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Dec

14

Paid-Up Capital Requirements for Existing Foreign Direct Investment Companies (PT PMA) Before the Enactment of Guidelines and Procedure for Risk-Based Licensing and Investment Facilities (BKPM) Regulation No. 4 Of 2021 in Indonesia

The Ministry of Investment/Indonesia Investment Coordinating Board (Badan Koordinasi Penanaman Modal or “BKPM”) issued BKPM Regulation No. 4 of 2021 on Guidelines and Procedure for Risk-Based Licensing and Investment Facilities (“BKPM Regulation 4/2021”), which came into effect on 2 June 2021. Article 12 paragraph (2) of BKPM Regulation 4/2021, which is the implementation of Indonesian government Regulation No. 5 of 2021 on the Organization of Risk-Based Business Licensing (“GR 5/2021”), has set up a new minimum paid-up capital value for Foreign Direct Investment Companies (PT PMA), which must be greater than IDR 10 billion, excluding land and buildings per five-digit Indonesia Standard Industrial Classification (Klasifikasi Baku Lapangan Usaha Indonesia or “KBLI”) business field and per project location with an exemption for certain business activities.

The question that many foreign investors who have less than IDR 10 billion of paid-up capital in a PT PMA in Indonesia before the enactment of BKPM Regulation 4/2021 may have is whether or not they should adjust their paid-up capital to comply with the new regulation. In other words, are existing PT PMAs before the enactment of BKPM Regulation No. 4 of 2021 required to increase their paid-up capital to a minimum of IDR 10 billion (previously, IDR 2.5 billion) to be able to continue operating legally by the law in Indonesia?

BKPM Regulation 4/2021 does not specify, nor has the BPKM clarified, if the increase in paid-up capital requirements applies retrospectively to established or existing PT PMA. As a comparison, the previous IDR 2.5 billion requirements were first introduced under BKPM Regulation No. 5 of 2013 (“BKPM Regulation 5/2013”), a precursor to BKPM Regulation 4/2021, which is no longer valid (and several reiterations have been issued since then). Just like BKPM Regulation 4/2021, BKPM Regulation 5/2013 did not explicitly state whether or not it was being applied retroactively either. However, in practice, BKPM Regulation 5/2013 was not intended to apply retroactively to applications approved before its issuance.

Based on the Transitional Provisions of BPKM Regulation 4/2021 (Articles 95 to 100), it can be concluded that the IDR 10 billion increase in paid-up capital requirement applies to:

  1. A PT PMA that has not been established after BPKM Regulation 4/2021 takes effect.
  2. An established PT PMA with paid-up capital of less than IDR 10 billion that:
    • has not yet obtained a Business Identification Number (Nomor Induk Berusaha or NIB) and Business Licenses;
    • has obtained NIB, but not obtain Business Licenses yet;
    • has obtained NIB and Business Licenses but they are not effective yet;
    • wants to change its KBLI.

Specifically, Article 99 of BKPM Regulation 4/2021 stipulates that businesses (including PT PMA) that obtained Business Licenses before the regulation above came into effect and need new business licenses must fulfill the requirements under applicable laws and regulations. In other words, PT PMA must comply with BKPM Regulation 4/2021 if they want to obtain new business licenses. Therefore, they must increase their paid-up capital to a minimum of IDR 10 billion if they have less than the minimum requirement.

If you, a prospective client, have further inquiries regarding the topic explained above, Schinder Law Firm is one of many corporate law firms in Indonesia that has handled a lot of similar matters, with many experienced and professional investment, civil lawyers and dispute lawyers in its arsenal, making it one of the top consulting firms in Indonesia. Feel free to contact us at info@schinderlawfirm.com for further consultation.

Author: Suryani Lim