What jurisdictional thresholds trigger a review or application of the law? Is filing mandatory?
The Capital Investment Law does not contain any threshold requirements that would trigger a review or application of a transaction. If the investment involves a foreign shareholder, it is subject to BKPM and OSS under the laws and regulations referenced in question 2 and applicable policies. Under the Company Law, an acquisition by means of a share issuance that results in a change in control of a company must be done in accordance with an acquisition plan that is widely published. The MOLHR does not approve the acquisition plan, and will not approve an amendment of the company’s articles of association, unless the amending resolution submitted by the notary confirms that the acquisition plan has been approved by the shareholders of such company without objection by the creditors of the acquired company.
GR 57/2010, elaborated upon in question 6, establishes threshold requirements for voluntary and mandatory notifications.National interest clearance
What is the procedure for obtaining national interest clearance of transactions and other investments? Are there any filing fees?
There is no special requirement or procedure to obtain national interest clearance of a transaction. If an investment is permitted by the DNI and satisfies the foreign investment capitalisation requirement, the transaction need only be completed, which the MOLHR must either approve or acknowledge after receiving notice of the transaction. This will be followed by the MOLHR’s online system automatic update to the OSS system. This means that business entities in Indonesia are required to be registered with the OSS system to have any changes of their business entity’s data automatically included within the OSS system. In the case where the OSS account is created upon the completion of a transaction, the business entity needs to submit a letter through its notary to the MOLHR to have its data updated in the OSS system.
Even though OSS system does not refer to the BKPM regulations on the amount of capital investment, the OSS Institution announced on its website and OSS officials recently confirmed that the paid-up capital of a PMA company must be least 2.5 billion rupiah upon commencement of its investment. This is a change to the previous BKPM policy of 10 billion rupiah in paid up capital. However, the total investment required remains the same (ie, more than 10 billion rupiah, 7.5 billion rupiah of which may consist of loan capital).
As an example, new investors must arrange for their limited liability company to be established prior to registering with the OSS system. This requires that they pay in their issued and paid up capital, then execute the deed of establishment for the limited liability company, for which MOLHR approval is required. Once the company is established, it must create an account in the OSS system through the OSS website (www.oss.go.id) to obtain its NIB. This is required for all companies. Then, if the company is subject to article 4(2) of BKPM Regulation 6/2018, it must obtain a specific licence from BKPM through its online system (ie, the National Single Window for Investment (NSWI) (https://nswi.bkpm.go.id/).
The data required for registration in the OSS System are, inter alia:
- name and identity number (ID card or passport) of the company’s representative;
- residential address;
- business field, identified by a five-digit KBLI Code.
- location of the capital investment;
- amount of planned capital investment;
- plan of the use of workers;
- business or activity contact number, or both;
- any request for fiscal, customs facilities, and/or other facilities; and
- the tax identification registration number (NPWP) of an individual business executive. If a business actor that wishes to register a company with the OSS system has not yet obtained an NPWP, the integrated systems of the OSS and the Directorate General of Taxation will process the issuance of NPWP.
Along with the NPWP, business actors can also obtain the registration documents for the Employment Social Security (BPJS) and the Health BPJS certificate of membership, the approval letter of foreign employee utilisation plan and fiscal incentives.
The OSS system implements business licensing, which includes the activities of the registration and issuance of permits, information on the compliance with permits, (ie, post-audit requirements), the provision of information on the obligation to pay certain fees to the relevant technical ministries, and the facilitation and supervision of licensing administration.
The attachment of GR 24/2018 lists the type of licences relevant to the above-mentioned sectors. Certain businesses are sufficiently licensed if they have acquired an IU but others may be required to obtain both an IU and an IKO. For example, based on the attachment of GR 24/2018, a web portal business is required to obtain an IU and an IKO, whereas business management consulting needs only an IU.
Through the OSS system, every business entity must acquire a NIB upon registration. A NIB serves as a certificate of company registration (TDP), importer identification number (API), and allows customs access for the business entity. An NIB is a mandatory requirement for a business entity to obtain a business licence.
Once the NIB has been obtained, a PMA company may directly proceed to obtain the IU. The OSS system will ask whether the PMA Company’s business requires any construction of facilities. If the answer is yes, the OSS system will inform the PMA company that its IU will be issued immediately but that it must fulfil certain commitments, specifically to obtain a location permit, a water location permit, an environmental permit (Environmental Impact Analysis/Amdal or Environmental Management Effort and Environmental Monitoring Effort (UKL-UPL)), and a Building Construction Permit or IMB upon the issuance of the IU. This commitment requirement does not apply to PMA companies that do not need to construct a facility to operate their business. For example, a PMA company that engages in management business consulting is not required to make a commitment because it can rent office space to operate its business.
Commitments imposed must be completed by one or more deadlines, which are determined by the type of the commitment. This is further explained in the response to question 11. Article 40 of GR 24/2018 provides that the OSS Institution may revoke the IU if the commitments imposed on the holder of an IU or an IKO are not fulfilled. Although an IU or an IKO can be obtained by a PMA Company by completing the information required by the OSS system, the IU and IKO are not valid until the post issuance requirements, if any, are fulfilled. Once the post-audit commitments have been fulfilled and any relevant taxes have been paid, the OSS system will automatically be updated to indicate that the IU is effective.
An IU without a commitment requirement will be issued with a statement that it is already effective.
An IKO can also be issued the same day as the issuance of the IU, but may not be necessarily effective. The relevant ministry must determine and confirm whether the commitment has been completed. BKPM and the relevant technical ministry will supervise and review the completion of the commitment for an IKO. Once the required commitment has been fulfilled and non-tax state revenues have been paid, the IKO issued by the OSS system will be valid.
Business entities need to determine what licences are required to be obtained by checking the attachment to GR 24/2018. However, in practice, the relevant ministries may not yet understand the procedure. For example, web portal companies are subject to the jurisdiction of the Ministry of Communication and Informatics (MOCI). Pursuant to GR 24/2018, internet companies must obtain both an IU and an IKO. The OSS system will issue the IU and IKO for web portal companies. However, when it comes to the requirement to register with MOCI, MOCI only requests at this time the NIB and IU of the web portal companies.
Although most PMA companies must comply with the mandatory requirement to file and obtain an NIB through the OSS system, BKPM continues to supervise the licensing process of those business entities that are subject to BKPM’s jurisdiction. In such cases, the licence application must be conducted online through SPIPISE with the prerequisites listed in article 8 of BKPM Reg 6/2018, after the company obtains the NIB through the OSS system. In the event that the application cannot be submitted online, the application can be submitted offline at BKPM’s Central PTSP using the format set out in the attachment of BKPM Regulation No. 6/2018.
The licensing procedure of the OSS and BKPM may be carried out by the prospective investors themselves or their representatives, such as legal advisers or business consultants through a power of attorney (POA). The form of the POA is provided in the attachment to BKPM Regulation No. 6/2018) and must be submitted online along with other supporting documents. The OSS Institution does not provide any specific format for its POA.
Owing to the promulgation of GR 24/2018, the licence sets out in the attachment of GR 24/2018 are no longer issued by the BKPM. However, if a company has already obtained an IU, a licence of principle, or investment registration number from BKPM during the BKPM regime, such documents continue to be valid and the reference numbers of such documents can be used to register with the OSS system.
Which party is responsible for securing approval?
If the PMA company has not been established, the prospective shareholders are responsible for securing the approval. If the PMA company has been established, the company, represented by its president director or other persons under its articles of association are responsible for obtaining its approval.
In completing the application form and submitting the supporting documents, the prospective shareholders or the established PMA company may be assisted by a third party as mentioned in question 9.Review process
How long does the review process take? What factors determine the timelines for clearance? Are there any exemptions, or any expedited or ‘fast-track’ options?
In the OSS system, if the foreign investment complies with the 2016 DNI and the corporate information is input correctly, then the company shall automatically be granted an NIB, an IU and an IKO on the same day, the validity of which is contingent upon the completion of any required post-audit commitments. The OSS system is implemented with an expectation that all business entities will conduct their own self-assessment and comply with all post-compliance requirements. The fulfilment of commitments for an IU shall not exceed the period set by GR 24/2018 and the guidelines available in the OSS system. For instance, the company is required to file an application for a location permit within a period not exceeding 10 days of the issuance of a location permit. The processing time until the location permit is effective is stipulated in GR 24/2018. If such a timeline is not followed by the PMA Company, the OSS Institution is entitled to revoke its IU. In the matter of an IKO, in practice, the timeline depends on which licence or approval is required by the commitments and whether there are other additional supporting documents required by the technical ministries or any comments thereon. Upon the fulfilment of commitments, the system will display the status of the licence, changing it from pending status to completed.
The OSS Institution may revoke the issued IU if the PMA company does not fulfil the commitment for an IU or an IKO.
BKPM will issue licences not later than three working days after the application and supporting documents are regarded as complete by BKPM.
The MOLHR normally issues it approval for the establishment of a limited liability company in one or two weeks.
Previously, to commence a transaction, prior approval from the BKPM was required. Now, the only approval needed is the final approval from the MOLHR. With the launch of the OSS system, business entities are expected to actively maintain and update their online accounts. The OSS system is integrated with the MOLHR system in order to synchronise all business entities’ data. However, back and forth correspondence with the OSS Institution or BKPM regarding how to use the OSS system, what types of licences are required and additional supporting documents that must be filed by the foreign investor are still needed. The OSS system is being operated at present under a trial and error process. It is not unusual for the OSS Institution to publish an announcement regarding modifications to the system’s interface. This will delay the licensing process as all the OSS stakeholders are not yet familiar with the OSS system.
Despite the present difficulties in using the OSS system, the OSS system is intended to accelerate business licensing process once it is fully established. For particular licences for which applications are submitted to and issued by BKPM, BKPM has also reduced its unwritten policies that were often cumbersome for investors. It is important to comply with all requirements at the outset to minimise the review and approval time. Foreign investors are well advised to carry out an independent consultation with the OSS, BKPM, and the technical ministries before and during submitting their application to learn whether there are any specific requirements for the proposed investment.
Since 2015, PMA companies that fulfil certain criteria are able to receive a priority business licensing treatment from BKPM. BKPM Regulation No. 6/2018 continues this approach with different options. The said criteria are as follows:
- a total investment of at least 100 billion rupiah; and/or
- Indonesian manpower of at least 1,000 persons.
The above criteria are exempt for:
- certain industries, areas or locations granted domestic free trade facilities based on inland free trade arrangements;
- certain industries that are part of a production supply chain, provided that such business actors convey a statement letter or memorandum of understanding as a supplier of a company using the product manufactured by the business actor;
- companies participating in the tax amnesty programme, provided that such company conveys a copy of the tax amnesty statement letter from the Minister of Finance or any official appointed by the Minister of Finance; and
- infrastructure or national strategic projects stipulated under laws and regulations.
BKPM Regulation 6/2018 provides detailed information on the provisions and procedures of priority services in relation to infrastructure investment in the energy and mineral resources sectors. There are specific forms attached to BKPM Regulation 6/2018 that must be submitted by companies within these sectors. Priority services may be granted by BKPM pertaining to temporary business licences with commitments. The temporary licences that may be given are as follows:
- temporary business licences for the storage of oil, oil fuel, liquid petroleum gas, composed natural gas or liquid natural gas;
- temporary business licences for oil processing with a refinery capacity of above 20,000 barrels of oil per day, gas processing or processed product processing; and
- temporary business licences for general commerce of oil, oil fuel and processed products.
To enjoy such priority services, the company’s executive must physically convey the application to BKPM. The Ministry of Energy and Mineral Resources (MEMR) should also issue a regulation regarding the fulfilment of commitment for the priority services. To date, the MEMR has not issued this regulation.
Must the review be completed before the parties can close the transaction? What are the penalties or other consequences if the parties implement the transaction before clearance is obtained?
To form a new PMA company, the step-by-step procedure required by the MOLHR must be completed, as must the mandatory registration required by the OSS system.
To acquire a PT and convert it to a PMA company, which is necessary because of the proposed foreign shareholding, it is also necessary to follow the procedures under the Capital Investment Law and the Company Law. The foreign shareholder’s ownership of a PMA company will not be recognised by the GOI unless the MOLHR approves the acquisition.
If a company or its investors fail to obtain MOLHR approval or acknowledgement of a transaction, the transaction will not be recognised by the MOLHR.Involvement of authorities
Can formal or informal guidance from the authorities be obtained prior to a filing being made? Do the authorities expect pre-filing dialogue or meetings?
Relevant laws and regulations do not specifically address the issue of consultation. However, the OSS Institution, BKPM and other relevant government authorities in practice welcome all investors to request guidance through direct consultation. Any guidance provided is informal and cannot be regarded as an approval to implement any specific request. BKPM’s guidance may be provided at a meeting with BKPM if it deems necessary.
When are government relations, public affairs, lobbying or other specialists made use of to support the review of a transaction by the authorities? Are there any other lawful informal procedures to facilitate or expedite clearance?
As mentioned above, investors may engage legal advisers or business consultants to assist them in registering their investments and applying for licences with the OSS Institution or BKPM approval. Engaging other parties such as government relations, public affairs or lobbying specialists may also be done to assist the investors in ensuring compliance and discussion with government authorities. Unless the proposed investment has special characteristics, such public relations support of the type indicated above is unnecessary.
There are no informal procedures that can be carried out to facilitate or expedite clearance. Again, foreign investors should conduct preliminary consultation with BKPM or the OSS Institution to obtain informal guidance on the proposed investment.
What post-closing or retroactive powers do the authorities have to review, challenge or unwind a transaction that was not otherwise subject to pre-merger review?
Under the OSS system, post-audit requirements may be imposed for new investments. They are not required for established companies whose actions result in changes to the company’s data that is recorded with the MOLHR. For example, an established company that increases its capital investment or changes the composition of its shareholders or its management structure will not be subject to post-compliance requirements. A new company making a new investment may be subject to such requirements, even though it is directly issued an IU and IKO after making its application. It is possible that once a company completes it past-compliance conditions, its IU and IKO may be revoked if the OSS Institution assigned to monitor investment activity determines that the conditions have in fact not been satisfied.
If a licensed company enters into a transaction that affects the information it has previously provided the OSS system, or makes a change to its corporate documents that will have such a result, it must obtain MOLHR approval or an acknowledgement from the MOLHR if only notice is required to be given to the MOLHR. Then the MOLHR shall update any changes to the company’s information to the OSS and the company will have its OSS account updated with such information. GR 24/2018 also requires a PMA company to actively check its OSS account to verify whether or not recent information has been updated by the OSS. If new changes have not been updated, the PMA company must submit a letter through its notary that the company’s information should be updated by the OSS and the MOLHR.
It is unclear on how this process would be implemented for companies licensed by BKPM.
Once the required MOLHR approval has been granted, it would be extremely rare for the MOLHR, OSS or BKPM to revisit the process, including the grant of an approval, unless the investors have misled them. That said, if the conditions specified in the DNI or other prevailing laws and regulations have not been met, or if investors do not keep their corporate information current and the authorities become aware of this failure, MOLHR can decline to issue its approval or acknowledgement to a future request. If erroneous information has already been included in the OSS or BKPM systems, the OSS Institution and BKPM may question the company. For example, if the investors fail to make the minimum investment required in the DNI, the investors will not be granted access to sign up for their company’s OSS account and the NIB and IU or the IKO will not be granted.
As noted above, the KPPU can challenge an investment on anti-competitive grounds after an acquisition or merger transaction has closed and it can require the unwinding of the transaction, among other sanctions. See question 6 for further details.