GOVERNMENT REGULATION NO. 7 OF 2016

July 28, 2020 | Regulatory Updates


BACKGROUND

On 21 March 2016, the Government of the Republic of Indonesia has issued Government Regulation No. 7 of 2016 concerning Change of the Authorized Capital of a Limited Liability Company (“GR No. 7/2016”). This regulation is issued with the intention to increase investment which respectively should promote growth in Micro, Small, and Medium Enterprises.

Pursuant to Law No. 40 of 2007 concerning Limited Liability Companies (“Law No. 40/2007”), the provision concerning the minimum authorized capital of a limited liability company (“Company”) is Rp50.000.000,-. With the issuance of GR No. 7/2016, the government allows for a lower minimum authorized capital in the event that one or all of the Company’s founder(s) has(have) a net equity such is applicable to Micro, Small, and Medium Enterprises. In such case, the minimum authorized capital of such Company can be determined by agreement of the founders which is to be set forth in the deed of establishment (vide Article 1 paragraph (1) of GR No. 7/2016) and the required minimum authorized capital of Rp50.000.000,- is not applicable in such case.

As additional information, a Micro, Small, and Medium Enterprises’ net equity is stipulated in Law No. 20 of 2008 concerning a Micro, Small, and Medium Enterprises, which stipulates the following:

No.

Type of Enterprise

Net Equity

1.

Micro

Max. Rp 50 million

2.

Small

Min. > Rp50 million – Max. Rp500 million

3.

Medium

Min. > Rp500 million Rupiah – Max. Rp10 billion

Although the minimum authorized capital of Rp50.000.000,- is exempted for founders that fit the above-mentioned criteria, the provision concerning the minimum issued and paid up capital as set forth in Law No. 40/2007 is still applicable. The minimum issued and paid up capital is 25% from the authorized capital and shall be evidenced by a valid payment receipt. Said payment receipt should be submitted electronically to the Minister of Law and Human Rights no later than 60 days since the deed of establishment is signed.

GR No. 7/2016 has been published and came into force on 22 March 2016.

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