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Company Formation

Types of Companies Available for Foreign Investors

The Indonesian government restricts foreign investment in Indonesia. Below is an overview of the main types of company establishment in Indonesia:

Local owned limited liability company (PT)
The shares of a PT are 100% owned by local shareholders. Foreign investors can however obtain full control over the company by way of a shareholder arrangement. The shareholder arrangement consists out of a set of agreements which, combined together, allow the foreign investors to have full legal control on all decisions taken in the general meeting of shareholders of the PT.

A PT company is easy to setup (depending on the business field) and the investment threshold is low. Because foreign investors do not own the shares directly, there is a lower perceived level of security and control.
Foreign owned limited liability company (PT PMA)
In case one of the shareholders is a foreign entity or foreign individual, the limited liability company is categorized as PT PMA. The maximum allowed percentage of foreign shareholding depends on the business field the PT PMA will be active in and generally ranges between 33% - 100%.

The investment threshold for a PT PMA company is higher. However, in case the investor can comply with the investment requirements, the setup is straight forward (depending on the business field). Since foreign investors directly own shares in the PT PMA, there is a higher sense of security and control.
Representative Office
The representative office does not require any capital investments, which makes it very easy and straight forward to setup. The representative office is however limited in its activities. They are only allowed to take care of the interests of the mother company abroad or prepare the establishment of a PT PMA in Indonesia. A representative office is not allowed to directly earn income or directly be engaged in commercial contracts.

The representative office is a perfect solution for foreign companies that have small supporting operations in Indonesia or that wish to perform market research in order to find out whether there are opportunities to further invest in Indonesia.