On December 28, 2015, the Financial Services Authority (Otoritas Jasa Keuangan – "OJK") issued new regulations governing venture capital business, which was previously regulated by the Ministry of Finance ("MOF"). The new regulations cover:

  1. Arrangement of Venture Capital Company Business (Reg. No. 35/POJK.05/2015)
  2. Licensing and Organization of Venture Capital Companies (Reg. No. 34/POJK.05/2015)
  3. Good Corporate Governance for Venture Capital Companies (Reg. 36/POJK.05/2015)
  4. Direct Inspection of Venture Capital Companies (Reg. 37/POJK.05/2015)

(collectively, the "New Regulations") and include provisions on traditional and Sharia venture capital business.

The venture capital sector was previously regulated under MOF Regulation No. 18/PMK.010/2012 on Venture Capital Companies ("Old Regulation"). The New Regulations are intended to revitalize the venture capital sector and elaborate more detailed requirements in response to the rapid increase of venture capital activities in recent years.


The New Regulations expand the types business activities that can be carried out by Venture Capital Companies ("VC Companies"). Unlike the Old Regulation, which limited venture capital activities to equity participation, quasi equity participation (convertible securities) and financing based on profit/revenue sharing, the New Regulations expand the activities of VC Companies as follows:

  • equity participation;
  • quasi equity participation (convertible securities);
  • financing through purchase of debt securities issued by venture partner (pasangan usaha) in the stages of start-up and/or business development; and
  • financing of productive business (including financing based on profit/revenue sharing),

(collectively, "VC Business Activities").

In carrying out VC Business Activities, a VC Company may manage Venture Funds (i.e., joint investment contract between the VC Company /Sharia VC Company and custodian bank, whereby the VC Company/Sharia VC Company is authorized to manage investor funds that will be used for VC Business Activities) and provide mentoring assistance (pendampingan) to the venture partner and/or debtor. The New Regulations also allow VC Companies to provide fee-based services and other business activities subject to OJK approval.

Similar with the Old Regulation, in financing productive business, a VC Company may cooperate with other parties in the form of channeling or joint financing activities. Note, however, that the New Regulations require the VC Company to carry out risk mitigation in this regard.

In addition, several general requirements under the New Regulation must be considered, e.g.

  • minimum of 15% of VC Company's portfolios to be equity or quasi equity participation within 3 years of receiving a business license;
  • maintaining an Investment and Financing to Assets Ratio (IFAR) of at least 40% within 3 years of receiving a business license;
  • minimum equity of a VC Company in the form of limited liability company (PT) is Rp50 billion, and in the form of cooperative (koperasi) or limited partnership (perseroan komanditer/CV) is Rp25 billion;
  • maintaining equity to paid-up capital ratio of at least 30%.


Cooperatives and limited partnerships are limited to Indonesian investment, while VC Companies formed as PT can be owned by (i) Indonesian citizens; (ii) Indonesian legal entities; (iii) foreign entities or institutions (iv) Indonesian state government; and/or (v) regional government. The maximum foreign shareholding (either direct or indirect) is 85%, and a VC Company may only trade 85% of its shares on the stock exchange.

In order to commence operations, a VC Company must apply for a business license from OJK ("OJK License"). The application review period is now 30 working days (30 calendar days under the Old Regulation), and the deadline to commence operation after issuance of the OJK License has been extended from 2 months to 6 months. OJK has also increased the paid up capital requirement at the time of establishment to Rp50 billion for a PT and Rp25 billion for cooperatives and limited partnerships.

A VC Company's organizational structure must have the following functions: (i) administration and bookkeeping; (ii) feasibility analysis; (iii) risk management, including internal control; (iv) financing management, including investment portfolio management; and (v) anti-money laundering program and terrorism funding prevention.

The use of foreign manpower is also regulated under the New Regulations.


The New Regulations provide greater details on Good Corporate Governance ("GCG"), which require a VC Company to integrate GCG principles in carrying out their activities, including transparency, accountability, responsibility, independence, and fairness. The aim is to optimize the value of the VC Company, increase development of the VC Company, and increase their contribution to the national economy. Guidelines must be made to implement these principles. Self-assessment of GCG implementation must be conducted and a report submitted to OJK periodically.

In addition, a VC Company must have at least two members of the Board of Directors ("BOD"). The entire BOD of VC Companies that are 100% Indonesian owned must be Indonesian citizens, while PMA VC Companies must have at least one Director who is an Indonesian Citizen. All BOD members must be domiciled in Indonesia. BOD obligations and prohibitions are provided under the New Regulations.

For Board of Commissioners ("BOC") requirements, a VC Company having assets of more than Rp500 billion must have at least (i) two members of the BOC, at least one of whom must be domiciled in Indonesia; and (ii) one Independent Commissioner. The BOC's obligations and prohibitions are also provided under the New Regulations.


One of the substantial changes under the New Regulations is a separate regulation on direct inspection of VC Companies by OJK. OJK may appoint third party inspectors. Direct inspection is intended to ensure that the annual reporting to OJK is in accordance with the actual situation of the VC Company and to assess the company's compliance with relevant regulations.

Direct inspection may be carried out once every three years, or any time as necessary. Inspection includes examination of books, records and relevant documents, verbal confirmation with company staff and officers, physical inspection of documents, money or goods, and information from third parties that bears any relation to the VC Company.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.