GLOBAL GUIDE 2017

JOINT VENTURES

Joint ventures in Indonesia: overview

Ira A Eddymurthy and Nico A Mooduto
SSEK Indonesian Legal Consultants
global.practicallaw.com/5-617-3624

DOMESTIC COMPANY JOINT VENTURES (JVS) Contractual JVs

Regulation A contractual JV is formed by agreement between the JV
partners, and does not require the establishment of a legal or
1. Are JVs expressly regulated? business entity.

There are various laws and regulations that regulate the terms 3. What are the principal corporate/company laws
that can be included in JV agreements, including Law No. 40 of governing corporate JVs?
2007 regarding Limited Liability Company (16 August 2007) and
the Indonesian Civil Code.
The principal corporate/company laws governing corporate JVs
There are additional regulations for JVs operating in certain are the Law No. 40 of 2007 regarding Limited Liability Company
industries. For example, Law No. 2 of 2017 regarding (16 August 2007) and the Indonesian Civil Code.
Construction Service (12 January 2017) (Construction Law)
regulates certain JVs in the construction industry. The There are also additional regulations governing JVs operating in
Construction Law allows the formation of a joint operation, which certain industries.
is a legal arrangement that resembles a JV. A joint operation is
Formation and registration
an agreement between a foreign construction representative
office and a local construction company for the completion of a
specific construction project. 4. What are the typical JV founding documents for a
Types corporate JV?

2. Which types of JV are allowed? The typical JV founding documents for a corporate JV are the:
 JV/shareholders' agreement entered into by the JV
partners, which is a private agreement documenting the
There are two types of JVs: corporate JVs and contractual JVs.
relationship between the JV partners.
Corporate JVs  Deed of establishment, which contains the entity's articles of
Corporate JVs are divided into incorporated JVs and association and:
partnerships.
- a list of the members of the board of directors and board
An incorporated JV is a legal entity that has limited liability of commissioners, for a limited liability company
status, commonly referred to as a limited liability company (perseroan terbatas) (PT); or
(perseroan terbatas) (PT). PTs are organised under Law No. 40
of 2007 regarding Limited Liability Company (16 August 2007) - a list of the partners, for a partnership.
(Company Law).  The deed of establishment must be executed in the form of
A partnership is a business entity that does not have limited a notarial deed.
liability status. Common forms of partnerships in Indonesia  Decree from the Ministry of Law and Human Rights
include: (MOLHR) approving the establishment of the PT (MOLHR
 A firm (firma or venootschap onder firma). decree). A PT is granted limited liability status on issuance
of the MOLHR decree.
 A komanditer partnership/association (commanditaire
vennotschap) (CV).
5. Is the use of foreign language in a JV's founding
The main difference between a firm and a CV lies in the documents (both corporate and contractual)
contribution of the partners. In a CV, there are two types of restricted?
partners, namely active partners, who manage the business of
the CV, and passive partners, who merely make capital
contributions to the CV. The liability of a CV's passive partners Under Law No. 24 of 2009 regarding the Indonesian National
is limited to the amount of their capital contribution. In contrast, Flag, Language, Emblem and Anthem (9 July 2009), Bahasa
there are no distinct categories of partners in a firm. Indonesia (the official state language) must be used in:
 Official communications between the state and private
entities.
 Official documents issued by the state.
© Thomson Reuters 2017
This article was first published in the Joint Ventures Global Guide 2017
and is reproduced with the permission of the publisher, Thomson Reuters.
The law is stated as at 01 October 2017.
 Agreements involving the Indonesian Government, Modal), which derives its authority from the Ministry of Public
Indonesian private companies or Indonesian individuals. Works.
Therefore, a JV's founding documents, which comprise the JV
agreement and/or the deed of establishment, must be prepared 8. What other formal requirements must be complied with
in Bahasa Indonesia if one of the parties is Indonesian. If one of to validly constitute a JV?
the parties to the JV agreement is a foreign party, the agreement
can be drafted in the language of that foreign party in addition to
Bahasa Indonesia. In the vast majority of agreements with a The formal requirements that must be complied with to validly
foreign party, the parties typically agree that the foreign constitute a JV include the following:
language version will prevail. However, the deed of
establishment, which must be prepared in the form of a notarial  Characterisation of business activities. The JV must set
deed, must always be in Bahasa Indonesia. out the business(es) that it engages in accordance with the
Indonesian Business Fields Classification (Klasifikasi Baku
Lapangan Usaha Indonesia) (KBLI) issued by Indonesia's
6. Are public officers (for example, public notaries) Central Statistics Body (Badan Pusat Statistik). The KBLI is
involved in a JV's formation procedure? represented by five-digit codes. The most recent KBLI is set
out in Regulation of the Chairman of the Central Statistics
Body No. 95 of 2015 (29 October 2015) regarding the KBLI,
A public notary is involved in the formation of a corporate JV. as amended by Regulation No. 19 of 2017 (21 February
The role of the public notary includes the preparation and 2017).
execution of the deed of establishment in the form of a notarial
deed. In the case of a limited liability company, the notary  Minimum number of shareholders. A limited liability
handles the submission of the deed of establishment to the company (perseroan terbatas) (PT) must have at least two
Ministry of Law and Human Rights (MOLHR) to obtain the shareholders (Law No. 40 of 2007 regarding Limited
MOLHR Decree (see Question 4). Liability Company (16 August 2007) (Company Law)).

The formation of a contractual JV does not involve any public  Board of directors (BOD). A PT must have at least one
officers. member in its BOD (Company Law). The duties and
responsibilities of the BOD consist of managing the day-to-
day operations of the PT.
7. Are JVs registered with any local registries? Are public  Board of commissioners (BOC). A PT must have at least
sector bodies' authorisations required for a JV's one member in its BOC, the duty of which is to supervise
establishment? the functions of the BOD (Company Law).
 Capitalisation. A PT has three types of share capital:
Local registries authorised, issued and paid up. The aggregate issued and
paid-up share capital must be no less than 25% of the PT's
Corporate JVs must be registered with the following bodies
authorised share capital. All issued share capital must be
(among others):
fully paid up on issuance of the decree of the Ministry of
 Company Registry of the Ministry of Law and Human Rights Law and Human Rights (MOLHR) approving the
(MOLHR) (for limited liability companies (perseroan incorporation of the PT. The minimum authorised share
terbatas) (PTs)). capital for a PT is IDR50 million (Company Law). There is
an exception for micro, small and medium enterprises,
 Local government of the area where the corporate JV is which can have an authorised share capital below IDR50
domiciled (domicile registration). million (Government Regulation No. 29 of 2016 regarding
 Local tax office (Nomor Pokok Wajib Pajak) (tax Change of Authorised Capital of Limited Liability Company
identification registration). (14 July 2016)). Payment for shares can be made in cash or
in kind, but any in-kind payment must be valued by an
 Local office of the Ministry of Trade (company registration). independent appraisal company.
 Local office of the Ministry of Manpower (labour and  Publication requirements. The articles of association of a
employment registrations). corporate JV must be submitted to the State Printing Office
for publication in the Supplement to the State Gazette.
Contractual JVs are not subject to registration requirements.
Permitted markets
Public sector bodies
Corporate JVs in the form of a PT must be authorised by the
MOLHR. To this end, the deed of establishment of the corporate 9. Can the JV structure be used in every industry sector?
JV must be filed with the MOLHR. The MOLHR will approve the Are there any restrictions to be considered and
formation of the PT by issuing an MOLHR decree. carefully assessed before investing in a JV?

Corporate JVs in the form of a partnership must file a deed of

establishment with the competent local district court. The district Presidential Regulation No. 44 of 2016 regarding List of the
court will legalise the partnership's deed of establishment. Business Fields that Are Closed and Business Fields that Are
Open With Requirements for Capital Investment (18 May 2016)
Contractual JVs do not normally require authorisations from
(Daftar Negatif Investasi) (DNI) lists the areas in which
public sector bodies, unless otherwise required by specific
investment by both Indonesians and foreign nationals is either
regulations in certain industries. For example, in the case of a
prohibited or restricted. The lines of business that are closed to
joint operation (see Question 1), the foreign construction
investments are as follows (Attachment 1, DNI):
representative office must be licensed by the Indonesian
Investment Co-ordinating Board (Badan Koordinasi Penanaman  Cultivation of marijuana.

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 Fishing of fish species listed in Appendix 1 to the Share capital and participation
Convention on International Trade in Endangered Species
of Wild Fauna and Flora 1973.
11. What possible forms of participation are there in a JV's
 Salvage of valuable artefacts from shipwrecks. share capital? How can a JV member contribute and
 Gathering (retrieval) of coral for construction materials, lime, are there statutory limits on the possibility to make
calcium and souvenirs/jewellery, as well as gathering of contributions in kind?
living or recently dead coral from nature.
 Manufacture of chloro-alkali with mercury. Forms of participation
 Manufacture of active ingredients of pesticides. Participation in a limited liability company's (perseroan terbatas)
(PT) share capital is by way of issuance and subscription of
 Manufacture of industrial chemicals and ozone-depleting shares in the PT (Law No. 40 of 2007 regarding Limited Liability
substances. Company (16 August 2007) (Company Law)).
 Manufacture of chemicals listed in Schedule 1 to the Participation in a partnership's share capital is by making a
Chemical Weapons Convention (Attachment I, Law No. 9 of contribution to the capital of the partnership (Indonesian Civil
2008 regarding Use of Chemicals and Prohibition on Use of Code).
Chemicals as Chemical Weapons (10 March 2008)).
Contributions
 Manufacture of alcoholic liquor.
In the case of a PT, share capital contributions can be made in
 Manufacture of alcoholic beverages. cash or in kind (Company Law). The valuation of contributions
in kind must be determined on the basis of their fair value or by
 Manufacture of malt beverages. an expert who is not affiliated with the PT. Contributions in kind
 Provision and operation of terminals for land transport of must be announced in one or more daily newspapers within 14
passengers. days after the deed of establishment is executed.

 Provision and operation of motor vehicle weighing stations. Participation in a partnership's share capital can take the form
of contributions in cash, goods, or labour.
 Telecommunications/aids for shipping navigation and vessel
traffic information system.
12. Can a corporate JV's share capital be denominated in
 Provision of flight navigation services.
a foreign currency?
 Performance testing of certain types of motor vehicles.
 Management and operation of radio frequency spectrum A JV's share capital must be denominated in Indonesian rupiah.
and satellite orbit monitoring stations.
However, a limited liability company (perseroan terbatas) (PT)
 Governmental museums. can denominate its share capital in a foreign currency in addition
 Historical and archaeological remains (such as temples, to Indonesian rupiah, provided that both currencies in equal
sultans' palaces, inscriptions, ruins, ancient buildings, and value are referenced in the PT's deed of establishment. For the
so on). purposes of foreign capital investment, the Capital Investment
Co-ordinating Board allows the use of foreign currencies (for
 Gambling/casinos. example, US dollars).
However, a person can enter into a closed line of business for Duration and limits on membership
non-commercial purposes (such as research and development),
subject to approval from the agency in charge of the relevant
line of business (DNI). 13. Are there statutory limits on a JV's duration?

In addition to the DNI, the laws and regulations governing

specific business sectors should be reviewed, to determine There are no statutory limits on a JV's duration. For both
whether the line of business in question is open for investment corporate and contractual JVs, the existence or duration of a JV
and, if so, whether a JV would be subject to foreign investment depends on the agreement between the JV partners.
restrictions or other special requirements.
Purpose 14. Are there statutory limits on the number of members
participating in a JV?
10. Can a JV be established with any purpose?
There are no statutory limits on the number of members
The Indonesian Civil Code recognises the principle of freedom participating in a JV, for either corporate or contractual JVs.
of contract, provided that a contract does not violate any Public sector bodies
prevailing laws and regulations or the rules of public order. In
this regard, parties to both contractual and corporate JVs are
free to establish a JV with any purpose, provided that this 15. Can a public sector body enter into a JV agreement?
purpose does not fall under a restricted or prohibited line of Subject to what conditions? In particular, do public
business (see Question 9). private partnerships (PPP) laws and regulations apply?

A public sector body can enter into a JV agreement subject to

the following conditions.

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Corporate JV termination non-competition clause will in principle be binding on
the JV partners.
A corporate JV that is set up with capital derived from the state
budget is a state-owned company (badan usaha milik negara) However, a non-competition clause may be held invalid if it
(BUMN). A BUMN takes the form of a limited liability company violates the Anti-Monopoly Law (see above, During period of
(perseroan terbatas) (PT) and is established under a effectiveness). Accordingly, a non-competition clause may have
government regulation. The state must own at least 51% of the no legal effect following termination of the JV agreement.
shares in a BUMN.
Additionally, even where a non-competition clause does not
The state can only participate in the capital of existing corporate violate the Anti-Monopoly Law, the courts will look at the scope
JVs in certain circumstances, to rescue the state's economy. of the clause. Specifically, if the scope of a non-competition
clause is blatantly unfair (for example, it is for an indefinite period
The primary laws and regulations that govern BUMNs and
or is subject to a very long duration), such that it may be deemed
capital participation in BUMNs are:
to restrict competition, the affected JV partner can challenge the
 Law No. 17 of 2003 regarding State Finance (28 April validity of the clause before a judicial body. Unfortunately, the
2003). dearth of precedent does not provide clear guidance on these
issues.
 Law No. 19 of 2003 regarding State-Owned Enterprise (19
June 2003). De facto company/partnership
 Law No.1 of 2004 regarding State Treasury (14 January
2004). 17. Must the contractual JV satisfy any conditions to avoid
falling within the definition of de facto
 Government Regulation No. 44 of 2005 regarding
company/partnership?
Procedures of Participation and Management of State
Capital in State-Owned Enterprise and Limited Liability
Company (25 October 2005).
A contractual JV does not need to satisfy any conditions to avoid
 Law No. 40 of 2007 regarding Limited Liability Company (16 falling within the definition of de facto company/partnership. The
August 2007). formation of a partnership or a limited liability company
(perseroan terbatas) (PT) is subject to specific formal
Public private partnership (PPP) laws and regulations do not requirements, including the execution of a deed of
apply to the formation and management of corporate JVs. establishment in the form of a notarial deed, obtaining relevant
authorisations and filing local registrations (see Question 4,
Contractual JV
Question 7 and Question 8). If these formal requirements are
The Government of Indonesia (GOI) can enter into JV not fulfilled, a contractual JV will not be deemed a de facto
agreements with private entities for infrastructure projects. The company or partnership.
process for entering into such JV agreements is governed
byPPP laws and regulations, as well as Presidential Regulation Limiting member liability
No. 38 of 2015 regarding Co-operation between Government
and Business Entity in Infrastructure Development (20 March
2015) (PR 38). Under PR 38, private entities that seek to form a 18. Can a JV agreement provide that a JV member can
participate without incurring any risk, loss or reward?
PPP with the GOI must be in the form of a PT, a foreign legal
entity, or a co-operative.
Non-competition and anti-trust clauses There are no express restrictions on such a JV agreement.
However, in the case of a limited liability company (perseroan
16. Are there statutory constraints on the use of non- terbatas) (PT), the shareholders'/JV partners' liability is limited
competition or anti-trust clauses in a JV agreement? to the amount of their shares in the PT (Law No. 40 of 2007
regarding Limited Liability Company (16 August 2007)
(Company Law)). Therefore, the Company Law does not appear
During period of effectiveness to allow transfers of liability between the JV partners that would
result in a JV partner bearing liability that exceeds its liability
The freedom of contract principle recognised under the under the Company Law.
Indonesian Civil Code allows contracting parties to include any
clauses in their agreement, provided that they do not violate In the context of a partnership and contractual JV, the
Indonesian laws and regulations. There is no law or regulation Indonesian Civil Code provides that an agreement cannot
that expressly regulates or prohibits non-competition and anti- provide that benefits (or profits) will be given to only one JV
trust clauses in JV agreements. It is common for JV partners to partner to the exclusion of the other JV partners. However, the
include a non-competition clause in their JV agreement. same provision states that the JV parties can agree that any loss
will be borne by one JV member only.
However, Indonesian law prohibits practices that aim to unfairly
restrict competition under Law No. 5 of 1999 regarding Anti-trust
Prohibition of Monopolistic Practices and Unfair Business
Competition (5 March 1999) (Anti-Monopoly Law). For example,
the Anti-Monopoly Law prohibits a market-dominant entity from 19. Do any anti-trust rules, guidelines or policies apply to
abusing its position by unfairly restricting its competitor(s)' a JV agreement?
activities. Therefore, a non-competition clause may not hold up
before the Indonesian Competition Supervisory Body if it is
entered into by an industry-dominant business player. JV agreements are subject to the anti-trust rules set out in the
Law No. 5 of 1999 regarding Prohibition of Monopolistic
Following termination Practices and Unfair Business Competition (5 March 1999)
Under the freedom of contract principle, JV partners are (Anti-Monopoly Law). However, the Anti-Monopoly Law does
generally free to enter into any agreement. Therefore, a post-

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not apply to research and development JV agreements that aim A PT's articles of association cannot provide for lower quorum
to increase the standard of living of the general public. and voting requirements. However, articles of association can
impose higher quorum and voting requirements (including
Governance and limits on directors unanimity requirements) for the approval of resolutions relating
to any or all of the above matters (Company Law).
20. Can the parties to a JV freely regulate the JV or are they Additionally, shareholders of a PT (that is, the JV partners) have
subject to certain restrictions? the right to receive dividends issued by the PT (Company Law).
Therefore, a JV agreement cannot exclude a shareholder's right
to dividends.
Under the Indonesian Civil Code, which recognises the principle
of freedom of contract, the parties to a JV can freely regulate the There are also restrictions that apply to partnerships and
JV, subject to certain restrictions set out in the applicable laws contractual JVs (see Question 18).
and regulations.
In addition, specific sectoral laws and regulations may need to
Law No. 40 of 2007 regarding Limited Liability Company (16 be consulted to assess other potential restrictions.
August 2007) (Company Law) places certain restrictions on the
operation of limited liability companies (perseroan terbatas)
(PTs) (for example, in relation to voting and quorum 21. Are there limits or restrictions on the eligibility of an
requirements, shareholders' rights, appointment of the board of individual as a member of the board of
directors (BOD) and board of commissioners (BOC), and so on). directors/statutory auditor?
For example, PTs are subject to the following votingand quorum
requirements (Company Law):
There are limits and restrictions on the eligibility of an individual
 Simple majority. Certain corporate matters are delegated as a member of the board of directors (BOD) and statutory
to the general meeting of shareholders, which typically auditor under the Law No. 40 of 2007 regarding Limited Liability
requires a quorum of more than one half of the total shares Company (16 August 2007) (Company Law).
with valid voting rights and a voting threshold of more than
one half of the shares in attendance. These matters include BOD
the: To be eligible for appointment to the BOD, an individual must be
- appointment, replacement or dismissal of members of qualified to undertake legal actions and, within a period of five
the BOD and BOC; years before their appointment, must not have:

- determination of the term of the BOD and BOC;  Been declared bankrupt.

- determination of the salary and allowance of members of  Assumed a position as a member of a company's BOD or
the BOD and BOC; board of commissioners (BOC) and been declared
responsible for the bankruptcy of that company.
- ratification of the PT's audited financial statement, if the
PT is required to prepare an audited financial statement  Been punished for criminal acts causing losses to state
(publicly listed companies and companies with assets or finances and/or relating to the financial sector.
revenue of more than IDR50 billion, among others, must Statutory auditor
prepare audited financial statements);
Expert(s) or independent appraisers must be appointed for:
- ratification of the PT's annual report;
 The valuation of contributions in kind.
- increase of the PT's issued share capital and paid-up
capital within the limit of the authorised capital;  Investigations into a limited liability company (perseroan
terbatas) (PT).
- utilisation of net profits, including the determination of the
amount to be allocated to the reserve fund and the The following requirements must be met.
amount and distribution of dividends; Valuation of contributions in kind. Contributions in kind must
- approval of work plan, as required by the PT's articles of be valued on the basis of a fair value or by an independent
association or the laws and regulations. appraiser. The independent appraiser must not:

 Super majority. The following matters are subject to higher  Have a family relationship either by marriage or lineage up
majority and quorum requirements: to the second degree, horizontally or vertically, with an
employee, a member of the BOD or BOC, or a shareholder
- amendments to the articles of association: these must be of the PT.
approved at a general meeting of shareholders at which
at least two-thirds of the company's voting shares are  Share one or more members of the PT's BOD or BOC.
represented, by at least two-thirds of the shares in  Control the PT, directly or indirectly.
attendance;
 Have 20% or more of shares in the PT.
- merger, consolidation, acquisition, bankruptcy and/or
dissolution of the company, and transfer or pledge of the Investigation into a PT. An application can be filed with the
PT's assets as security for a loan, which comprise more court to conduct an investigation into alleged unlawful acts
than 50% of the PT's net assets in one or more related or committed by a PT. The court will appoint experts that will
unrelated transactions: these must be approved at a conduct the investigation. Court-appointed experts must not
general meeting of shareholders at which at least three- include any of the following:
quarters of the PT's voting shares are represented, and
 Members of the PT's BOD or BOC.
at least three-quarters of the shares in attendance must
approve the resolution.  PT's employees.

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 Consultants or public accountants that have been appointed JVS WITH FOREIGN MEMBERS
by the PT at any time. Validity and authorisation
The above provisions are without prejudice to specific sectoral
regulations. 25. What are the rules relating to validity and authorisation
of JVs with foreign parties?
Termination

22. What legal regime applies to a JV's termination? Can a

Validity
JV be terminated for just cause on request of one JVs with foreign parties are allowed in Indonesia. The rules
party? relating to the validity and authorisation of JVs with foreign
parties are mainly set out in Law No. 25 of 2007 regarding
Capital Investment (26 April 2007) (Investment Law).
The JV's termination is governed by the JV agreement. The JV
parties can mutually agree on the grounds of termination of the Additionally, specific regulations issued by the Indonesian
JV in their agreement. Default is normally included as a ground Investment Co-ordinating Board (Badan Koordinasi Penanaman
for termination. Other grounds for termination of a JV include the Modal) (BKPM) relate to JVs with foreign parties, including:
legal incapacitation or bankruptcy of one of the JV partners.  Regulation of the Chairman of BKPM No. 14 of 2015
regarding Guidelines and Procedures for Capital Investment
(29 September 2015), as amended.
23. Is the termination of a JV agreement subject to any
public sector body's approval?  Regulation of the Chairman of BKPM No. 15 of 2015
regarding Guidelines and Procedures for Investment
Licensing and Non-Licensing (8 October 2015).
Unilateral termination of an agreement must be approved by the
court (Article 1266, Indonesian Civil Code). In practice, it is Limits
common for JV parties to agree to waive this requirement, in Foreign parties/investors are only allowed to form a limited
which case court approval will not be required for unilateral liability company (perseroan terbatas) (PT), unless otherwise
termination. permitted under other regulations (Investment Law). A PT that
is formed by a foreign party is known as a foreign investment
The above provision is without prejudice to specific sectoral company (Perseroan Terbatas Penanaman Modal Asing)
regulations. In certain sectors, the termination of a JV (PMA). The formation of a PMA is also governed by Law No. 40
agreement may require the approval of the Government of of 2007 regarding Limited Liability Company (16 August 2007)
Indonesia. (Company Law). One example of law that permits a JV with a
Choice of law and jurisdiction foreign party in a form other than a PT is Law No. 2 of 2017
regarding Construction Service (12 January 2017) (Construction
Law). The Construction Law allows the formation of a joint
24. Are there constraints on the choice of the law and the operation between a foreign construction representative office
jurisdiction applicable to a JV? and a local construction company.
Additionally, areas of business in which foreign participation is
Generally, a choice of law must have a sufficient link with the prohibited or restricted are listed in Presidential Regulation No.
subject matter of a JV agreement. This rule aims to limit the use 44 of 2016 regarding List of the Business Fields that Are Closed
of, and reference to, a foreign law that is egregiously irrelevant and Business Fields that Are Open With Requirements for
to the subject matter of an agreement. Additionally, it is Capital Investment (18 May 2016) (Daftar Negatif Investasi)
recommended that certain JV agreements refer to Indonesian (DNI) (see Question 9).
law due to their object. The application of Indonesian law may In addition to the DNI, specific sectoral laws and regulations
also be required, for example, for JV agreements relating to: should be reviewed to determine whether a particular line of
 The management of assets located in Indonesia, such as business is open for investment and, if so, whether a JV will be
land or buildings. subject to foreign investment restrictions or other special
requirements.
 Construction services provided in Indonesia.
Authorisation
 The exploitation and exploration of oil and gas fields.
The formation of a PMA must be pre-approved by the BKPM,
The JV partners can freely make a choice of jurisdiction. which is evidenced by BKPM's in-principle approval.
However, the Indonesian courts do not recognise foreign court
In the construction industry, a foreign construction
judgments. Therefore, a foreign court judgment relating to a
representative office must be licensed by the BKPM before it can
dispute arising from a JV agreement will not be recognised and
form a joint operation with a local construction company.
enforceable in Indonesia.
Arbitration is a common choice of dispute resolution
Effect of foreign membership
mechanism. A choice of foreign arbitration is valid and
enforceable, provided that the country of arbitration is a party to 26. Are any of the rules relating to domestic company JVs
the UN Convention on the Recognition and Enforcement of (see Questions 1 to 24) different for JVs with members
Foreign Arbitral Awards 1958. Many JV agreements refer to
arbitration in Singapore or Hong Kong. JVs with state-owned
enterprises most often refer to domestic arbitration in Indonesia,
or to litigation in the Indonesian courts.

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 incorporated under, or governed by, the laws of a Minimum investments/contributions
foreign country?

28. Are there mandatory minimum equity investments or

The rules relating to domestic company JVs are different for JVs contributions in kind thresholds for a foreign JV
with members incorporated under, or governed by, the laws of a member?
foreign country (see Question 25).
Economic or financial incentives For foreign investment companies (Perseroan Terbatas
Penanaman Modal Asing) (PMA), the Indonesian Investment
Co-ordinating Board currently requires a minimum total equity
27. Are there economic or financial incentives for foreign investment of more than IDR10 billion. Each shareholder of a
direct investments in a JV? PMA must invest no less than IDR10 million in the PMA.
Additionally, certain industry sectors (such as construction)
There are various economic and financial incentives for foreign require foreign JV members to make a minimum total investment
direct investments in a JV, including tax facilities and import duty of IDR50 billion.
exemptions.

THE REGULATORY AUTHORITIES

Ministry of Law and Human Rights (MOLHR)
Main activities. The MOLHR is responsible for approving the establishment of limited liability companies and foreign investment
companies (Perseroan Terbatas Penanaman Modal Asing) (PMAs), and for registering them in the Company Register.
W www.kemenkumham.go.id
Indonesian Capital Investment Co-ordinating Board (Badan Koordinasi Penanaman Modal) (BKPM)
Main activities. The BKPM is authorised, among other things, to approve the establishment of PMAs and foreign representative
offices, issue business licences in certain industries, and approve foreign investment incentives.
W www.bkpm.go.id

ONLINE RESOURCES
State Secretary of the Republic of Indonesia
W www.setneg.go.id/index.php
Description. This is the official website of the State Secretary of the Republic of Indonesia. The State Secretary is responsible
for maintaining national archives. The website contains references and pdf copies of Indonesian main laws and regulations. The
website is generally up to date.

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Practical Law Contributor profiles

Ira A Eddymurthy, Senior Partner Nico A Mooduto, Associate

SSEK Indonesian Legal Consultants SSEK Indonesian Legal Consultants

T +62 21 5212038 / 2953 2000 T +62 21 5212038 / 2953 2000

F +62 21 5212039 F +62 21 5212039
E iraeddymurthy@ssek.com E nicomooduto@ssek.com
W www.ssek.com W www.ssek.com

Professional qualifications. Advocate, Capital Market Legal Professional qualifications. Advocate, Indonesia
Consultant (HKHPM), Indonesia
Areas of practice. General corporate law; investment;
Areas of practice. M&A; capital markets; insurance; foreign construction; dispute resolution.
investment.
Languages. English, Indonesian
Recent transactions
 Acted as Indonesian counsel to Alibaba Group in its US$1
billion acquisition of online retailer Lazada.
 Acted as Indonesian counsel to Akastor AS and KOP
Surface Products Singapore Pte. Ltd. in its acquisition by
the Weir Group PLC, a transaction valued at approximately
US$115 million.
 Advised Thai Containers Group, part of Siam Cement
Group, on its acquisition of an Indonesian packaging
company.
 Acted as Indonesian counsel for BlueScope Steel Limited
in a US$1.3 billion joint venture with Nippon Steel
Corporation to establish a new coated products business in
Southeast Asia and North America.
Languages. Indonesian, English
Professional associations/memberships. International Bar
Association; Inter-Pacific Bar Association; Indonesian
Advocates Association; Indonesian Capital Market Legal
Consultants.

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