There is no more doubt that Indonesia provides many entrepreneurs and investors both foreign and local with a wide range of business opportunities. However, to earn success and profit, a foreign-owned company should be changed to a PT PMA (Foreign Investment Limited Company) as regulated in the article No. 40, the Year 2007 (Law Regulation on setting up a startup in Indonesia).
Majority of foreign companies established in Indonesia have changed their business entity into a PT PMA (Foreign Investment Limited Liability Company) as it can be in the form of a foreign-owned LLC or an LLC within a partnership with an Indonesian company (a local partner).
One of the perks of having this kind of business entity is that it entitles foreign investors full authority to direct the company, there are no limitations on the locations that a PT PMA may choose to run its business in, and it will also reduce the risk in getting suitable local partners.
Nevertheless, the Indonesian government restricts foreign companies on several business fields they may choose, according to the Negative List of Investment. Therefore, a foreign-owned company must be stipulated as a local company (referring to the Regulation of the President of the Indonesian Republic No. 39 / Year 2014 on the business fields closed for investment and those that are not restricted). In that case, one of the effective solutions is by hiring a local nominee company in the form of a PT (LLC) with local shareholders but still under the control of the foreign investors.
Here is the scope of work of a nominee company in Indonesia
As mentioned above, a nominee company can be a solution to those foreign investors who are trying to run their business in Indonesia but find their business sectors are included in the Negative List of Investment. The next question is: how does a nominee company work for the foreign investors who hire it? Is it the same with a conventional PT? Below is the scope of work of a nominee company in Indonesia:
- You will get a complete package of legal agreements—such as Director Appointment Letter, Pledge of Shares Agreement, and Cooperation Agreement—so that Indonesian shareholders safely hold your company without any of them having control over the company and its financial matters.
- You will have the company take care of the business, administration, employee recruitment, and monthly employee taxes (BPJS).
- You are lawfully the director of the company and have the total control over it.
How to set up a nominee company safely and under Indonesian regulations
Besides the scope of work of a nominee company in Indonesia, you also need to know how to set up a nominee company safely and under the regulation of Indonesian government. Following are the tips:
- Have at least two (2) local shareholders in your nominee company to avoid one person from possessing the majority shares (as the Indonesian government regulation mentions two local shareholders at a minimum to run a PT PMA).
- Take your money from the company regularly or on a daily/weekly basis.
- Choose a trustworthy law firm to take care of the nominee company of yours (including the business licenses, two local shareholders at a minimum, and legal contract that will protect your rights regarding the company ownership).