Indonesia's Limited Liability Company's Capital Structure

What's the Law On LLC's Capital Structure?

According to the Omnibus Law, Article 109 (3), companies must maintain authorized capital with specific requirements. The regulation mandates that "at least 25% of the authorized capital must be fully issued and paid-up." Company founders determine the total capital amount. This provision updated the earlier Law Number 40 of 2007 on Limited Liability Companies.

What's the Difference Between 'Issued Capital' and 'Paid Up Capital'?

Paid Up Capital represents funds that investors have already contributed in exchange for shares, even if not fully paid initially. When issued shares are completely paid, this becomes "Paid Up Share Capital."

Issued Capital refers to the value of shares a company can actually distribute to potential investors. Once shares are distributed to shareholders, this total is called "Issued Share Capital."

Important Note: Fully issued and paid-up capital requires a valid deposit receipt. Any subsequent share issuance to increase capital must also be completely paid-up.

Prohibitions Concerning Ownership of Company's Shares

Law 40/2007 Article 36 (1) prohibits "A Company from issuing shares to be owned by itself or to be owned by another company whose shares are directly or indirectly owned by the Company."

However, exceptions exist for shares acquired through legal transfer, grants, or inheritance. In these cases, the shares must be transferred to an eligible third party within one year of acquisition.