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Get to Know How to Transfer Company Shares to Foreign Investors in Indonesia

Get to Know How to Transfer Company Shares to Foreign Investors in Indonesia
Get to Know How to Transfer Company Shares to Foreign Investors in Indonesia

The enactment of the Job Creation Law in Indonesia has streamlined the entry of foreign citizens into the country’s economic sector.

Historically, regulations regarding the transfer of shares to foreigners were governed by Article 12, paragraph (1) of the Investment Law, which permitted investment activities in all business fields except those explicitly declared closed or open with specific requirements. Article 77, point 2 of the Job Creation Law has since modified these provisions.

The restricted business sectors now include:

  1. The cultivation and industry of class I narcotics
  2. All forms of gambling and casino activities
  3. The capture of fish species listed in Appendix I of the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES)
  4. Coral utilisation or extraction for various purposes
  5. The chemical weapons manufacturing industry
  6. The industrial chemical and ozone layer-depleting materials industry

Indonesian citizen shareholders seeking to transfer all their shares to foreigners must ascertain whether the business sector within their PT (Perseroan Terbatas or Limited Liability Company) is open for investment or closed, as per the applicable investment procedures.

The first condition for transferring all shares owned by Indonesian citizens to foreign citizens involves amending the articles of association through a General Meeting of Shareholders (GMS) with approval from the Minister of Law and Human Rights. Additionally, the PT must adhere to Indonesian law, be domiciled within Indonesia unless specified otherwise by law, and update company data and management information through the Online Single Submission system, as per Article 7 of Minister of Trade Regulation 76/2018.

Upon approval of changes to the articles of association by the Ministry of Law and Human Rights, the company can adjust its Business Identification Number and other permits related to its business activities. Converting a PMDN (Domestic Capital Investment Company) into a PMA (Foreign Capital Investment Company) also necessitates alterations in company management, requiring updates to management and personnel data post-status change.

Furthermore, foreign investors seeking to acquire shares in a company must adhere to the obligations outlined in Article 15 of the Capital Investment Law, including:

  • Implementing good corporate governance
  • Fulfilling corporate social responsibility
  • Submitting investment activity reports to the Investment Coordinating Board
  • Respecting local cultural traditions
  • Complying with all statutory provisions

Foreigners interested in foreign capital investment must also meet the requirements for a Limited Stay Permit (ITAS), specifically in the form of an Investor Permit.

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