Individuals Can Now Establish Companies on Their Own
To facilitate the ease of doing business and bolster micro and small businesses’ competitiveness, the amendment of Law No. 40 of 2007, dated August 16, 2007 on Limited Liability Companies (“the 2007 Company Law”) under Law No. 11 of 2020 dated November 2, 2020 on Job Creation (the “Job Creation Law”) (jointly, the “Amended Company Law”) introduced the concept of companies that qualify as Micro and Small Enterprises. Under the Amended Company Law, companies that qualify as Micro and Small Enterprises are allowed to either be incorporated by a single individual or the usual 2 or more founders. Further details on these individual legal entities (badan hukum perorangan) are regulated in Government Regulation No. 8 of 2021 dated February 2, 2021 on Authorized Capital as well as the Incorporation, Amendments, and Dissolution of Companies that Qualify as Micro and Small Enterprises (“GR 8/2021”).
GR 8/2021 revokes the Government Regulation No. 29 of 2016 dated July 14, 2016 on Changes to Authorized Capital of Limited Liability Companies (“GR 29/2016”). GR 8/2021 is effective as of February 2, 2021.
The key provisions of GR 8/2021 are as follows.
- Authorized Capital
GR 29/2016 already set out that the authorized capital of limited liability companies shall be based on the agreement of the founders. However, prior to its amendment under the Job Creation Law, the 2007 Company Law still required companies to have the authorized capital of at least Rp50 million.
Now, the Amended Company Law no longer stipulates a minimum amount of authorized capital and allows founders of companies to agree on the amount of authorized capital for their companies. GR 8/2021 further clarifies that companies in certain business activities shall fulfill the minimum authorized capital provided under the laws and regulations. As an example, foreign investment companies are required to have issued and paid-up capital of at least Rp2.5 billion. Because of this, foreign investment companies will need to stipulate their authorized capital to accommodate such minimum issued and paid-up capital.
- Issuance and Payment of Capital
Similar to GR 29/2016, GR 8/2021 also requires companies to submit proof of capital payment to the Minister of Law and Human Rights (the “MOLHR”) within 60 (sixty) calendar days as of the date of the deed of establishment.
Since GR 8/2021 introduces a new form of companies, namely, “individually owned companies (perseroan perorangan)” (which will be further elaborated below), the proof of capital payment for these companies shall be submitted to the MOLHR within 60 (sixty days) as of the date of fulfillment of the Statement of Incorporation.
- Individually Owned Companies
Individually owned company is a new category of companies regulated in the Amended Company Law and GR 8/2021. True to its name, one person companies are companies incorporated by a single individual, which shall be acting as an individual founder, be legally capable and at least 17 (seventeen) years old.
Please note that an individual may only establish an individually owned companies that are categorized as a Micro or Small Enterprise. Currently, under GR No. 7 of 2021 dated February 2, 2021 on the Facilitation, Protection and Empowerment of Micro, Small and Medium Enterprises, the criteria of Micro and Small Enterprises are based on the following criteria of capital or annual sale.
| Scale | Capital | Annual Sale |
| Micro Enterprise | Up to Rp1 billion, excluding land and building | Up to Rp2 billion |
| Small Enterprise | More than Rp1 billion up to Rp5 billion, excluding land and building | More than Rp2 billion up to Rp15 billion |
While the usual companies are incorporated through a deed of incorporation to be further ratified by the MOLHR, individually owned companies are incorporated by filling out online Statement of Incorporation that shall be registered to the MOLHR. Thus, the individual founder is not required to make a notarial deed of establishment.
However, if an individually owned company has more than one shareholder and/or no longer fulfill the criteria as a Micro or Small Enterprise, it shall change its status to a regular limited liability company.
- Obligation to File Financial Statements
Unlike regular companies which financial statements shall be ratified by the General Meeting of Shareholders, individually owned companies are required to submit their financial statements to the MOLHR. The financial statements shall be submitted within 6 (six) months as of the end of the accounting period.
Failure to submit the financial statements shall be subject to administrative sanctions in the form of written warning, suspension of access or service rights, or revocation of legal entity status.
With the enactment of this GR 8/2021, individually owned companies may have more options when it comes to how they want to conduct their business, as they are now able to enjoy the benefits of having the legal entity status of a “Company” without having to worry too much on its various administrative requirements.
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March 5, 2021
Please contact Inka Kirana (ikirana@aksetlaw.com), Alfa Dewi Setiawati (asetiawati@aksetlaw.com), N. Sekar Lestari (nlestari@aksetlaw.com), or Caleb Sitorus (csitorus@aksetlaw.com) for further information.
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