Establishment Of A Limited Liability Company In Indonesia Based On Law Number 11 Of 2020 Concerning Job Creation (UU Cipta Kerja)
By : A.M Oktarina Counsellors at Law (“AMO”)
Contributors
Drafted by : Nasfiahtul Istani Daely, S.H., & Cholid Syaefulloh, S.H.
Reviewed by : Noverizky Tri Putra Pasaribu, S.H. LL.M (Adv) & Denny Umri ButarButar,
S.H., M.H.
ESTABLISHMENT OF A LIMITED LIABILITY COMPANY IN INDONESIA BASED ON LAW NUMBER 11 OF 2020 CONCERNING JOB CREATION (UU Cipta Kerja)
Establishment Of A Limited Liability Company In Indonesia Based On Law Number 11 Of 2020 Concerning Job Creation (UU Cipta Kerja)
In recent years, the Government of Indonesia has consistently made gradual improvements to the ease of business process. One of the initiatives is to launch an Online Single Submission System (“OSS”) in 2018 to facilitate business licensing in Indonesia. Furthermore, The government is trying to make it easier for business actors to run their business in Indonesia with the hope that this facility can attract local and foreign investors who can bring significant changes to the progress of the Indonesian economy. Therefore, in 2021 the government will simplify the procedures and conditions for the establishment of Limited Liability Company under the Law Number 11 of 2020 concerning Job Creation (“Job Creation Law”) that contains the implementation of new rules regarding the procedures for establishing a Limited Liability Company.
Through this rule, there are several changes related to the procedures and conditions for the establishment of the Limited Liability Company, which are as follows:
1. Number of Legal Subjects or Founder of the Limited Liability Company (PT)
Previously, based on Article 7 Chapter (1) of Law Number 40 of 2007 Concerning Limited Liability Company, a Limited Liability Company must be established by 2 (two) or more people with a notarial deed created in the Indonesian language. However, under the Law of Job Creation, now a Limited Liability Company that meets the criteria for Micro and Small Enterprises (“MSE”), the Regional Owned Enterprise (“BUMD”) and the Village Owned Enterprise (“BUMDES”) can also be established by 1 (one) person. With this new law, the Individual Company is one-tier characteristics, this means that the owner of the company shall be run and supervise by an individual, the company may require to train other business actors to be more prudent. This is regulated in Article 109 Chapter (2) of the Law of Job Creation which amends Article 7 Chapter (7) of the Law of Limited Liability Company, which read as follows:
Chapter 109
(2) The provisions of Article 7 are amended to read as follows:
(1) ……
(2) ……
(3) ……
(4) ……
(5) ……
(6) ……
(7) The provisions that require the Company to be established by 2 (two) or more persons as referred to in chapter (1), chapter (5), and chapter (6) do not apply to:
a. Company whose shares are wholly owned by the state;
b. Regional Owned Enterprise/BUMD;
c. Village Owned Enterprise/BUMDES;
d. Company that manage stock exchanges, clearing and guarantee institutions, depository and settlement institutions, and other institutions in accordance with the Law concerning Capital Markets; or
e. Company that meet the criteria for Micro and Small Enterprises (MSE).
(8) Etc.
In addition, the above provision also mentioned the provisions that require the Company to be established by 2 (two) or more persons as referred to in chapter (1), chapter (5), and chapter (6), meaning that the establishment of the company based the Job Creation Law shall consist of the following:
1. If after the company (that has been established) obtains its legal entity (based on the Job Creation Law) status and the number of the shareholders becomes less than 2 (two) persons, then within the period of not later than 6 (six) months as from such condition, the relevant shareholders is obliged to transfer part of their shares to other persons or the Company shall issue new shares to other persons.
Based on the above stipulation, there is no further obligation required by the remaining shareholders to transfer partially its shares to the other partners within the 6 (six) months period after the number of the shareholders reduced to only 1 (one) shareholder. The company may still run its business although the company has only 1 (one) remaining shareholder
2. In the event that the time period as referred to in paragraph (5) has exceeded, and there are still less than 2 (two) shareholders, the shareholders shall be personally liable for all agreements/legal relationship and the Company’s loss, and upon required of the interested party, the district Court may wind up the Company.
Based on the above stipulation, the later condition that resulted to the personal responsibility (agreement/legal relationship, the company loss) of the remaining shareholder shall be diminished and the other requested party shall not be able to request the wind-up condition against the company that has been established by 1 (one) shareholder. Based on this stipulation, we can conclude that this new provision under the Job Creation Law has created a huge discrepancy, as follow based on our opinion:
1) The 1 (one) company shareholders cannot be considered liable for all agreement/legal relationship and the company loss. This legal consequence created a big question, if the remaining shareholders cannot be considered liable for such action, then who will be responsible for the agreement/legal relationship and the company loss? while the Job Creation Law already declared that the company with 1 (one) shareholder can run its business, and can create legal relationship with other party, since its establishment has been guarantee accordingly by the prevailing law.
2) The absence of the wind-up condition by other related party to the company with 1 (one) shareholder has created a contradiction with the Indonesian bankruptcy law and provision contained the liquidation, where there is no restriction for any related party to request the wind-up condition to any company that has a limited shareholders or 1 (one) shareholder in the targeted company. Meaning that, the Job Creation Law has created a legal basis for the company with 1 (one) shareholder to refused (potentially) legally the request of bankruptcy or liquidation from any related party.
3) Furthermore, it’s questionable regarding the authority of district court to dissolve the company with 1 (one) shareholder because this regulation makes the district court have no right to dissolve the company with 1 (one) shareholder.
A. Establishment of Micro and Small Enterprises
Please be advised that based on Article 2 Chapter (1) of Government Regulation Number 8 of 2021 concerning Company Authorized Capital and Registration of Establishment (“PP No. 8/2021”), a company that meet the criteria for MSE consists of company that is established by 2 (two) person or more and individual company that is established by 1 (one) person, which read as follows:
Article 2 PP No. 8/2021
1) Company that meet the criteria for micro and small businesses consist of:
a. Company that is established by 2 (two) person or more; and
b. Individual Company that is established by 1 (one) person.
AMO’S Note:
According to AMO’s opinion, there is a contradiction that appear in this stipulation, since provided under the Job Creation Law has stated that the Company is founded by 2 (two) or more person does not applied to the company that meets the MSE criteria. However, as we all can understand that under the PP No. 8/2021, the criteria of the company establishment by 2 (two) person or more is also fall under the MSE criteria. This has created a bit of discrepancy between the PP No 8/2021 and the Job Creation Law. However, please be advised that, to the date of this issuance of this article, the Ministry of Law and Human Rights has yet to clarify this issue accordingly, should there any clarification from the officials, we will updated accordingly this article.
In addition, under Article 153E of the Job Creation Law, it is stipulated that MSE Founders can only establish 1 (one) Limited Liability Company in 1 (one) year. Therefore, MSE actors are now able to establish 1 (one) PT in 1 (one) year alone without the present of any partners as long as the business is run in accordance with the MSE criteria as regulated in Article 87 number (1) of the Law of Job Creation jo. Government Regulation Number 7 of 2021 concerning Ease, Protection and Empowerment of Cooperatives and Micro, Small and Medium Enterprises (“PP No. 7/2021”), where the MSE criteria cover several aspects, namely business capital, turnover, net worth indicators, annual sales results, or investment value, incentives and disincentives, application of environmentally friendly technology, local content, or several workers according to the criteria of each business sector.
B. The Establishment of BUMDES/Partnership BUMDES
For the establishment of BUMDES/BUMDES partnership, it is regulated based on the Government of the Republic of Indonesia Number 11 of 2020 concerning Village-Owned Enterprises (BUMDES), where the establishment of BUMDES is established by 1 (one) Village based on a Village Deliberation and its establishment is determined by Village Regulation, while BUMDES are jointly identified by 2 (two) or more Villages based on inter-village deliberation and their establishment is determined by a Joint Village Head Regulation.
Furthermore, Village Regulations and Village Head Joint Regulations shall at least contain:
1. Determination of the establishment of BUMDES/partnership BUMDES;
2. Articles of Association of BUMDES/partnership BUMDES; and
3. Determination of the amount of the Village and/or Village community capital participation in the framework of establishing the BUMDES/partnership BUMDES.
Furthermore, regarding to the legal entity status of BUMDES/partnership BUMDES, the legal status is obtained at the time of issuance of an electronic registration certificate from the Ministry of Law and Human Rights by acknowledging the registration of BUMDES/partnership BUMDES. The result of the registration of the BUMDES/partnership BUMDES integrated with the administrative system of legal entities of the Ministry of Law and Human Rights with the final result being a certificate of registration of the legal entity BUMDES/partnership BUMDES.
C. The Establishment of the BUMD
Based on the Government Regulation/Peraturan Perusahaan No 54 of 2017 concerning Region State Owned Company (Badan Usaha Milik Daerah) (“PP No.54/2017”) Article 4 paragraph 1, 2 and 3 has stipulated the following:
1. The Region (daerah) able to establish the Region State Owned Company or BUMD;
2. The establishment of the BUMD shall be determined under the Regional Regulation or Peraturan Daerah;
3. The BUMD shall consist of 2 types: (a) public regional company/perusahaan umum daerah; and (b) regional company/perusahaan perseroan daerah.
The above stipulation is clearly conflicted with the new definition that has been established by the Job Creation Law that stated the BUMD can be established by 1 (one) person, while the terms of definition stipulated by the PP No. 54/2017 has clearly stated that the BUMD shall only can be established by Regional Regulation that required the regional approval by law.
In addition, under Article 5 paragraph 1 and 2 of the PP No. 54/2017 has stipulated that:
1. The public regional company is the company that the entire capital is owned by the 1 (one) region and shall not be divided by share;
2. The regional company is the company in form of the limited liability company that its capital shall be divided in the form of shares of its entirely or at minimum 51% of its shares owned by 1 region.
By following the above definition, we can understand that the BUMD can only be made through the regional approval, since all its establishment required the presence of at least 1 (one) region instead of 1 (one) person. The question that can be asked to the Job Creation Law, is the meaning of 1 (one) person under the elaboration of the Job Creation Law can be interpreted as 1 (one) region as required by the PP No.54/2017? To best of our knowledge and till the date of the issuance of this article, AMO has not acquired any concrete evidence on the same answered as above as determined by any Indonesian prevailing law.
2. How to Obtain Limited Liability Company Legal Entity Status
Prior to the enactment of the Law of Job Creation, Limited Liability Company generally obtained legal entity status on the issuance date of the Decree of the Minister of Law and Human Rights regarding the legalization of the Limited Liability Company legal entity. So after the existence of the Law of Job Creation, the Limited Liability Company obtained the status of a legal entity after being registered to the Minister of Law and Human Rights and obtaining proof of registration, not after the issuance of the Decree of the Minister of Law and Human Rights regarding the legalization of the Company’s legal entity. This is in accordance with Article 109 Chapter (2) of the Law of Job Creation which amends the provisions of Article 7 Chapter (4) of the Company Law which reads as follows:
Article 109
(2) The provisions of Article 7 are amended so that it reads as follows:
(1) ……
(2) ……
(3) ……
(4) The Company obtains the status of a legal entity after being
registered to the Minister and obtaining proof of registration; and
(5) Etc.
Furthermore, based on Article 6 and Article 7 of PP No. 8/2021, it is regulated that the establishment of a Limited Liability Company for MSE or individual companies does not require a Deed of Establishment from Public Notary. However, it is sufficient that the founders of the Individual Company, namely Indonesian Citizens aged at least 17 (seventeen) years and legally competent, fill out the establishment statement form electronically in Indonesian with the following fields:
a. Name and domicile of the individual company;
b. The period of establishment of an Individual Company;
c. The purposes and objectives as well as the business activities of the individual Company;
d. The amount of authorized capital, issued capital, and paid-up capital;
e. Nominal value and number of shares;
f. Individual Company address; and
g. Full name, place and date of birth, occupation, place of residence, identification number, and tax identification number of the founders as well as directors and individual shareholders of the Company.
After that, the Individual Company will obtain the status of a legal entity by obtaining an electronic registration certificate and the status of the legal entity will be announced on the official website of the directorate general which carries out duties and functions in the field of general law administration.
Furthermore, based on Article 8 of PP No. 8/2021 it is regulated that an individual company in making changes to its company can be done by filling out the form for the change in the statement of establishment of an individual company which is determined by a decision of the shareholders of the individual company which has the same legal force as the general meeting of shareholders. The Amendment Statement is submitted to the Minister electronically to obtain a Certificate of Amendment Statement. Therefore, the individual company in making changes to its business no longer uses the deed of change from a notary as the basis but simply fills out the change statement form. Changes to the Statement of Establishment can also be made more than 1 (one) time.
The Change of Individual Company to Capital Partnership Company and the Amendment of Articles of Association and Company Data from Capital Partnership Company.
For what need to be noted is, Individual Companies must change their legal entity status to Limited Liability Company in general if the shareholder becomes more than 1 (one) person and/or no longer meets the MSE criteria. Therefore, the change in the status of the legal entity must be carried out by notarial deed and subject to provisions of law regarding the company.
The steps to change it are listed in the Regulation of the Minister of Law and Human Rights of the Republic of Indonesia Number 21 of 2021 concerning Terms and Procedures for Registration, Establishment, Amendment and Dissolution of a Limited Liability Company Legal Entity (“Permenkumham No.21/2021”) are as follows:
A. Change the status through a notarial deed.
Based on Article 8 Permenkumham No. 21/2021, the deed contains:
1. Shareholder’s statement containing the change of status of individual PT into a capital partnership PT;
2. Changes to the articles of association from the original statement of establishment and/or a statement of changes to the individual PT become the articles of association of the PT, which includes:
a. Name and/or domicile of PT;
b. The aims and objectives as well as the business activities of PT;
c. The period of establishment of PT;
d. The amount of authorized capital;
e. Issued and paid-up capital; and
f. PT status is closed or open.
3. Company data, which includes:
a. Changes in the composition of shareholders due to the transfer of shares and/or changes in the number of shares owned;
b. Changes in the composition of the names and positions of the members of the board of directors and/or the board of commissioners;
c. Mergers, takeovers, and separations that are not accompanied by changes to the articles of association;
d. Dissolution of PT;
e. The expiration of the legal entity status of PT;
f. Change of name of shareholder due to shareholder’s name change; and
g. Change of full address of PT.
The change of the articles of association and/or changes to the Company’s data must be determined through the General Meeting of Shareholders (“GMS”) based on Article 9 Permenkumham No. 21/2021,with the following provisions:
a. Amendments to the articles of association and/or data of the Company are contained or stated in a notarial deed in Indonesian.
b. Amendments to the articles of association that are not contained in the deed of minutes of meeting made by a notary must be stated in the notarial deed within a maximum period of 30 (thirty) days from the date of the decision of the GMS.
c. Amendments to the articles of association may not be stated in a notarial deed after a period of 30 (thirty) days has passed.
d. In the event of a change in the Company’s data in the form of a change in the members of the board of directors and the board of commissioners, the board of directors must notify the change in the Company’s data to the Minister to be recorded in the register of the Company within a maximum period of 30 (thirty) days from the date of the change.
e. Applications for changes to the articles of association and/or data of the Company other than changes to the members of the board of directors and board of commissioners as referred to are submitted to the Minister of Law and Human Rights within a maximum period of 30 (thirty) days from the date of the notarial deed containing the amendments to the articles of association.
f. In the event that the application for amendments to the articles of association and/or data of the Company exceeds the period referred to above, it cannot be submitted to the Minister.
Based on Article 10 Permenkumham No. 21/2021, the application for the change of articles of association and/or Company data is submitted electronically through the Legal Entity Administration System organized by the Directorate General Legal Administration of the Ministry of Law and Human Rights by filling in the amendment format accompanied by information regarding supporting documents and making an electronic statement from the applicant regarding the amendment document of articles of association and/or changes to the company’s complete data. Last, upload the documents in the form of a copy of the deed of amendment to the company’s articles of association and/or company data electronically.
This is the difference provision from the Law Number 40 of 2007 Concerning Limited Liability Company, where the amendments to the articles of association will enforce from the date of issuance of notification acceptance letter amendments to the articles of association by the Minister, but the current system for the application of changes to the articles of association or company data is to be valid if it has been submitted electronically through the Legal Entity Administration System of the Minister with the complete required documents.
3. Minimum Amount of Authorized Capital of Limited Liability Company
One of the important issues in the establishment of a PT is the amount of capital, Law concerning Limited Liability Company requires the amount of authorized capital to establish a Limited Liability Company in the minimum amount of IDR50.000.000,00 (fifty million Indonesian Rupiah). This has changed based on the provisions of Article 109 number 3 of the Law of Job Creation which amends Article 32 of the Law of Limited Liability Company which reads as follows:
Article 109
(3) The provisions of Article 32 are amended so that it reads as follows:
(1) The company must have the authorized capital of the company;
(2) The amount of the authorized capital of the Company as referred to in Chapter (1) is determined based on the decision of the founder of the Company; and
(3) Further provisions regarding the authorized capital of the Company are regulated in a Government Regulation.
In line with the above provisions, PP No. 8/2021 stipulates that the amount of authorized capital of PT is determined based on the decision of the founder of Limited Liability Company.
Thus, it can be concluded that at this time the minimum authorized capital limit for Limited Liability Company is no longer set, but for Limited Liability Company that carries out certain business activities, the minimum amount of authorized capital must be in accordance with the provisions of the legislative regulation. For example, for a transportation management service company, the authorized capital is at least IDR25.000.000.000,00 (twenty five billion Indonesian Rupiah) and at least 25% (twenty five percent) of the authorized capital must be issued and fully paid up with a valid proof of deposit or audited by a public accountant.
4. Conclusion
In conducting business activities, business actors are required to always comply with the laws and regulations in Indonesia. With the emergence of the Law of job Creation, the regulations regarding the establishment of a Limited Liability Company underwent several changes which basically aimed to simplify the process of establishing a Limited Liability Company. With the enactment of the Law of Job Creation, business actors are required to obey and comply with all policies contained in the Law of Job Creation regarding the establishment of a Limited Liability Company.
Changes to the provisions that contained in the Law of Job Creation on the Establishment of Limited Liability Company, such as changes to the minimum limit of founder for establishing a company, the process in obtaining legal entity status for a Limited Liability Company, and also the amount of authorized capital for Limited Liability Company should be the main focus for every business actor who wants to establish a Limited Liability Company in Indonesia, therefore there are no difficulties in the process of establishing a Limited Liability Company or the emergence of legal problems due to discrepancies between the process of establishing a Limited Liability Company that are carried out by business actors with the laws in force in Indonesia. The professional team are needed for every business actor to be able to ensure that there are no legal defects and conformity in establishing a Limited Liability Company with all forms of new regulations that apply in Indonesia regarding the Establishment of a Limited Liability Company. However, in our opinion, the changes of the provisions on Job Creation Law in relation to the establishment of limited liability companies should be more socialized by the government to business actors and the government must prevent overlapping between the provisions of the law and its derivatives, therefore there is no legal confusion created.
Last, if you wish to create a Limited Liability Company, you can immediately access https://www.amoktarina.co or contact us at 021-7193650. By using our Limited Liability Company Establishment services, all your company affairs will be taken care of quickly and perfectly by our professional team.
[1] Minister of Law and Human Rights, “Mengenal Konsep Perseroan Perseorangan di Indonesia”, https://kemenkumham.go.id/berita/mengenal-konsep-perseroan-perseorangan-di-indonesia, accessed on July 15, 2021, at 13.20 WIB
[2] Article 109 Chapter (2) of Law Number 11 of 2020 concerning Job Creation
[3] Article 2 Government Regulation Number 8 of 2021 concerning Authorized Capital of Companies and Registration of Establishment, Change and Dissolution of Companies that Meet the Criteria for Micro and Small Businesses.
[4] Chapter 153, Op. Cit
[5] Article 9, Op, cit.
[6] Article 6 Regulation of the Minister of Transportation of the Republic of Indonesia Number PM 74 of 2015 concerning the Implementation and Operation of Transportation Management Services
