July 28, 2020 | Regulatory Updates

Investment Coordinating Board (“BKPM”) introduced BKPM Regulation No. 5/2019 that amends several provisions set out in BKPM Regulation No. 6/2018 regarding Guidelines and Procedures for Licensing and Investment Facility (“BKPM Regulation No. 6/2018”). The changes made by the BKPM Regulation No. 5/2019 include:

1. Deletion of Investment Value Provision for Real Estate Business 

The BKPM Regulation No. 5/2019 revokes the provision stating that every real estate businesses shall have an investment value higher than IDR10,000,000,000 (ten billion Rupiah) including land and buildings. Previously, the Regulation No. 6/2018 required general foreign investment companies to have the same investment value of IDR10,000,000,000. However, land and buildings were excluded from what is considered as the minimum required amount.

2. Divestment Requirement

The Regulation No. 5/2019 adds a divestment provision, setting out the procedures to carry out divestment obligation. The provision states that the divestment requirement of foreign investment companies, which has been set out in the approval letter and/or business license prior to the enactment of the Regulation No. 5/2019, is still in force and shall be implemented in accordance with the stipulated period. Foreign investment companies that conduct their business in specific sectors shall also fulfill the divestment obligation pursuant to the prevailing regulations. The divestment obligation is done through a deed stating the agreement of the involved parties in relation to the implementation of divestment obligation.

Divestment of shares may be conducted through the following means:

a. Shares are divested to Indonesian citizens or Indonesian business entities in which the shares are wholly owned by Indonesian citizens through direct ownership. The direct ownership must be at least adds up to the amount of IDR10,000,000 (ten million Rupiah); or

b. Shares are divested through the domestic capital market.

Shares that have been acquired from the divestment implementation, after the approval of the Ministry of Law and Human Rights, can subsequently be sold to any Indonesian individuals/foreign individuals/Indonesian business entities/foreign business entities, subject to prevailing regulations.

The divestment obligation can be exempted provided that in the corporate deed of the company, the shareholders agree:

a. For foreign investment companies that are not 100% of its’ shares are owned by foreign party, where the Indonesian party states that they do not wish/demand for the ownership of shares in accordance with the divestment share provisions as stated in the approval letter and/or business license; or

b. For foreign investment companies that are 100% of its’ shares are owned by foreign party, and where the shareholders state that they do not have any commitment/agreement with any Indonesian party to sell shares.

3. Criteria for an Exemption of Foreign Shareholding Directors/Commissioners from the Rules to Employ Foreign Nationals

Presidential Regulation No. 20/2018 regarding the Utilization of Foreign Manpower exemptes foreign shareholders who also serve as Board of Directors (“BOD”) or Board of Commissioners (“BOC”) members from being subject to the regulations governing the employment of foreign nationals. The foreign shareholders whom are BOD or BOC members will not be included in the ratified foreign employee utilization permit in which the base for the issuance of notification, limited stay visa, and limited stay permit shall be laid out.

Regulation No. 5/2019 regulates the minimum shareholding amount for the issuance of the recommendation for the granting of a limited stay visa as per the requirement to obtain” in the approval of a limited stay visa. The criteria are as follows:

a. Foreign nationals shareholders who serve as members of BOD and BOC - At least IDR1.000.000.000 (one billion Rupiah);

b. Foreign national shareholders who do not serve as members of BOD and BOC -IDR1.125.000.000 (one billion and one hundred twenty five million Rupiah).

The same criteria apply to foreign shareholders in order for them to obtain the recommendation for the transfer of their visit permit status into limited stay permit or a permanent stay permit.

In the event that the foreign nationals shareholders do not meet the minimum shareholding requirement regardless of the fact whether or not they serve as members of BOD or BOC; Then, in order to obtain a permit to be able to employ foreign nationals, they must submit an application to the Ministry of Manpower which shall serve as the ground:

a. To grant approval of a limited stay visa.

b. To grant approval of changing of visit permit status into a limited stay permit.

c. To grant approval of transferring limited stay permit status into a permanent stay permit.