Establishment of a Limited Liability Company

Background

Practically, in Indonesia, Limited Liability Company is the most common form of business entities. Therefore, it is necessary to arrange laws and regulations concerning the Limited Liability Company as set out in Law Number 1 of 1995 on Limited Liability Company (“Law 1/1995”), which has been replaced in 2007 because it was no longer suitable for the developing economy in the Republic of Indonesia. Now, the Limited Liability Company is regulated in Law Number 40 of 2007 on Limited Liability Company (“Law 40/2007”).

Limited Liability Company (“Company”) can be defined as a legal entity which constitutes a joint of capital established pursuant to a contract in order to on business activities with authorised capital all of which is divided into shares and which fulfils the requirements as stipulated in the Law 40/2007 and its implementing regulations.

Establishment of a Company

A Company must be established by 2 (two) or more persons by a notarial deed made in the Indonesian language. This is in accordance with Article 7 Law No. 40/2007. In other words, a Company must be established pursuant to a contract, and therefore it must have more than 1 (one) shareholder.

However, there are some exemptions of the aforementioned provision regarding the obligation of a Company that should be established by 2 (two) or more persons (founders). The said provision does not apply to (i) State-owned company, all of whose shares are owned by the State, or (ii) a Company managing stock exchanges, clearing and guarantee houses, central securities depositories, and other institutions regulated in the capital market law.

There are some requirements that are required in establishing a Company, such as providing information related to the Company before obtaining its status as a legal entity, such as the name, domicile, the period of incorporation and other information related to a Company. The said information related to a Company must be contained in the deed of establishment.

In establishing a Company, it is also important for a Company to obtain the status of a legal entity given by Minister of Law and Human Rights (“Minister of Law”), in which that a Company shall obtain the status of a legal entity on the date of the Decree of the Minister of Law concerning a Company’s ratification as a legal entity (“Decree”) is issued.

To obtain this Decree, the founders of a Company shall jointly submit an application to the Minister of Law electronically via legal entity administration system information technology services, filling in the form, no later than 60 (sixty) days after the signature date of the deed of establishment of a Company. If the requirements for the submission application are in accordance with the related regulations, the Minister of Law shall reply electronically at the same time as the submission of the application to declare that there is no objection to the application concerned and the applicant will have thirty (30) days to deliver the deed of establishment with the necessary documents to the Minister of Law. If the requirements for the submission application are not in accordance with the related regulations, the Minister of Law shall directly notify the applicant electronically of the rejection and the reasons thereof.

However, in the event that the application to obtain the Decree is not submitted within the aforementioned period of 60 (sixty) days, the said deed of establishment will become void and a Company shall be wound up by law and the founders shall settle its affairs.

Stephanie Portier

 

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