Legal Obligations of an Indonesian Company

Legal Obligations Every Indonesia Company Must Follow

The corporate law in Indonesia created legal obligations that every company in the country must follow strictly.

Failure to adhere to these legal obligations is punishable under the law.

Perseroan Terbatas (PT), also called a limited liability company, is a legal entity that allows companies to run a shared capital business. The limited liability companies are Indonesian businesses.

In essence, limited liability companies:

• Can run any business in their desired field.
• Have lower paid-up capital in comparison to a foreign-owned company.
• Clearly separate the company asset from a personal asset.

In this article, we’ll get into more details about the legal obligations of an Indonesian company.

 

Are Perseroan Terbatas Penanaman Modal Asing (PT PMA) in Indonesia?

The legal entity established under the Indonesia law that allows foreigners to run a commercial business in Indonesia is the Perseroan Terbatas Penanaman Modal Asing (PT PMA).

The law also allows foreign individuals & legal entities to register as shareholders. Foreign investors can own up to 100% of the share of PMA. The investors have lower import or onsite duties. Rights and responsibilities are the same as local liability companies

Furthermore, company law in Indonesia states that:

• The board of commissioners can’t be held responsible for a company’s bankruptcy. & they can’t be penalized for financial mismanagement in the finance sector or any loss inflicted on the state.
• The employment laws and regulations prohibit foreigners from taking up the position of human resource directors. The prohibition also restricts foreign nationals from holding Indonesia incorporation services & other directorship positions.

According to the minister of Manpower (in the Decree No.40 of 2012) about restricted positions for foreign nationals, “some positions related to industrial & personal relations are prohibited for foreign nationals.”

The Board of Directors holds no responsibility for the actions taken on behalf of the company. However, each member of the BOD or BOC is accountable for any loss in the company, provided the loss required from an inappropriate act from the particular BOC/BOD member.

 

Parent Companies Liability – What is Company Law Saying?

Parent companies are answerable to the law if they fall under the following ways

• Subsidiary stopped fulfilling the legal entity requirement.
• The parent company fails to use the subsidiary for company interest.
• The subsidiary committed an unlawful act which the parent company played a part in.

 

What Are the Requirements of an Indonesia Consumer Protection Law?

Organizations and companies must fulfill the necessary standards:

• Companies and organizations must adhere to the info in their packaging.
• They must avoid false marketing or advertisement.
• Products like food and drugs undergo extra regulatory requirements as stated in the Law No.36 of 2009 on health and Law No.18 of 2012 on food.

 

What Are the Requirements for Registration and Formation?

The primary requirements for registering and establishing a corporate vehicle (PT PMA) include:

• The PT PMA must be well knowledgeable in communicating in the Indonesian language.
• Attach all requirements on the shareholding limitation in the Negative investment list.
• The PT PMA must obtain approval from MOLHR. Also, the Ministry of Law & Human Rights before running the corporation.
• Certificate of residence needs to obtained from the Sub-District Head (Lurah) with a taxpayer registration number which can be obtained from the nearest tax office.
• The PT PMA must open a valid account in any Indonesia bank.

 

Here are the reports the PT PMA must submit:

• Capital Investment Activity Report.
• Audited Annual Financial Statements need to be submitted to the Ministry of Trade.
• Financial service need to submit a report every month & an audited financial statement (to be presented yearly)

These laws are set to facilitate a smooth operation of companies & organizations while maintaining a decent workforce structure.

 

Here’s Where You Need 3E Accounting

At 3E Accounting, our Indonesia incorporation service is your go-to when looking to run a business in Indonesia.

We provide different incorporation services to support your new business. We work to guide you through the Legal Obligations of an Indonesian Company. Get in touch with us today for your inquiries and concerns. We’ll be happy to help! Reach us at 3E Accounting.