How Foreign Parent Companies Can Establish a Subsidiary in Indonesia

A foreign parent can establish a subsidiary in Indonesia through a PT PMA for eligible activities. Prepare the corporate shareholder’s authority documents, confirm the ownership structure, and distinguish incorporation from permission to operate.

Separate the Parent From the Indonesian Legal Entity

Your subsidiary is a separate Indonesian company whose shares the foreign parent holds. Article 5 of Investment Law No. 25 of 2007 generally requires this structure for foreign investment, unless another law provides otherwise.

The parent subscribes for shares when establishing the company. The subsidiary then needs its own corporate records and approvals for the activities it will perform.

Article 3 of Company Law No. 40 of 2007 generally limits shareholder liability to the shares held. The law provides exceptions involving incomplete legal-entity requirements, bad-faith misuse, unlawful acts, and unlawful use of company assets.

Review any proposed parent guarantee separately. Keep the parties’ assets, payments, and contracts identifiable rather than assuming group ownership alone protects the parent from every exposure.

If you intend to buy an existing Indonesian company instead, use our business due diligence checklist to examine the target’s historical liabilities and transaction risks.

Confirm the Ownership Chain Before Preparing Documents

Choose the actual shareholders after checking whether the intended activities permit their ownership percentages. Presidential Regulation No. 10 of 2021, as amended by No. 49 of 2021, provides the investment-business-field framework.

Assess each activity and applicable sector rule. A parent’s permission to conduct business abroad does not establish its eligibility to own the same business activity in Indonesia.

Full Foreign Ownership Still Requires the Right Shareholder Count

Article 7 of Company Law No. 40 of 2007, as amended through Law No. 6 of 2023, generally requires two or more founders who subscribe for shares. Its explanation includes foreign legal entities.

For a conventional private PT PMA, plan at least two shareholders. Where the activity permits full foreign ownership, those shareholders may both be foreign entities; assess their eligibility and share allocation.

Group ownership can therefore differ from direct ownership by one parent. Record each legal shareholder separately, even when both belong to the same group.

Our guide to whether a PT PMA needs Indonesian shareholders and employees explains the nationality question and its distinction from staffing.

Trace the People Behind Corporate Shareholders

Prepare an ownership chart from the Indonesian entity through its corporate shareholders to the relevant natural persons. Minister of Law Regulation No. 49 of 2025 requires beneficial ownership documents in the incorporation file.

Ask the notary to reconcile the ownership chart with supporting records. Resolve differences in names, ownership percentages, or control arrangements before signing the deed.

Build a Corporate Shareholder File Around Authority

The foreign parent’s file should establish its legal identity and the authority of the person acting for it. Article 8’s explanation in Company Law No. 40 of 2007 recognizes equivalent foreign incorporation documents.

Use the following as a preparation matrix. Confirm the final documents and acceptable formats with the Indonesian notary and, where necessary, counsel in the parent’s jurisdiction.

A resolution approving the investment and a power authorising someone to sign answer different questions. Check both against the parent’s governing documents rather than treating a director’s job title as sufficient evidence.

Confirm Authentication Before Ordering Translations

The HCCH Apostille Convention applies to qualifying public documents exchanged between states for which the Convention operates. An applicable apostille comes from the competent authority in the document’s state of origin.

HCCH explains that an apostille authenticates the signature, the signer’s capacity, and the seal or stamp. It does not authenticate the underlying document’s contents.

Ask the notary which originals, certified copies, notarisation, apostille or other legalisation, and translations the proposed file requires. Check the country relationship and document category before commissioning that work.

Some corporate approvals begin as private documents. Have the receiving notary confirm their required form and authentication route; avoid ordering the same treatment for every item by default.

With the ownership and authority file agreed, you can define a workable filing scope. Through our PT PMA registration service, we coordinate company structuring, notary work, and registration steps.

Separate Incorporation, Funding, and Operational Readiness

Plan distinct milestones for creating the legal entity, funding it, and obtaining permission for its operations. An investment approval at headquarters does not complete those Indonesian steps.

Complete the Indonesian Corporate File

Minister of Law Regulation No. 49 of 2025 governs incorporation procedures through the Legal Entity Administration System, or SABH. It took effect on 17 December 2025 and replaced Regulation No. 21 of 2021.

The notary submits the electronic incorporation application. Supporting documents include the deed, capital-payment evidence, address evidence, and beneficial ownership documents in the forms prescribed by the regulation.

Compare the resulting corporate record with the parent’s approved shareholder structure. Identify the Indonesian directors and commissioners, their appointment details, and who will maintain the company’s records.

Budget the Subsidiary’s Capital Separately

Article 26 of BKPM Regulation No. 5 of 2025 sets general minimum placed and paid-up capital of IDR 2.5 billion per PT PMA, unless other regulations provide otherwise.

The general investment threshold exceeds IDR 10 billion per five-digit KBLI business field per project location, excluding land and buildings. The regulation contains activity-specific calculation rules and exceptions, including special economic zone provisions.

Ask the financial team to separate share capital, the investment plan, operating cash, and professional fees. Review the applicable capital-placement and use rules before moving funds between group companies.

Confirm the Activities the Subsidiary May Perform

Government Regulation No. 28 of 2025 governs risk-based business licensing, supported by BKPM Regulation No. 5 of 2025. Required approvals depend on the activity, risk classification, location, and sector.

Match the subsidiary’s planned revenue activities to its OSS profile and Business Identification Number, or NIB. Check any required Standard Certificate, verification, business permit, or supporting approval before the relevant operation starts.

Ask advisers for separate completion criteria and estimates for overseas documents, incorporation, banking, and operational approvals. A single setup estimate can obscure work that remains after the company exists.

Use Indonesian Corporate Powers to Implement Group Control

The parent exercises control through its shareholder rights and the subsidiary’s governance arrangements. Company Law No. 40 of 2007 assigns separate functions to shareholders, directors, and commissioners.

Article 92 requires directors to manage the company for its interests and purposes. Article 98 governs representation; Article 108 assigns oversight and advice to commissioners.

Build an authority schedule with Indonesian counsel before the first contract. Check that the articles of association, corporate decisions, and delegations support the intended approval process.

• Identify who approves budgets, new borrowing, and commitments that exceed agreed limits.
• Specify who signs customer contracts, employment documents, and banking instructions for the Indonesian entity.
• Define reporting to the parent and the records needed to support each corporate decision.
• Review conflicts of interest when group representatives act on both sides of an agreement.

Document Transactions Between the Parent and Subsidiary

Minister of Finance Regulation No. 172 of 2023 requires the arm’s-length principle for transactions affected by special relationships. Common control can create such a relationship.

Prepare a transaction list for goods, services, intellectual property, and financing supplied within the group. Ask tax advisers to assess pricing, supporting evidence, withholding, and documentation obligations for each proposed arrangement.

A group policy alone does not establish compliant pricing. Retain the agreement and evidence of what each entity provides, pays, and receives.

Resolve These Decisions Before Signing the Deed

Give the parent and Indonesian advisers one agreed decision file. It should connect the proposed ownership to the documents, funding, and operations the subsidiary will need.

1. Confirm the Indonesian activities and permitted foreign ownership.
2. Identify each direct shareholder and the relevant beneficial owners.
3. Approve the investment and document the parent’s signatory authority.
4. Agree on authentication, translation, and the notary’s final document requirements.
5. Confirm capital, local governance, and the approvals required before operations begin.

Seek advice before finalising the structure if an ownership condition, corporate authority, or intercompany arrangement remains unresolved. Decide who will close each issue and what evidence will establish completion.