B&A News Brief – The Indonesia Investment Coordinating Board (BKPM) issued New Regulation on Investment

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The Indonesia Capital Investment Coordinating Board (“Badan Koordinasi Penanaman Modal or BKPM”) recently amended Head of BKPM Regulation No. 5 of 2013 regarding Guidelines and Procedures for Capital Investments Licenses and Non Licenses.

The Amended Regulation is set out in Head of BKPM Regulation No. 12 of 2013 regarding Amendment of Head of BKPM Regulation No. 5 of 2013 regarding Guidelines and Procedures for Capital Investments Licenses and Non Licenses (“BKPM Reg 12/2013”), which was promulgated on 11 September 2013 and entered into effect on 18 September 2013.

In general, the amended regulation covers several changes to provisions relating to:

1. Share Ownership of Venture Capital Companies

In the previous regulation, Venture Capital Company was prohibited to be shareholder in large scale Domestic Investment and Foreign Direct Investment Companies. However, BKPM Reg 12/2013 explicitly allows Venture Capital Company to be shareholder in Investment Companies as long as it is in compliance with the prevailing laws. This kind of ownership will be considered as national capital participation.

Moreover, BKPM Reg 12/2013 allows the capital participation of Venture Capital Companies for ten years and it can be extended to a maximum of five years. Previously, they can only obtain the ten years timeframe.

2. Time Extension for Project Completion

The companies that have not completed their investment project within three years, can be granted a time extension by submitting a request for time extension. New BKPM Reg 12/2013 also has further explanations about the time extensions for investment project. BKPM as the central organizer will be cooperating with the Provincial Units (Perangkat Daerah Provinsi Bidang Penanaman Modal or “PDPPM”) and the Regency/City Units (Perangkat Daerah Kabupaten/Kota Bidang Penanaman Modal or “PDKPM”) in regards to the submission of extension request from the companies.

The request should be submitted before the expiration date of the project completion as stipulated in the Principle Permit. In case the request is submitted later than the expiration date of the project completion, a field observation will be conducted.

Based on the field observation, the requesting company can be granted time extension for the project completion, a new Principle Permit, or a Principle Permit revocation. While in the previous regulation it can only be granted with a replacement Principle Permit or a Principle Permit revocation.

3. Business Permit Application

The companies that engaged in more than 1 (one) type of activities or produce more than 1 (one) product and/or located in more than 1 (one) province/regency as stated in their Principle Permit and are ready to operate can apply for Business Permit simultaneously or sequentially to BKPM.

Under the previous regulation, the application of Business Permit for a company who has more than one business field has to be submitted simultaneously, and the failure to do so will resulted in the cancellation of the business field.

4. Time Extension for Expansion Principle Permit

BKPM Reg 12/2013 gives more clarity on how long the time extension will be given when the project of business expansion has not been completed which is as the time given on the previous Expansion Principle Permit. While the previous regulation only stated that the expansion activity shall be completed in a maximum of 3 (three) years and can be extended.

5. Publicly Listed Investment Companies

The previous regulation stipulated the definition of Publicly Listed Company Controller, the categorization of Publicly Listed Investment Company and also the obligation for Publicly Listed Foreign Direct Investment Companies to apply for an amendment of its Principle Permit if there are any changes on the controlling shareholders composition. However, the related article has been deleted in BKPM Reg 12/2013.

In conclusion, we would like to wish that the amended regulation on Guidelines and Procedures for Capital Investments Licenses and Non Licenses through BKPM Reg 12/2013 will provide advancement for Indonesia’s investment regulatory framework.

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