indonesia: Establishing A Business In Indonesia

Last Updated: 25 February 2016
Article by Ira A. Eddymurthy and Denny Rahmansyah
Most Read Contributor in Indonesia, September 2019

Establishing a presence from abroad

The most common option for an overseas company as a foreign investor to establish a presence in Indonesia is by setting up a limited liability company (Perseroan Terbatas (PT)) with foreign ownership (PT PMA). The first step in establishing a PT PMA is to determine whether the PT PMA can be wholly foreign owned or only partially foreign owned. This involves what is known as the Negative Investment List. The current Negative Investment List is contained in Presidential Regulation No. 39 of 2014 outlining the list of business fields that are closed and business fields that are open with requirements for investment (PR 39).

To establish a PT PMA, a foreign investor must submit an application to the Capital Investment Coordinating Board to obtain a principle license (izin prinsip). Once the principle license is issued by the Capital Investment Coordinating Board, the founding shareholders or their proxies need to execute the deed of establishment containing the PT PMA's articles of association, which must be signed before a notary public and filed with the Ministry of Law and Human Rights for its approval. The filing process is handled by the notary. Once the Ministry of Law and Human Rights approves the articles of association, the PT PMA must then register with the Ministry of Trade.

Another common option for an overseas company to establish a presence in Indonesia is by acquiring an existing PT PMA. Such an acquisition is also subject to approval by the Capital Investment Coordinating Board and the Ministry of Law and Human Rights and registration with the Ministry of Trade.

There are advantages and disadvantages both to establishing a new PT PMA and to acquiring an existing PT PMA.

Establishing a new limited liability company (Perseroan Terbatas (PT)) with foreign ownership (PT PMA)

The advantage is that the foreign investor has immediate control once the PT PMA is established and the management can be set up to suit the investor's preferences.

The disadvantage is that establishing a new PT PMA requires permits, setting up a physical presence (office) and hiring employees, which is time consuming compared to acquiring an existing PT PMA. Setting up a new PT PMA also requires completing an administrative process with government institutions/agencies related to the technical licences of that PT PMA.

Acquiring an existing limited liability company (Perseroan Terbatas (PT)) with foreign ownership (PT PMA)

The advantage is that there is pre­existing brand recognition in the market if the existing PT PMA is already widely known and in good standing. Also, the existing PT PMA will have licenses, an office and employees.

The disadvantage is that before acquiring an existing PT PMA an investor is recommended to conduct a legal due diligence on the PT PMA's documents to ensure the soundness of the PT PMA, specifically with regard to its outstanding taxes and financial obligations and whether the PT PMA is involved in any disputes with other parties. The legal due diligence may incur legal costs and require time before the foreign investor can proceed to the next steps. In addition the administrative procedures that must be followed, such as notification/registration with government institutions/agencies, are time consuming.

Representative offices

Foreign companies can also establish a representative office, specifically a Foreign Company Representative Office (Kantor Perwakilan Perusahaan Asing (KPPA)) or a Foreign Trade Representative Office (Kantor Perwakilan Perusahaan Perdagangan Asing (KP3A)) by submitting an application to the chairman of the Capital Investment Coordinating Board.
A KPPA is established by foreign companies engaging in a service business, while foreign companies involved in the trading of goods will establish a KP3A. A KPPA and KP3A are limited to acting as a liaison between their principal and potential customers (for example, marketing and promotional activities) and are prohibited from generating revenue in Indonesia.

Forming a private company in Indonesia

A limited liability company (Perseroan Terbatas (PT)) is governed by Law No. 40 of 2007 regarding limited liability companies (Company Law). The other applicable laws and regulations include Law No. 3 of 1982 regarding mandatory company registry. A limited liability company (Perseroan Terbatas (PT)) with foreign ownership (PT PMA) must also observe Law No. 25 of 2007 regarding capital investment.

The procedure for establishing a PT PMA is governed under Capital Investment Co­ordinating Board Regulation No. 5 of 2013 as amended by Regulation No. 12 of 2013 regarding the guidelines and procedures for investment licensing and non­licensing. The relevant authorities involved in establishing a business are the Ministry of Law and Human Rights and the Capital Investment Coordinating Board. The Capital Investment Coordinating Board is a regulatory body and the centrt for the administration of foreign investment.

The Capital Investment Coordinating Board, as the supervisory authority for a limited liability company (Perseroan Terbatas (PT)) with foreign ownership (PT PMA), will reject an application for a principle license if:

  • The company cannot substantiate that it will implement its investment.
  • The company only has a virtual office.

A PT PMA must also submit an activities report to the Capital Investment Coordinating Board, and if that PT PMA does not conduct any activities the Capital Investment Co­ordinating Board has the authority to revoke the PT PMA's license.

This publication is intended for informational purposes only and does not constitute legal advice. Any reliance on the material contained herein is at the user's own risk. You should contact a lawyer in your jurisdiction if you require legal advice. All SSEK publications are copyrighted and may not be reproduced without the express written consent of SSEK.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions