Law No. 11 of 2020 on Job Creation dated 2 November 2020 ("Law 11/2020"), or also known as the Omnibus Law has amended numerous laws in various sectors, including Law No. 40 of 2007 regarding Limited Liability Company ("Law 40/2007").
Some essential changes under the Omnibus Law encompass among others, the removal of company's minimum authorized capital and introduction of the simplification for the incorporation of micro and small enterprises ("MSE").
Legal Frameworks: The executive summary below referred to the following prevailing laws and regulations:
- Law 40/2007 as amended by Law 11/2020 ("Amended Law 40/2007"); and
- Government Regulation No. 8 of 2021 on Authorized Capital of Limited Liability Company and Registration of Its Establishment, Alteration, and Dissolution of Micro and Small Enterprises ("GR 8/2021"); and
- Minister of Law and Human Rights Regulation No. 21 of 2021 on Requirements and Procedures for the Establishment, Adjustment, and Dissolution of a Limited Liability Company ("MoLHR Regulation 21/2021").
Key Amendments introduced by Amended Law 40/2007: Below are some key of the amendments of Law 40/2007 provisions.
Legal Status of Company: Based on Law 40/2007, legal entity status of the company shall be obtained after (i) the Company being registered with the Minister of Law and Human Rights ("MoLHR") and (ii) issuance of proof of registration issued by the MoLHR (Art. 7 (4) of Amended Law 40/2007).
In the previous regime, the Company would obtain its legal entity status on the date of the issuance of the Ministry Decree on the legalization of the Company's legal entity (approval to the establishment). This procedural change simplifies and expedites the Company establishment process.
Minimum Requirement of Company's Authorized Capital: The omnibus has omitted the minimum requirement of company's authorized capital. In this instance, the amount of authorized capital shall be agreed solely by company's founders (Art. 32 (2) of Amended Law 40/2007). However, there is still no certainty on the implementation of the omission of such minimum authorized capital requirement. Please also note that this provision is only applicable for Local Investment Company.
In addition to the above, foreign companies/Perusahaan Modal Asing (PMA) there are also changes to provision regarding minimum capital requirement, however, this is not regulated under the Amended Law 40/2007 but is being further addressed under the Indonesia Investment Coordinating Board/Badan Koordinasi Penanaman Modal (BKPM) regulation.
Easing on the requirement of MSE Establishment: Law 11/2020/Omnibus Law stipulates that MSE can be established by a sole shareholder ("Individual MSE Company") through an Establishment Statement Letter/Surat Pernyataan Pendirian, instead of notarial deed (Art. 153A (1) of Amended Law 40/2007).
In addition to the above, the establishment of MSE should fulfill the general conditions which are: (i) shareholder of MSE must be individuals; (ii) the founders of MSE company may only establish 1 (one) MSE in one year (Art. 153E of Amended Law 40/2007).
Establishment Procedures of Individual MSE Company: Any business actor who intends to establish an Individual MSE Company shall: (i) register itself to Legal Entity Administration System/Sistem Administrasi Badan Hukum, a platform that is managed by MoLHR; and (ii) fill in the provided establishment form that is deemed as Establishment Statement Letter (Art. 13 of MoLHR Regulation 21/2021)
Afterwards, MoLHR will issue an Establishment Certificate that shall be kept by the business actor, along with the Establishment Statement Letter, to be the evidence of Individual MSE Company establishment. (Art. 14 (1) and (2) of MoLHR Regulation 21/2021).
Changes of Individual MSE Company: An individual MSE company must convert into a 'general' limited liability company if the same: (i) no longer has a sole shareholder; (ii) does not fulfill the MSE general requirements as provided under Art 153A of Amended Law 40/2007 (Art. 153H (1) of Amended Law 40/2007 jo. Art. 17 (1) MoLHR Regulation 21/2021).
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.
