A local shareholder in an Indonesian foreign investment company, or PT PMA, can generally be replaced through a transfer of their shares. Replacing the shareholder does not require establishing a new PT PMA. The existing company continues after the transfer, while the permitted identity and ownership percentage of the incoming shareholder depends on the company’s business activities.
How Is an Existing Local Shareholder Replaced?
The existing shareholder transfers their shares to the incoming shareholder. The company’s Articles of Association may impose conditions on how that transfer can take place.
Changing the shareholder structure of your PT PMA? Contact MAP Resources Indonesia at info@mapresourcesindonesia.com for assistance with the share transfer.
If the Articles require the shares to first be offered to specified existing shareholders, those shareholders have 30 days from the offer to purchase them. If they do not, the shares may be offered to a third party.
Where approval from a company organ is required, approval or rejection must be given in writing within 90 days after the request is received. If there is no written response within that period, approval is deemed given. Once approval is granted, the transfer must generally be completed within a further 90 days.
The transfer must be entered in the company’s shareholder register, and the directors must notify the change in shareholder composition to the Minister within 30 days from the date the transfer is recorded. A change in shareholder composition resulting from a share transfer must also be recorded as a change in the company’s registered data. Beneficial ownership and OSS information must be updated where the transaction changes the information recorded in those systems.
If the transaction results in a transfer of control over the PT PMA, it constitutes an acquisition under Indonesia’s Company Law. For an acquisition conducted directly from an existing shareholder, the full acquisition-plan procedure involving the target company’s directors does not apply. However, the applicable public announcement and creditor-protection requirements extend to a direct acquisition, including 14 days for creditors to submit objections. The direct acquisition must also be documented in a notarial deed in Indonesian.
Can the Local Shareholder Be Replaced with a Foreign Shareholder?
The outgoing Indonesian shareholder can be replaced by another Indonesian shareholder without increasing the PT PMA’s foreign ownership. Replacing that shareholder with a foreign investor is different because the resulting foreign ownership level must be permitted for the company’s business activities.
Where the relevant activities permit 100% foreign ownership, all Indonesian ownership may potentially be removed from the PT PMA. Where an activity is subject to a foreign ownership ceiling, the transfer cannot increase foreign ownership beyond that limit. If the PT PMA conducts several activities, the resulting ownership structure must comply with the foreign ownership requirements applicable to each activity.
Planning to replace an Indonesian shareholder with a foreign shareholder? Contact MAP Resources Indonesia at info@mapresourcesindonesia.com to assess whether the new ownership structure is permitted.
Removing the Indonesian shareholder does not ordinarily remove Indonesia’s requirement for a PT to have at least two shareholders. If a transfer leaves the company with only one shareholder, the remaining shareholder generally has six months to transfer part of the shares to another person or for the company to issue shares to another person.
A PT PMA permitted to have 100% foreign ownership can therefore have two foreign shareholders rather than retaining an Indonesian shareholder solely to satisfy the general shareholder-number requirement.
What if the Local Shareholder Refuses to Transfer?
If the Indonesian shareholder refuses to transfer their shares, the ability to obtain them depends on any applicable rights or obligations contained in the Articles of Association, shareholder agreement, or another binding arrangement between the parties.
MAP Resources Indonesia Can Support Your PT PMA Shareholder Change
MAP Resources Indonesia assists foreign investors in changing the ownership structure of an existing PT PMA, including assessing whether an Indonesian shareholder can be replaced by another local or foreign shareholder. Contact us at info@mapresourcesindonesia.com.
