This ultimate guide will provide you with what you need to know about registered capital in Indonesia.
It is a requirement that companies have registered capital to successfully establish a company. Businesses need capital as it can be used in the future, such as to purchase assets and maintain the operations of the company.
Let’s jump right in.
Share capital in Indonesia
For Indonesian companies, there are three types of capital, which are:
- Authorised capital
- Issued capital
- Paid-up capital
What is authorised capital?
Authorised capital is the total amount of shares that a company can issue to the shareholders. It can be called registered capital as authorised capital is included in the deed of establishment when the company is set up.
What is issued capital?
Issued capital is the capital that is issued to the shareholders.
What is paid-up capital?
Paid-up capital is the capital a company has received from the shareholders in exchange for shares.
How much capital does your company need?
The minimum authorised capital of a company should be at least IDR 50 million. However, the capital also depends on the size of your company.
If your business is a small-sized business, the authorised capital should be IDR 50 million to IDR 500 million.
For medium-sized companies, the capital should be from IDR 500 to IDR 10 billion, and for large-sized companies, the capital should be more than IDR 10 billion.
At least 25% of the authorised capital must be issued and paid-up, and it must be proved with valid payment evidence.
Specifically for 100% foreign-owned companies, the minimum issued and paid-up capital is IDR 10 billion.
Increasing the registered capital
Increasing the company’s capital can be done with the approval of the general meeting of shareholders (GMS). The GMS may transfer the authority of increasing the company’s capital to the board of commissioners. However, the authority transfer may only be valid for 1 year and may be revoked at any time by the GMS.
The increase of authorised capital is valid if the requirements for the quorum and the number of approving votes to amend the articles of association are in accordance with the Company Law or the company’s articles of association.
The increase of issued capital and paid-up capital within the limits of the authorised capital is valid if a quorum with more than one half of the total number of shares with the right to vote and is approved by more than one half of the total number of votes, unless a larger number is specified in the articles of association.
Decreasing the company’s capital
The reduction of capital is approved by the GMS which the shareholders are holding not less than two-thirds of the total shares with voting rights, and the resolution is approved by at least two-thirds of the total shareholders with voting rights.
The board of directors will have to notify all creditors about the reduction by announcing it in one or more newspapers within seven days since the date of the GMS resolution. Within 60 days of the announcement, the creditors can submit a written objection regarding the capital reduction.
When an objection concerning the capital is received, the company must give a written response within 30 days. If 1) the company rejects the objection or fails to provide a settlement to agree with the creditors within 30 days; or 2) the company fails to give a response within 60 days the objection is submitted, the creditor may file a lawsuit against the company to the district court.
The reduction of capital must have the Ministry of Laws and Human Rights (MOLHR) approval. The MOLHR will approve the reduction only if 1) there is no objection from the creditors; 2) a settlement between the creditor and company is reached; or 3) the creditor’s lawsuit is rejected by the district court.
Where to pay paid-up capital
Paid-up capital should be deposited into the company’s bank account, which bank accounts can be opened once you have completed the company registration process.
While you are in the process of incorporating your business and cannot open a bank account, the shareholders will have to sign a capital statement letter to verify that they have the funds prepared.
When to pay paid-up capital
You should inject the paid-up capital as soon as your company’s bank account is open. If the full amount is not paid, you should record the remaining amount as the shareholder’s liabilities.
Capital payment forms
The payment of capital can be made in the form of money into the company’s bank account or in other forms such as assets.
If the payment is made with assets, instead of cash, the value of the assets will be determined based on the current market price or by an independent expert.
Capital payment in the form of immovable assets, such as buildings, estates or plots, must be announced in one or more newspapers within 14 days after signing the deed of establishment.
The registration, increasing and decreasing process of registered capital in Indonesia may be complicated for investors who are still new to doing business in Indonesia.
In order to avoid any mistakes, you should consider engaging with Acclime’s professional corporate services to help ensure that your company complies with the Indonesian regulations.
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