Indonesia’s Limited Liability Company’s Capital Structure

Limited Liability Company (“LLC”) establishment procedure in Indonesia consists of various factors ranging from a certain amount of capital to numerous documents that must be owned. The task of an LLC establishment can prove to be difficult. In this article, we’ll discuss the topic of LLC’s capital structure that will entail details regarding the new LLC regulations and many more.

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

Taking the latest regulation as reference, Omnibus Law, Article 109 (3) states that a Company is required to have authorized capital, the amount of this capital is determined based on the decision of the company founder and accordingly, at least 25% of the authorized capital must be fully issued and paid-up. This regulation amend some parts of its preceding law, namely Law Number 40 of 2007 on Limited Liability Companies (“Law 40/2007”).

Paid Up Capital’ means any amount (even if the capital concerned hasn’t been paid in full) of money that has already been paid by investors in exchange for shares of stock, when the amount of issued share capital has already been fully paid, the ‘Paid Up Capital’ has become ‘Paid Up Share Capital’. Meanwhile, ‘Issued Capital’ means the value of shares the company can actually issue to potential investors, the total amount of shares that have been given to shareholders will then be called ‘Issued Share Capital’.

Note: The fully issued and paid-up capital is proven by a valid deposit receipt and any subsequent issue of shares that are performed each time (to increase issued capital) that must be fully paid-up.

Article 36 (1) of Law 40/2007 states, “A Company is prohibited 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.” This excludes, however, in situations where ownership of shares are acquired from transfer due to law, grant, or bequest. On acquiring shares through mentioned means, the shares concerned must be transferred to another party (not prohibited from owning shares in the Company) within a period of 1 year after the date of acquisition.

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