Capital Structure of Limited Liability Company


In the limited liability company (“Company”), capital is the primary factor which allows the Company to conduct their business activities. The Law number 40 of 2007 on Limited Liability Companies (“Company Law”) has set out the provision on the company capital.

Company Law stipulates that the capital in the company can have 3 (three) differentiations:

  1. Authorized Capital, means the total amount of shares that a Company is allowed to issue to the shareholders. The authorized capital can be called as the registered capital because this capital shall be included in the deed of establishment when the Company is established;
  2. Issued Capital means the capital that is issued by the Company to the shareholders; and
  3. Paid Up Capital means the capital obtained from the shareholders.

According to Article 32 of Company Law, the minimum authorized capital for a company is Rp 50,000,000 (fifty million Rupiah). However, the minimum requirement for the authorized capital can be waived for certain business activities such as banking, insurance or freight forwarding business.

Moreover, with regards to the issued and paid up capital, the minimum portion for those capitals are 25% for each capital which will be calculated from the Authorized Capital and shall be paid up in full by the shareholders. Moreover, as the evidence for the issued and paid up capital, according to Article 33 of Company Law, it is stated that those capital shall be proven by lawful evidence of deposit. According to the elucidation of the article, evidence of deposit means, among others, evidence of deposit by the shareholders into a bank account under the name of the Company, data from financial reports audited by an accountant, or the Company’s balance sheet signed by the Board of Directors and Board of Commissioners.

The capital can be paid in the form of money and other forms, such as tangible or intangible goods, which have a monetary value. Moreover, if the shareholders pay its share by immovable property, it must be announced in 1 (one) national newspaper at least 14 (fourteen) days after that the deed of establishment is signed by the shareholders. The purpose of this provision is to provide information to the public and to allow possible objections, for example in the case that the immoveable property does not belong to the person who undertook the payment.

Stephanie Portier

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