Establishing an Indonesian PT (LLC): A Practical Perspective

Your business is growing, and you need to establish a company for taking your business to the next level. what should you do? First and foremost, you should ask yourself: Do you really need to establish a company? Why you should establish a company when you can run the whole business with your name as a sole proprietorship (or in Indonesian legal term, Usaha Perseorangan)?

The answer is quite easy actually. If you are running a sole proprietorship and everything goes well, then you can have all the money for yourself, but if things go wrong, all of your money will be used to pay your debt (and by your money, even the ones that are not associated with your business will be used). While if you own a company, your responsibility only applies to the shares that you own (limitation of liability) – hence the name, limited liability company (or in Indonesian law term, Perseroan Terbatas).

Ok, so now that you have decided to establish an Indonesian limited liability company (hereinafter we're going to use the term “company”), what should you do? First, you're going to need a partner as Indonesian law clearly stipulates that a company must be owned by a minimum of two people.

Shortly after finding a partner, you should discuss and draft a shareholders' agreement with your him/her; and don’t forget to find a suitable name for your company (it should consists of three Indonesian words),

The next thing that you need to do is to go to a notary and ask him/her to provide you with a deed of establishment for you to sign. the notary will need the following information:

1. Name of the company (the notary will need to reserve and secure this name before signing the Deed of Establishment);
2. Name of the director;
3. Name of the commissioner;
4. Name of the shareholders and their shareholding composition;
5. The amount of your capital. under the Indonesian law, capital is divided into authorized capital and paid up/subscribed capital. By law, the minimum amount of authorized capital is Rp 50 million so let’s use that benchmark as illustration. If you believe for the first year of your business you are going to run a Rp 12.5 millon business from your savings, put Rp 12,5 million as the paid up/subscribed capital, and tell the notary to write down the downright minimum Rp 50 million as the authorized capital (Indonesian law states that paid up/subscribed capital must be at least 25% of the authorized capital). Surely, if you want to have a bigger business at startup, just raise the numbers to suit your plans.

Synchronize your signed shareholders' agreement with the content of the deed of establishment, have the notary to redraft the deed of establishment, and then, sign it.

Does signing a deed of establishment means that your company is up and running? Sadly no. After signing deed of establishment, the notary will usually need you to sign a statement letter saying that the subscribed capital will be paid up into the company's account, or if you can pay the capital up into the company's account that will be very great.

The notary will then submit your deed of establishment into the Ministry of Law and Human Rights' system, and your company will be up and running once an approval for the establishment of your company has been issued by the Minister of Law and Human Rights.

Congratulations, now you own a company.

Bakhtiar Yusuf is a Managing Partner at Loys & Co Law Firm. You can find him at http://loysco.com or send him an e-mail directly at bakhtiar@loysco.com

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