Indonesia Law – The Latest Government Regulation on the Authorized Capital Amendment of Limited Liability Company

regulation-leksncoBackground

On 14 July 2016, Government has issued the Government Regulation No. 29 of 2016 on Authorized Capital of Limited Liability Company Amendment (“PP 29/2016”). PP 29/2016 revokes Government Regulation No. 7 of 2016 which previously also regulated the amendment of authorized capital of limited liability company.

PP 29/2016 was issued with the purpose to provide the ease of doing business for entrepreneurs in order to start their business, and also to enhance investment which on its turn will encourage the growth of Micro, Small, & Medium Enterprises.

Authorized Capital of Limited Liability Company

Limited Liability Company is required to have sufficient amount of authorized capital to start business activity. Authorized capital of limited liability company must be stated on articles of association as stated in limited liability company’s deed of establishment.

Authorized capital amount of the limited liability company is determined by the agreement of the founder. According to the PP 29/2016 elucidation, it can be known that determination of authorized capital amount according to agreement of founders is based on freedom of contract principle, so the public is given the freedom to make an agreement on establishing limited liability company.

Deposit of authorized capital

25% (twenty five percent) of the authorized capital must be issued and paid up, evidenced by legal proof of the deposit. Legal proof of the deposit must be submitted electronically to the Minister of Law and Human Rights within the period of 60 (sixty) days since the signed date of the deed of establishment. For limited liability company which conducts particular business activity, then minimum amount of authorized capital shall be in accordance with prevailing laws and regulations.

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