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Things to Watch Out for Registration of Companies in Indonesia

Registration of Companies in Indonesia – Company is where the process of production of goods and services. Companies may we already know but whether it is really a company or business entity, some people are difficult to distinguish business entities and companies, because if seen and see the business entities look the same, both try, very wrong if we assume like that, hence previously discussed the difference of business entity and company.

The Company has a wide range of types covering all sectors according to its business field and for example, where it is divided into 5 i.e. extractive companies, agrarian companies, industrial companies, trading companies, service companies, from each type of company holds a separate field in this life, or it can be said that the division of companies into 5 types is the classification of companies moving to agrarian, industry, services, trading, extractive, so we more easily know the form of this company. Registration of companies in Indonesia shall be carried out in accordance with the procedure of adjustment of the type of company owned.

Another form of company is “PMA” or also called with Foreign Investment. Elements that exist in Foreign Investment under Capital Investment Law no. 25 Year 2007 among others; Conducted by foreign investors, entirely using foreign capital or incorporated by domestic investors. Is an activity to invest, aiming to do business in the territory of the Republic of Indonesia. This form of investment can be done through several ways, including by taking shares of stock at the time of the establishment of Limited Liability Company by buying shares or performing other ways in accordance with the provisions of the legislation.

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The presence of PMA is quite helpful in our country because PMA is an activity of investing to do business in the territory of the Republic of Indonesia conducted by foreign investors, either with full foreign capital as well as those that interact with foreign investors. But still there must be rules – rules that apply to the investor to occur harmony between the giver and the recipient. In doing this Foreign Investment sometimes there is a mistake that can be fatal. Here are some errors that need to be watched for Foreign Investment can run smoothly.

  1. Inappropriate Nominee Agreement with Local Entrepreneurs

PT PMA who becomes a leader in established companies often become obstacles in the process of registration is quite complicated. Therefore, to simplify the registration of this foreign investment company, foreign entrepreneurs choose to enter into agreements with Indonesian citizens to become directors of the company and shareholders.

This is often done by foreign businessmen to accelerate the process of establishing foreign investment companies. However, this is not recommended by an Indonesian consulting agency. However, this is sometimes unavoidable so that foreign businessmen and local entrepreneurs will make a nominee agreement. With this nominee agreement will cause the following:

  • Foreign entrepreneurs do not have sufficient capital (at least US $1 million) as required by Indonesian Law to establish PT PMA, so they prefer to enter into agreements with one or more local people to become shareholders of the company so that they can form a PT Indonesia (company) with low capital.
  • Foreign entrepreneurs do not have some documents required for PMA registration (work permits and residence permits) so that they ask local people as shareholders of the company until they can obtain the required permits.
  1. Not Confident with Company Location

To register PT PMA you also need a domicile letter stating the location of your PMA. This document is used to create a Tax Card or Taxpayer Identification Number. If you do not know about the location where your business is running, you will find some problems in the future. First, you need to spend extra time and money because you have to change the location of your office.

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Secondly, you also need to close your Tax Revenue from your previous office and create a new one in the new place. Therefore, it is very important to decide where your corporate headquarters will be. Some cities in Indonesia, such as Jakarta, allow PT PMA to have a virtual office. However, you should consult your consulting agent. However, you should consult your consulting agent for registration of companies in Indonesia.

  1. Not Confident with Business Sector

You must define a clear business activity to set up a PMA company A company registration is actually a simple and easy process as long as every document required for the registration process is processed legally and then given fully. In Indonesia, there are certain areas of industry that are restricted to PMA. To find out more about the negative list of investments, you need to consult with a local agency that will assist you with the registration process.

  1. Local Agent to Assist in Managing Incorporation of Foreign Investment Company Not Competent

Your plan may be disrupted by the conditions of the use of incompetent consulting services. Here are some points to find out the competence level of the consultant you choose:

  • Make sure that during the process your agent will ask you to sign a Power of Attorney. This document is required especially when you, as the owner of a PMA, cannot register and ask a third party (agent) to register. BE CAREFUL if they do not ask for your signature for this document, because they will tend to fake your signature, make the whole business illegal.
    In any business your agency makes in connection with your company’s registration, the relevant agencies (BKPM, Notary, Legal and Human Rights Department, Tax Office, and Ministry of Commerce) will actually request this document. If your agency fakes your signature, it means you have no control over what your agent does.
  • Without being asked for communication, the Agent will report the progress of the registration process. You must be alert when communication is not working properly, because something might have happened. You have the right to always know about everything.
  • Look through their website and find clients before. Ask the local consulting agency to provide some references. Call them to make sure they are satisfied with the agent service. Do not hesitate to reproduce the references, and then call them all.
  • Local agents must come from Indonesia. This is the policy of the Foreign Investment Coordinating Board (BKPM) which issued a new regulation that only local agents or at least have local entities that can help register PT PMA.
  • Ensure that the consulting agency is certified by BKPM. Only certified agents can help you register your PMA. You must make sure the registration of companies in Indonesia is done correctly.
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