Background

Head of Investment Coordinating Board issued the Regulation Head of the Indonesia Investment Coordinating Board No. 14 Year 2015 on Guidelines and Procedures of Principle License on Investment (“Perka BKPM 14/2015”), which became effective on 8 October 2015. Perka BKPM 14/2015 revokes Regulation of the Head of Investment Coordinating Board No. 5 Year 2013 on Guidelines and Procedures for Application of License and Non-License on Investment as amended by the Regulation of Head of Investment Coordinating Board No. 12 Year 2013.

Principle License

Principle license is a license that shall be owned to commence business activities for  Domestic Investment (“PMDN”) or Foreign Investment (“PMA”). Activities that cover commencement of business are:

a.the establishment of new business activities, both in the context of PMDN and PMA;

b.change of status into PMA, as a result of the entry of foreign capital in the ownership of the whole/part of the company’s capital in a legal entity, or

c.change of status into PMDN, as a result of changes in the ownership capital of the company from foreign capital to  wholly domestic capital.

There are several types of principle license, as described below:

a.new principle license, is a first license before commencing a business activity;

b.principle license for expansion, is a license before the company expand;

c.principle license for change, is a license before implementing the changes of investment plan or its realization;

d.principle license for merger, is a license before merging two or more companies.

Licensing as set out above is submitted  to the One Stop Center (PTSP) at BKPM, the Investment Board PTSP (BPMPTSP) province, regency / municipality, PTSP Free Trade Zone and Free Port (KPBPB), and PTSP Special Economic Zones (KEK)

Provisions and Capital Investment Value

PMA in obtaining the principle license is obliged to implement the provisions of the investment value and capital requirements, as follows:

1. total investment value is more than Rp 10,000,000,000 (ten billion Rupiah), excluding land and buildings;
2. for the expansion project of the business field within one group under the Standard Classification of Indonesian Business (“KBLI”) at the same location, provided that the accumulated investment value of the entire project at the site exceeding more than Rp 10,000,000,000 (ten billion Rupiah) excluding land and buildings, the value of investments is allowed less than Rp 10,000,000,000 (ten billion Rupiah);
3. for the expansion of one or more business fields in the sub-class of business under the KBLI, which do not obtain facilities outside the industrial sector, within one location in the district/city, the investment value for all business fields is greater than Rp 10,000,000,000 (ten billion Rupiah) excluding land and buildings;
4. the issued and paid-up capital are at least Rp 2,500,000,000 (two billion five hundred million Rupiah);
5. the equity of capital, for each shareholder is at least Rp 10,000,000 (ten million Rupiah) and percentage of shares ownership is calculated based on the nominal value of shares.

PMA company having a principle license before this rule becomes effective with a paid up capital that is less than Rp 2,500,000,000 (two billion five hundred million Rupiah), which will apply for: (i) the extension of the project completion period; or (ii) principle license for expansion, is required to adjust the company’s investments in capital of at least Rp 2,500,000,000 (two billion five hundred million Rupiah).

Investors are prohibited from making agreements and/or participation that confirms that the ownership of shares in a limited liability company is for and on behalf of others.

Period of Principle License

Period of principle license is the same as the period of project completion in the principle license. The time period is given between one and five years depending on the characteristics of its business. If the time period specified in principle license has expired and the project has not been completed, the company cannot apply for licensing and other non-licensing. Therefore, if the company has not completed the project as set forth in the principle license, the company shall apply for an extension of the project completion period not later than 30 working days before the expiry date of the project completion period as stipulated in the principle license.

For a period of project completion in principle license which has been expired and the company does not extend or late in applying for an extension of the period of project completion, the company will be imposed by administrative sanctions in the form of a warning letter and be followed up by BKPM on the project that was not completed timely. Furthermore, if the result of the follow-up is the company cannot complete the project in accordance with the stipulated period and late in extending the term of completion of the project, thus the company may apply for a new principle license, as regulated in Perka 14/2015, if the extension of time completion of projects that is submitted after the expiration of a period of project completion, thus the extension request cannot be processed and shall apply for  a new principle license application.

Divestment Provisions

PMA Company’s obligation to divest before the enactment of Perka BKPM 14/2015 remains binding and shall be implemented with a minimum nominal shares ownership of Rp 10,000,000 (ten million Rupiah). If the divestment obligation has due and the PMA company is yet to obtain prospective domestic investor, it may apply for an extension of time. After approved by the Minister of Law and Human Rights of Indonesia, the shares of Indonesian’s participant obtained from divestment can be resold to individual Indonesian citizens/foreigners/entity Indonesian/foreign business entities.

In a previous regulatory, minimum requirement nominal stock ownership is not regulated.

Acceleration of Investment License

Perka BKPM 14/2015 regulates new item, namely issuance of principle license that is called as investment license. This license can be issued within 3 hours. Conditions to obtain investment license are (i) a minimum investment value of Rp 100,000,000,000 (one hundred billion Rupiah) and/or (ii) employing Indonesian manpower of at least 1,000 (one thousand) people. As for special for investment license is located in certain industrial areas and which has been approved by the Head of BKPM, the investement license can start construction without first having license, as building license (IMB) and environmental license, but the license shall be managed concurrently with time construction.

Erinda Resti Goesyen