26 February 2020 (closed)
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Businesses are constantly developing. It often happens that companies decide to change their initial business activities, due to change of course of the company. A change of business activity may have severe impact for companies as it requires not only adjustment of the Articles of Association of the company but also adjustment of the principle license. In this column we discuss the procedure to change the business activities of a company and the impact it may have on such company.
Adjustment of Articles of Association of the Company
The business activities of a company are set out in the deed of establishment/articles of association of a company. When companies wish to change the business activity, by way of adding a business activity or changing the current business activities, the articles of association of the company need to be adjusted.
The articles of associations of a company can only be adjusted after the shareholders of the company have agreed on such adjustment. Such shareholder decision can be made through an extraordinary general meeting of shareholder or if all shareholders sign a circular, and thereby agreeing on the change of the articles of association.
Process of Changing Business Activity at the Investment Authority (BKPM)
The change in business activities for a company will require a change in the business licenses of the company at BKPM, such as an adjustment of the principle permit (Izin Prinsip). The procedure for adjusting the investment licenses can be carried out either before or after the company notarized the decision of the shareholders regarding the adjustment of business activity. We recommend processing in BKPM before the notarization of the shareholders decisions, as it my request amendments to the submitted documents. In case notarization is already performed the company may be required to make amendments to the notarized document at the notary again.
Notarization of the Shareholder’s Decision
Once the process is completed at BKPM, and the company made any adjustments to the shareholders’ decision (if required), the shareholders decision can be notarized by the Notary. Once the notary has prepared the notarial deed, it will update the companies register at the Ministry of Law and Human Rights, and will request approval of the amendment of the articles of association from the same ministry.
Impact on Capital Requirements for Foreign Investment Companies (PMA)
The change of company activities may impact Foreign Investment Companies (PMA) which were established under the old investment regime. Under the old investment regime, foreign investment companies were not required to invest minimum 10 billion Rupiah and a paid up share capital of at least 2.5 billion Rupiah. The old investment regime is still applicable to companies established under this regime.
Under the new investment regime such obligations apply to foreign investment companies. When companies (which are established under the old investment regime) are changing their business activities, this may in certain cases have the consequence that these companies are required to comply with the rules under the new investment regime. In this case the companies are, besides changing the business activity, required to increase the share capital (in case it does not yet comply with the new investment rules).
This column is provided by PNB Law Firm Jakarta