Business Due Diligence in Indonesia: A Pre-Investment Checklist for Foreign Investors

Business due diligence in Indonesia helps foreign investors verify a company’s ownership, licenses, financial position, liabilities, and operating claims before committing capital. The scope depends on whether you plan to acquire shares, purchase business assets, or enter a joint venture.

Start by checking whether the intended business activity permits your proposed foreign ownership. Then examine the company behind the opportunity. A profitable business can still carry unpaid taxes, disputed assets, or contracts that become difficult to maintain after an acquisition.

Start With the Transaction Structure

The structure of your investment determines which documents and liabilities deserve closer attention. A share purchase, asset acquisition, and joint venture can involve the same business while presenting different legal and commercial issues.

Buying Shares in an Indonesian Company

In a share purchase, the company generally continues as the same legal entity. Its existing contracts, loans, employees, assets, and disputes remain relevant to the buyer’s assessment.

Request the shareholder register, articles of association, share certificates where applicable, and agreements affecting ownership or voting rights.

Ask Indonesian counsel whether the proposed transfer changes control or triggers shareholder approvals, pre-emption procedures, creditor notices, or other statutory acquisition requirements.

Law No. 40 of 2007 on Limited Liability Companies, as amended, provides the corporate legal framework. The applicable process depends on the transaction’s actual structure.

Check financing agreements and major commercial contracts for change-of-control provisions. The company may continue operating under the same legal identity while still needing a lender’s consent or a regulatory update.

Buying Selected Business Assets

An asset acquisition allows you to define which assets and rights the seller will transfer. Check ownership and transferability before assuming those assets will be available to your business.

Request the fixed asset register, land and building documents, equipment financing records, inventory reports, and material intellectual property agreements.

Ask whether customer contracts, permits, leases, and software licenses can be assigned to the buyer.

An asset purchase also needs its own tax and employment analysis. Selecting particular assets does not automatically resolve secured claims, employee consequences, or restrictions imposed by third parties.

Investing Through a Joint Venture

Joint venture due diligence should cover the proposed partner’s legal standing, financial commitments, decision-making authority, and ability to contribute the promised assets or business relationships.

Review the proposed shareholders’ agreement and identify which decisions require consent from both parties.

Pay particular attention to:

• Board composition and voting rights.
• Reserved matters and quorum requirements.
• Initial funding and future capital calls.
• Related-party transactions and approval procedures.
• Shareholder dilution and funding defaults.
• Audit and information rights.
• Deadlock resolution and exit arrangements.

These provisions help investors understand how the partnership will operate when shareholders disagree or one party cannot meet its commitments.

Our guide to starting a business partnership in Indonesia explains the wider considerations for foreign investors entering local business arrangements.

Confirm the Business Activity and Foreign Ownership Structure

Check whether Indonesian investment rules permit your proposed ownership in every material business activity. The target company’s broad industry description is insufficient for this assessment.

Map the Target’s Activities to Its KBLI Codes

Request the company’s current OSS business profile, NIB, applicable licenses, and articles of association. Compare these records with the activities that generate its revenue.

Indonesia uses the Klasifikasi Baku Lapangan Usaha Indonesia (KBLI) to classify business activities.

BPS Regulation No. 7 of 2025 introduced KBLI 2025. Existing companies may still have documents or historical records showing KBLI 2020 codes.

Use the official OSS conversion tool to check how those codes correspond to KBLI 2025. A code may remain unchanged, receive a different number, split into several classifications, merge with another code, or undergo restructuring.

The conversion result requires a closer look at the underlying activity. A code’s name may remain familiar even when the description or scope has changed.

For each material activity, record:

• The actual product or service the company sells.
• The corresponding purpose stated in its articles of association.
• The KBLI recorded in its OSS business profile.
• The relevant KBLI 2025 conversion result.
• The business location and applicable risk classification.
• The licenses or supporting approvals required for that activity.

In April 2026, BPS clarified that adopting KBLI 2025 does not automatically invalidate previously issued business licenses.

Where the adjustment involves only a code conversion without changing the substance of the business, the government may handle the conversion through the AHU and OSS systems without requiring a new license or amendment to the articles of association.

A substantive change to the company’s purpose, business activities, or operating scope requires a separate assessment of the necessary corporate and licensing updates.

For the classification process itself, read our guide to Indonesia KBLI codes and how to choose the right classification.

Check Whether the Planned Foreign Shareholding Is Permitted

Presidential Regulation No. 10 of 2021, as amended by Presidential Regulation No. 49 of 2021, provides Indonesia’s investment-business-field framework.

Assess the company’s actual activities against the applicable foreign ownership conditions and any sector-specific rules.

A business that operates under Indonesian ownership may need structural changes before accepting foreign shareholders. Existing registration does not establish that the proposed ownership percentage is permitted.

Have Indonesian counsel examine the shareholder structure, relevant nationalities, ultimate ownership, and proposed voting arrangements before you commit to the transaction.

Check PMA Investment and Capital Requirements

Foreign ownership eligibility and PT PMA capital requirements are separate matters. A permitted shareholding percentage does not establish that the proposed investment structure meets the applicable capital rules.

BKPM Regulation No. 5 of 2025 addresses both minimum investment value and minimum capital for foreign investment companies.

The regulation provides different calculation treatments for certain activities, including wholesale trade, food and beverage services, construction, manufacturing, property, accommodation, and specified activities in special economic zones.

Ask the financial and legal teams to check the provisions that apply to your actual business model.

These figures describe investment and capital requirements. They are not due diligence fees, acquisition prices, or interchangeable measures of the same obligation.

If an existing domestic PT will receive foreign investment, review whether the transaction requires changes to its capital structure, investment plan, or registered investment status.

Check the Licensing Framework Against Actual Operations

Government Regulation No. 28 of 2025 replaced Government Regulation No. 5 of 2021 as Indonesia’s general risk-based business licensing framework.

BKPM Regulation No. 5 of 2025 provides further procedures for business licensing through OSS.

Check the licensing requirements for each material activity and operating location. Obtain the target’s current OSS status rather than relying on an old NIB document or a screenshot supplied during initial negotiations.

An NIB alone does not establish that every activity has completed the licensing requirements applicable to its risk classification.

Review the relevant Standard Certificates, business permits, supporting approvals, and verification status. A certificate that remains subject to further verification should be assessed according to the applicable licensing requirements.

Where the target lacks a material approval, ask counsel to identify the corrective action, responsible party, and point at which the company can lawfully conduct the intended activity.

Match the Company Record to Its Operating Reality

Before relying on the seller’s company profile, verify the legal entity that owns the business and will enter the transaction.

The name on the proposed agreement should match the relevant corporate records. Confirm that the entity also owns the assets and holds the contracts on which the valuation depends.

Review Corporate Documents and Share Ownership

Request the deed of establishment, amendments, articles of association, shareholder register, and relevant corporate resolutions.

Compare these documents with records available through the Directorate General of General Legal Administration’s AHU system.

Law No. 40 of 2007, as amended, provides the company-law framework. Minister of Law Regulation No. 49 of 2025 governs administrative procedures concerning the establishment, amendment, and dissolution of limited liability companies.

The 2025 ministerial regulation replaced Minister of Law and Human Rights Regulation No. 21 of 2021.

Ask counsel and the notary to identify the required resolutions, deeds, ministerial approvals or notifications, and AHU updates for the proposed transaction.

Use our guide on how to check company details in Indonesia for a closer explanation of the available corporate verification channels.

Identify the People Who Ultimately Control the Company

Request a beneficial ownership declaration and an ownership chart that identifies the relevant natural persons behind the corporate structure.

Presidential Regulation No. 13 of 2018 establishes Indonesia’s beneficial ownership framework. Minister of Law Regulation No. 2 of 2025 addresses verification and supervision of corporate beneficial ownership.

Examine shareholdings, voting rights, profit entitlements, appointment powers, and other arrangements that may establish effective control.

A cap table may show the registered shareholders without explaining every arrangement affecting control.

Compare the seller’s declaration with share registers, shareholder agreements, corporate records, and other supporting documents.

Record the source of each finding. Information obtained from a regulator, a seller declaration, and an independently reviewed agreement carry different evidentiary weight.

If two records disagree, obtain an explanation supported by documents before treating ownership as verified.

Check Litigation and Regulatory Enforcement

Ask the seller for a schedule of pending litigation, threatened claims, arbitration proceedings, regulatory investigations, and material administrative disputes.

Request the relevant pleadings, judgments, settlement agreements, regulator notices, and correspondence with external counsel.

Check whether any dispute affects a material contract, operating license, shareholder right, or business asset.

Ask Indonesian counsel to assess the unresolved exposure and identify any restrictions on transferring the relevant assets or shares.

A seller’s statement that a dispute has been settled should be supported by the settlement terms and evidence of compliance with any outstanding obligations.

Review Integrity and Related-Party Risks

Where the transaction warrants it, examine the target’s intermediaries, related-party payments, public-sector relationships, and material investigations.

Review unusual payments and business arrangements that lack a clear commercial explanation. Assess beneficial owners and relevant counterparties against the screening requirements applicable to the transaction.

For cross-border investments, confirm the documented source of transaction funds and any relevant sanctions or anti-money laundering requirements.

Test Revenue, Cash, and the Business Model

Financial due diligence should establish whether the target’s reported performance supports the proposed valuation and future cash flow assumptions.

Start with the financial statements, then examine the underlying transactions.

Reconcile Financial Statements With Cash Receipts

Request audited financial statements where available, management accounts, general ledgers, bank statements, and supporting sales records for a period appropriate to the business.

Trace selected invoices to contracts, delivery evidence, and bank receipts.

Distinguish revenue recognized under the target’s accounting framework from cash already collected and receivables that remain outstanding.

An unpaid invoice does not automatically represent fictitious revenue. It does require examination of the underlying transaction, collectibility, and any relevant impairment assumptions.

Review unusual period-end transactions, subsequent credit notes, related-party sales, and material adjustments made after the reporting date.

Test Receivables and Customer Concentration

Request the accounts receivable aging report and reconcile it with payments received after the reporting date.

Examine disputed invoices, credit notes, related-party receivables, and the assumptions used to estimate amounts that may not be collected.

If a few customers account for a substantial portion of revenue, review their contracts and purchasing history.

Determine whether those customers can terminate, renegotiate, or reduce orders following a change in ownership.

Identify Debt-Like Items and Working Capital Requirements

Ask the financial team to distinguish ordinary operating liabilities from items that should be treated as debt under the proposed pricing mechanism.

Potential items for review include shareholder loans, overdue financing obligations, unpaid dividends, and other transaction-specific liabilities.

Assess normalized working capital using a representative operating period. Seasonal businesses may require a different approach from companies with predictable monthly collections.

Review nonrecurring income and expenses before accepting management’s adjusted earnings presentation.

Where the parties use a cash-free, debt-free valuation, reconcile the agreed enterprise value with the equity price after applying the negotiated cash, debt, and working capital adjustments.

Challenge the Commercial Assumptions

Ask management to explain which customers, products, locations, or contracts support the business forecast.

For example, a manufacturer may project higher sales after installing another production line. Before accepting that growth in the valuation, check the equipment budget, site capacity, utilities, staffing, and required approvals.

If management expects a major customer to renew its contract, examine the renewal terms and available evidence of the customer’s intentions.

Separate assumptions supported by signed agreements from management forecasts that still depend on future negotiations.

Investigate Tax and Financing Exposure

Tax due diligence should examine the target’s historical compliance and identify unresolved exposure that could affect the buyer after closing.

The proposed transaction also needs a separate tax analysis. A share transfer and an asset transfer may have different consequences for the parties involved.

Verify Tax Filings With the Company’s Authorization

Request corporate income tax returns, relevant VAT filings, withholding tax records, payment evidence, and available correspondence with the Directorate General of Taxes.

Review outstanding assessments, audits, objections, disputes, and payment arrangements.

The Directorate General of Taxes provides role-based delegation arrangements through Coretax. Obtain access through authorized company representatives and the applicable system controls.

A company’s NPWP registration establishes its tax identity. It does not certify that the company has fulfilled every tax obligation.

Assess the Tax Consequences of the Transaction

Ask the tax adviser to examine the proposed share or asset transfer separately from the target’s historical tax exposure.

The analysis may need to address applicable withholding taxes, indirect taxes, transaction structure, cross-border considerations, and the treatment of relevant assets or liabilities.

Do not assume that the seller’s historical tax returns establish the tax treatment of the proposed acquisition.

Inspect Loans, Guarantees, and Related-Party Balances

Request loan agreements, repayment schedules, security documents, guarantees, and shareholder-loan records.

Check whether any facility requires repayment or lender consent following a change of control.

Reconcile related-party balances with the seller’s disclosures and the target’s financial statements.

Before closing, agree whether the seller will repay, waive, transfer, or leave those balances in the company. The treatment should match the negotiated purchase-price mechanism.

Review Employees, Social Security, and Management Dependencies

Employment due diligence helps the buyer understand the workforce and the obligations associated with the proposed transaction.

Request the employee register, employment agreements, payroll records, accrued leave balances, and information on ongoing disputes.

Review BPJS Kesehatan and BPJS Ketenagakerjaan registration and contribution records using appropriate company authorization.

Government Regulation No. 35 of 2021 addresses fixed-term employment, outsourcing, working time, termination, and related employment payments.

Ask employment counsel to assess any proposed workforce changes against the applicable rules and employment arrangements.

A share acquisition does not automatically terminate every employment relationship. The consequences depend on the transaction and subsequent actions involving employees.

Check Foreign Workers Where Relevant

If the target employs foreign directors, technical staff, or other foreign personnel whose continued employment matters to the business, review their employment and immigration documentation.

Government Regulation No. 34 of 2021 governs the use of foreign workers in Indonesia.

Check applicable foreign-worker approvals, role limitations, employment arrangements, and the effect of any planned management changes.

Identify Employees the Business Cannot Easily Replace

Some businesses depend heavily on a founder, technical specialist, account manager, or employee who maintains a material customer relationship.

Ask whether those individuals intend to remain after the transaction.

Review their contractual arrangements and determine whether the financial forecast assumes their continued involvement.

Inspect Land, Buildings, and Transfer-Critical Contracts

When the target operates a factory, warehouse, hotel, restaurant, or other location-dependent business, verify its legal right to use the premises.

Land ownership, building compliance, spatial suitability, and environmental requirements involve separate checks.

Check Land Rights and Encumbrances

Request land certificates or lease agreements, site plans, and documents showing mortgages or other encumbrances.

Government Regulation No. 18 of 2021 addresses land rights and registration.

Have a qualified Indonesian land professional verify the relevant title and records through the appropriate official channels.

Confirm the registered holder, type of right, remaining tenure, and any restriction affecting the planned transaction.

Verify Building and Environmental Requirements

Check whether the premises support the company’s actual operations under applicable spatial, building, and environmental requirements.

Depending on the site and activity, relevant documents may include:

• Spatial suitability documentation, including applicable KKPR requirements.
• Building approval documentation, including PBG where applicable.
• Building fitness-for-use documentation, including SLF where applicable.
• Environmental approvals and supporting documents required for the activity.

Government Regulation No. 16 of 2021 addresses building requirements, while Government Regulation No. 22 of 2021 provides the environmental protection and management framework.

Have the relevant specialists assess which documents apply to the actual site. The requirements for an office, manufacturing plant, and agricultural project may differ.

Read the Contracts That Make the Business Operate

Review the agreements that support the target’s revenue, supply chain, financing, and access to business-critical assets.

These may include customer contracts, distribution agreements, supplier arrangements, leases, technology licenses, and equipment financing agreements.

Identify termination rights, exclusivity provisions, price adjustments, assignment restrictions, and change-of-control requirements.

For an asset acquisition, establish whether the relevant rights can be transferred. For a share acquisition, identify provisions that require consent or notification when ownership changes.

Confirm Intellectual Property Ownership

Check whether the target owns or holds the necessary licenses for its trademarks, software, formulas, designs, and other material intellectual property.

Request relevant registrations, license agreements, and assignments from employees, founders, or external developers.

A trademark registered under the founder’s personal name deserves attention if the company presents that trademark as one of its principal assets.

Determine whether the rights can remain with the business after the transaction and whether material infringement disputes exist.

Protect Confidential Information During Due Diligence

A transaction data room may contain employee identities, shareholder information, customer records, bank statements, and commercially sensitive agreements.

Law No. 27 of 2022 on Personal Data Protection is relevant when the review involves personal data.

Agree on the information-sharing process before requesting unrestricted access.

Practical controls include:

• Confidentiality agreements appropriate to the transaction.
• Access permissions based on each reviewer’s role.
• Proportionate redaction of unnecessary personal information.
• Secure storage and restricted document downloads.
• Documented handling of information after the review ends.

Ask Indonesian privacy counsel to assess the lawful basis and safeguards for the specific data processing involved. Individual consent is not the only possible lawful basis under the applicable framework.

Use a Document-to-Decision Due Diligence Checklist

A useful due diligence report connects each material finding with the evidence supporting it and the action required from the parties.

Use the following matrix when organizing your document requests and reviewing the results with Indonesian advisers.

This matrix provides a starting framework for transaction planning. The appropriate response depends on the documents, applicable law, negotiated terms, and professional assessment of the particular deal.

Turn Findings Into Closing Decisions

The due diligence report should help you decide which problems must be resolved, which risks can be allocated through the transaction agreement, and which questions require further investigation.

Ask each adviser to distinguish confirmed findings from seller assertions, disputed information, and missing evidence.

Resolve Material Issues Before Closing

Certain issues may become conditions precedent under the transaction agreement.

Examples include obtaining a required lender consent, resolving a material ownership discrepancy, or completing a licensing correction necessary for the intended operations.

The agreement should identify the responsible party and the evidence needed to establish completion.

Allocate Quantifiable Risks in the Transaction Documents

Other findings may affect price or contractual risk allocation.

Depending on the circumstances, the parties may negotiate:

• Purchase-price adjustments.
• Escrow arrangements.
• Specific indemnities.
• Representations and warranties.
• Post-closing obligations with defined deadlines.

For example, the buyer and seller may need to agree who bears an identified tax assessment or how an outstanding shareholder loan affects the equity price.

Ask counsel to draft the relevant protection around the identified issue and the facts supported by the review.

Defer Commitment When a Core Assumption Remains Unverified

An unresolved ownership restriction, missing right to use a business-critical asset, or unsupported financial claim may require further investigation before the buyer commits funds.

Document the remaining questions and the information needed to answer them.

Where the information affects the investment thesis, ask the relevant adviser to assess the consequences before the parties proceed.

Separate Pre-Closing, Closing, and Post-Closing Obligations

A transaction may require different actions before signing, before closing, after legal effectiveness, and during subsequent operations.

Prepare a closing tracker that identifies:

• Consents and approvals required before closing.
• Documents and payments exchanged at closing.
• Statutory filings required after the transaction becomes effective.
• Corrective actions the parties have agreed to complete after closing.

Assign an owner and deadline to each action.

Check Whether KPPU Notification Applies

Indonesia’s Business Competition Supervisory Commission, KPPU, administers merger and acquisition notification requirements.

Under KPPU Regulation No. 3 of 2023 and the commission’s published guidance, qualifying transactions are generally subject to notification after the transaction becomes legally effective.

A share or asset acquisition may fall within the notification framework when it results in a relevant transfer of control and meets the applicable criteria.

Minority acquisitions can also require review where the acquired rights confer direct or indirect control.

KPPU’s published general financial thresholds include:

• Combined Indonesian assets exceeding IDR 2.5 trillion; or
• Combined Indonesian sales exceeding IDR 5 trillion.

The published asset threshold for banking is IDR 20 trillion.

The assessment requires the applicable group-level calculations, transaction structure, affiliation analysis, and other relevant criteria.

Where notification is required, the general filing deadline is 30 working days after the transaction becomes legally effective.

Have competition counsel assess the proposed transaction before closing so the parties can plan any applicable post-effective filing.

Review Corporate and Licensing Changes After the Transaction

Changes in shareholders, management, capital, or investment status may require updates through the applicable corporate and licensing systems.

Ask the notary and legal team to identify the AHU and OSS actions required for the completed transaction.

If the investment involves a change from domestic to foreign investment status, our guide to converting a local PT to a PT PMA explains the separate registration considerations.

Set a Realistic Due Diligence Scope, Timeline, and Budget

Business due diligence in Indonesia does not have a universal price or completion period. The work depends on the target’s size, industry, corporate structure, document quality, and transaction complexity.

A minority investment in a small service company may require a narrower review than an acquisition involving factories, land, employees, financing arrangements, and sector-specific licenses.

Agree on the review scope before appointing advisers.

Define the Review Period and Workstreams

Identify the entities, assets, locations, and reporting periods that the engagement will cover.

Specify whether the work includes legal, financial, tax, commercial, employment, property, technical, and regulatory review.

Ask the advisers to identify the areas they will exclude from their engagement.

Agree on Reporting Milestones

Arrange the review around identifiable deliverables:

1. Preliminary red-flag report: Identify issues that could affect transaction structure, legality, or major valuation assumptions.
2. Full findings: Review the agreed documents and explain material issues, evidence gaps, and recommended responses.
3. Issue resolution: Obtain additional evidence and assess the seller’s proposed corrective actions.
4. Closing support: Review relevant completion documents and the agreed responsibilities of the parties.

Agree on how the advisers will charge for additional work when new issues fall outside the original scope.

Complete the Review Before You Commit Capital

A useful due diligence process gives you the evidence needed to understand what you are acquiring and which obligations may remain after the transaction.

By the time you sign, you should know which findings have been verified, which issues the seller must resolve, and how the parties intend to handle outstanding risks.

If the transaction involves Indonesian corporate records, ownership changes, licensing, or contractual questions, review the available InvestinAsia Legal Services and discuss the specific scope your project requires.

InvestinAsia is the Indonesia market-entry arm of vOffice Group, with Indonesia corporate services supported by vOffice and IZIN.co.id. The wider group states that it has operated since 2003.