Foreign investors can acquire an existing Indonesian business by purchasing its shares or acquiring selected assets. A share acquisition provides ownership of an established company, including its existing operations, contracts, and liabilities. An asset acquisition allows investors to purchase selected business assets without acquiring the company itself.
The acquisition procedures differ depending on whether the target is a private limited liability company (PT) or a publicly listed company (Tbk).
Conducting Due Diligence Before an Acquisition
Financial due diligence should assess the target company’s financial statements, outstanding debts, cash flow, unresolved audit findings and related-party transactions. Tax due diligence should identify unpaid taxes, outstanding assessments and potential disputes with Indonesia’s Directorate General of Taxes.
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Legal due diligence should cover corporate ownership, shareholder agreements, material contracts, litigation and existing business licenses.
Where the target owns property, investors should verify applicable land rights, including Hak Guna Bangunan (HGB) and Hak Guna Usaha (HGU). The acquisition should also account for existing employment obligations, including outstanding wages, collective agreements and potential severance liabilities.
Complying With Foreign Ownership and PT PMA Requirements
Foreign investors must determine whether the target company’s business activities are permitted under Indonesia’s Positive Investment List, which may impose ownership limits, partnership requirements, or additional sector-specific conditions.
When foreign investors acquire shares in an existing domestic limited liability company, the company is generally classified as a foreign investment company (PT PMA), provided that foreign participation is permitted in its business activities.
The general minimum paid-up capital requirement for a PT PMA is IDR 2.5 billion (USD 150,000). Separately, the general minimum investment requirement exceeds IDR 10 billion (USD 650,000) per applicable five-digit KBLI business classification and project location, excluding land and buildings. Different calculation rules and exceptions apply to certain business activities.
Completing a Private Company Acquisition
Negotiating the Acquisition Agreement
Following negotiations and due diligence, the parties may sign a conditional share purchase agreement establishing the purchase price, payment arrangements, warranties, indemnities and conditions for closing, including any required corporate approvals or regulatory clearances.
Obtaining Corporate Approval and Completing Notifications
Where an acquisition is conducted through the company’s directors, the statutory process requires an acquisition plan and the applicable shareholder approvals.
A direct acquisition from existing shareholders does not require the same acquisition-plan procedure. However, it remains subject to the target company’s articles of association, applicable share transfer restrictions and relevant shareholder approval requirements.
For acquisitions involving a change of control, both structures remain subject to applicable employee notification, public announcement and creditor-protection requirements.
Under Indonesia’s Company Law, the announcement must generally be published in at least one newspaper, and employees must receive written notification at least 30 days before the notice convening the shareholders’ meeting. Creditors have 14 days following the announcement to submit objections.
Completing the Share Transfer and Registration
Once the applicable conditions have been satisfied, the parties complete the acquisition through the required share transfer documentation. Acquisitions involving a change of control must be documented in an Indonesian notarial deed.
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The company must record the ownership changes in its shareholder register and notify the Ministry of Law within 30 days of recording the share transfer.
The transaction’s legal effective date must be identified to determine the deadline for any mandatory KPPU notification.
Where foreign ownership is introduced, the company’s investment classification and licensing information must also be updated through Indonesia’s Online Single Submission (OSS) system, as applicable.
Acquiring a Publicly Listed Indonesian Company
Acquiring control of a publicly listed Indonesian company (Tbk) involves additional requirements under the Financial Services Authority (OJK).
Under OJK Regulation No. 9/2018, an investor may become a controlling shareholder by holding more than 50% of the company’s voting shares or otherwise having the ability to determine its management or policies.
An acquisition resulting in a change of control generally triggers disclosure obligations and a mandatory tender offer (MTO), subject to applicable exemptions. The new controlling shareholder must offer to purchase eligible shares from other shareholders under the prescribed procedures.
Where the acquisition and subsequent tender offer result in concentrated ownership, additional shareholding adjustments may be required.
Assessing Tax and Competition Requirements
For share acquisitions, the seller’s tax position is an important consideration. Gains realized by Indonesian resident sellers are generally subject to the applicable Indonesian income tax rules. Different provisions may apply to non-resident sellers, including withholding tax requirements and relief available under an applicable tax treaty.
The treatment also depends on whether the transaction involves shares in a private company or shares traded on the Indonesian stock exchange.
Asset acquisitions may create different income tax, VAT and land transfer tax consequences.
Acquisition financing and subsequent related-party transactions may also create transfer pricing obligations.
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Certain acquisitions must be notified to Indonesia’s Business Competition Supervisory Commission (KPPU). Notification generally applies when the relevant business groups’ combined Indonesian assets exceed IDR 2.5 trillion (USD 150 million) or their combined Indonesian sales exceed IDR 5 trillion (USD 300 million). A higher asset threshold of IDR 20 trillion (USD 1.2 billion) applies to banking transactions. The obligation also depends on the applicable transaction and jurisdictional criteria, including whether the acquisition results in a change of control.
Where notification is mandatory, it must generally be submitted within 30 working days after the transaction becomes legally effective. Acquisitions between affiliated companies are generally exempt.
Contact MAP Resources Indonesia for Acquisition Advisory
MAP Resources Indonesia assists foreign investors with company acquisitions, financial due diligence, corporate restructuring, tax advisory and regulatory compliance in Indonesia. For assistance, contact us at info@mapresourcesindonesia.com.
