Top reasons to use a local nominee company in indonesia năm 2024

Indonesia has long been known as one of the top destinations that offer numerous business opportunities to both local and foreign investors. In order to run a successful business in Indonesia, foreign investment in Indonesia must be carried out through the establishment of a legal entity known as foreign limited liability company (PT PMA).

PT PMA is specially designed to meet the needs of foreign investors, which is why the majority of foreigners incorporate their company in the form of PT PMA, instead of choosing a partnership with a local company (PT).

Further into this article, we will elaborate the reasons many foreigners choose PT PMA to run their business, restrictions of PT PMA and how a special purpose vehicle company can help to overcome those restrictions.

REASONS FOR CHOOSING A PT PMA IN INDONESIA

PT PMA, also known as Perseroan Terbatas Penanaman Modal Asing, is often foreigners’ first choice of legal entity in Indonesia because it is the only type of establishment that allows 100% foreign ownership.

Since it is entirely owned by the foreigner, the foreign owner of a PT PMA has full authority over the operation and direction of the company. In addition, a 100% foreign-owned PT PMA avoids the need to finding a local partner who may not be unreliable, thus mitigating company risks.

Other than 100% ownership and risks reduction, another perk of PT PMA is that this type of legal entity can sponsor and apply for work permits and stay visas (ITAS) for its foreigner staff, as well as business visas for its clients visiting Indonesia.

Want to apply for an Indonesian business visa? Apply online for a quick and hassle-free process.

RESTRICTIONS ON PT PMA

Even though PT PMA provides many benefits to foreign investors, the government of Indonesia restricts foreign ownership of certain business fields, which can be found in the Negative Investment List (NIL). Some of these restricted sectors only allow partial foreign ownership, and some of them prohibit foreign ownership entirely.

SPECIAL PURPOSE VEHICLE COMPANY IN INDONESIA

Therefore, in the event of business field that is partially close to foreign ownership, foreign investors can always partner with an Indonesian company or individual.

As for sectors that are entirely closed to foreign ownership, a special purpose vehicle company will work for a PT PMA in this case. Foreigners can engage a special purpose vehicle company in the form of PT (local company) via a strictly guarded loan agreement.

Even though a special purpose vehicle company is solely owned by an Indonesian national, the foreign investor will have full control over the company – given that you find a reputable special purpose vehicle service provider, such as Cekindo, to draft an effective agreement for you.

Here’s the scope of work of a special purpose vehicle company in Indonesia by using Cekindo’s service:

• You get a complete set of legal agreements: Pledge of Shares Agreement, Director Appointment Letter, and Cooperation Agreement. Since you’re holding these documents, the Indonesian shareholders will have no control over the company operational and financial matters
• You are the legal director of the company with full authority
• All business operations, administration, recruitment and employment taxes will be taken care of by this special purpose vehicle company

HOW TO SET UP A SPECIAL PURPOSE VEHICLE COMPANY SECURELY IN INDONESIA

You can follow the following tips to ensure that your special purpose vehicle company setup is safe and complies with the Indonesian Law:

• You should have a minimum of 2 local shareholders in your special purpose vehicle company (just like PT PMA) to avoid one person owning most of the shares.
• Withdraw or transfer money/profits from the company on a regular basis.
• Look for experienced and reputable business and law consultation services to help you take care of all processes, draft the legal agreement and protect your rights in the special purpose vehicle company.

GET IN TOUCH WITH CEKINDO

To get into details about our special purpose vehicle company services, do not hesitate to contact us. One of our consultants will be happy to answer your questions and guide you through business incorporation process in Indonesia.

The nominee acts as directed by the underlying investors in relation to their shares. The terms and conditions on which the nominee acts are set out in a nominee deed poll and the nominee manages a range of activities according to the instructions of the investors, including:

• Voting at investors' meetings and keeping a record of voting directions and other instructions
• Signing written resolutions or “entitled persons” agreements
• Delivering notices, reports, offers, agreements and other communications
• Distributing any proceeds such as dividends
• Exercising rights attaching to the shares
• Giving consents, approvals, or waivers
• Acquiring further shares or securities

What are the benefits of using a nominee company?

The nominee simplifies some parts of the capital raising process and ongoing investor relations. In some countries there are legal rules that apply to companies based on the number of recorded investors they have. For New Zealand companies, this includes enhanced financial reporting obligations for those companies with 10 or more shareholders. Additionally, the Takeovers Code also applies to New Zealand companies with more than 50 (voting) shareholders and 50 share parcels. As a nominee company only counts as one investor, these extra requirements can be reduced by using a nominee structure.

Using a nominee company can also reduce the administration requirements from investor voting and consents, while simplifying the company's share register and cap table. The nominee structure also provides a level of confidentiality as shares are held in the name of a nominee rather than that of the beneficial investor.

A nominee company can save time and minimise the risk of lost opportunities arising from time delays. For example, sharebrokers often use a nominee company to help facilitate transactions while leaving their clients as the real owner of shares.‍

What are the limitations of nominee companies?

A nominee does not guarantee the investment or provide investment advice. The nominee company only has the discretion to act on behalf of an investor where that investor has failed to validly respond to a request for direction in respect of their shares.

How to set up a nominee company?

For New Zealand companies, The Snowball Effect provides a Nominee Management Service. This includes the undertaking of Anti-Money Laundering (AML) and compliance checks, and the ongoing monthly management of the nominee company.

The nominee structures used are consistent with best practice around the world for early-stage investing and online private equity investments including the Seedrs Nominee structure in the UK and the SeedInvest Special Purpose Vehicles in the USA.

Common nominee structures

In New Zealand, there are several common nominee structures, including:

1. Bare trust nominee: This is a structure where the nominee company holds legal title to assets on behalf of the beneficial owner, who retains the right to the income and benefits generated by those assets.
2. Shareholder nominee: In this structure, the nominee company holds shares in a company on behalf of the beneficial owner. This is commonly used in situations where the beneficial owner wants to remain anonymous or keep their shareholding private.
3. Director nominee: A nominee company can also act as a director of a company on behalf of the beneficial owner. This can be useful when the beneficial owner wants to distance themselves from the day-to-day management of the company.
4. Limited partnership nominee: In this structure, the nominee company is a limited partner in a limited partnership. This can be useful in situations where the beneficial owner wants to invest in a partnership but does not want to be personally liable for any losses.

It's important to note that the use of nominee company structures can have legal and tax implications, and it's recommended that you seek professional advice before setting up a nominee company.

Who should use a nominee company?

It's important to note that the use of a nominee company can have legal and tax implications, and it's recommended that you seek professional advice before setting up a nominee company.

• To protect their privacy: Nominee companies can be used to keep the identity of the beneficial owner confidential, as the nominee company's name will be listed on public records instead of the beneficial owner's name.
• To limit liability: In some cases, a nominee company can be used to limit the personal liability of the beneficial owner, as the company will assume legal responsibility for any obligations or liabilities associated with the assets or investments held in the company.
• To facilitate transactions: Nominee companies can be used to facilitate transactions, such as the sale of shares or assets, as the nominee company can hold legal title to the assets or shares until the transaction is complete.
• To manage assets: Nominee companies can also be used to manage assets, such as property or investments, on behalf of the beneficial owner, allowing them to focus on other aspects of their business or personal life.

Get a free guided demo of Orchestra here

Related articles:

For more information on the topics covered, go to;

• How does a cap table work?
• Guide to ESOPs

DISCLAIMER: This article is for informational purposes only, and contains general information only. Orchestra is not, by means of this information, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services nor should it be used as a basis for any decision or action that may affect your business or interests. Before making any decision or taking any action that may affect your business or interests, you should consult a qualified professional advisor. This information is not intended as a recommendation, offer or solicitation for the purchase or sale of any options or shares.

What are the benefits of a nominee company?

The most frequent form of a nominee is a trustee holding shares on trust for beneficiaries. Furthermore, nominee structures have many benefits, including tax management, regulatory compliance, and simplified corporate governance and company administration.nullWhat is a Nominee Shareholder? - LegalVision UKlegalvision.co.uk › business-structures › what-is-nominee-shareholdernull

What is the reason for nominee arrangement?

To protect their privacy: Nominee companies can be used to keep the identity of the beneficial owner confidential, as the nominee company's name will be listed on public records instead of the beneficial owner's name.nullWhy use a nominee company structure? - Orchestrawww.orchestra.io › blog › why-use-a-nominee-company-structurenull

What is the purpose of a nominee?

A nominee is a person or firm whose name is titled on securities or other property to facilitate certain transactions or transfers while leaving the original customer as the actual or legal owner.nullUnderstanding Nominee and Nominee Accounts - Investopediawww.investopedia.com › terms › nomineenull

What is a nominee structure in Indonesia?

A nominee arrangement (i.e., an arrangement for the local party holding shares on behalf of a foreign party) is prohibited under the Indonesian Investment Law. The purpose of the restriction is to avoid an arrangement whereby a company is formally owned by a party while being beneficially owned by a different party.nullInvesting in Indonesia - PwCwww.pwc.com › publications › tax › investing-in-indonesianull