Emir Nurmansyah, Oene J Marseille and Giffy Pardede of Ali Budiardjo Nugroho Reksodiputro (ABNR) in Jakarta look at recent legislation changes in Indonesia

Indonesia continues to become the target of investment due to it being the largest economy in South East Asia, a growing middle class and a politically stable democracy.  The year 2013 closed with again strong numbers in foreign investment and economic growth which shows that there is a sustainable periods of growth on both sectors. Policy reforms are still needed in some sectors and the Government has put some efforts to close the gap.

This Article will highlight the new policies that have been passed by the Government of Indonesia particularly in regard to foreign direct investment, the capital markets and non-banking financial services company sector.

New Negative List

Effective as of April 24 2014 is the new Presidential Regulation No. 39 of 2014 on Restricted/Open Line of Business, usually referred to as the Negative List. The Negative List in essence compiles all of the regulations issued by the different line ministries in regard the restrictions, limitations, requirements related to the various line of businesses.

It is worth noting that there are fields of business that are closed to foreign investment, including: (i) retail trade of certain goods; retail through post or internet (E-commerce); (ii) supermarkets with retail space of less than 1,200m2, minimarket with retail space of less than 400m2 and department stores with retail space of less than 2,000m2; (iii) rental business service of land transportation (without operator), rental of construction and civil engineering machinery or other machines (for example, electricity generator machines, printing machines, etc); (iv) provision of certain services; including laundry, beauty, tailoring services, office services such as photocopy, documents preparation, among others; (v) inland oil and gas drilling; (vi) power plants with capacity of more than 1 MW; (vii) technical inspection services for electric power installation and use; and (viii) trade based on fees/contracts, such as agency (commission agent) or property agency.

The new Negative List does not apply to: (i) investments approved prior to its issue, unless the terms of the new Negative List are more favourable to the relevant investor; and (ii) indirect investments, or portfolio investments transacting through domestic capital markets.

We wish to note that in case of mergers and acquisitions, the new Negative List seems to maintain the policy of grandfathering existing companies. Which is fairly good news for foreign investors.

For consolidation, in contrast, it provides that the maximum foreign shareholding is as per the investment license of the new company resulting from the consolidation. Whilst in the case of a rights issue, a foreign shareholder may exercise its statutory pre-emptive right under the Indonesian Company Law, and if the local shareholder is unable to participate in the increase. If, as a result thereof, the foreign shareholding exceeds the limit set out in the investment license, a mandatory divestment must be made within 2 years by either selling the shares to Indonesian nationals, by offering the shares to the public, or by the company repurchasing the shares, until the limit is complied with.

Capital market

The Indonesian Stock Exchange (IDX) recently issued a new regulation on January 20 2014 being the PT Bursa Efek Indonesia Board of Directors Decision Number KEP-00001/BEI/01-2014 concerning the amendment to the Rule I-A (Shares Registration and Other types of Equity Securities aside from Shares as issued by Listed Company). This new regulation is effective as of January 30 2014.

The new regulation aims to improve the liquidity of shares in the stock market, and one of the major points is in regard the increase to the minimum free float. For already listed companies, a new free float minimum requirement of at least (i) 50 million shares listed, (ii) at the least free float shares amounting to 7.5% of the outstanding issued and paid up shares of the company, and (iii) having at least 300 shareholders registered as a member of the exchange.  In addition, already listed companies will need to comply with the following requirements: (i) at minimum 30% of the members of the board of commissioners being independent, (ii) to have at least one (1) independent director, (iii) an audit committee, (iv) corporate secretary and (v) an internal audit unit. IDX listed companies prior to 30 January 2014 will have two years as of such date to comply with the above requirements.

Non-banking financial services

There has been several regulations issued in regard the non-banking financial services sector, one of which is being the Financial Services Authority (locally known as Otoritas Jasa Keuangan – OJK) Regulation Number 4/POJK.05/2013 concerning the Fit and Proper Test for Primary Parties in Insurance Companies, Pension Funds, Financing Companies and Credit Guarantee Companies.

This new regulation aims to consolidate the various stand-alone policies concerning fit and proper test Re. non-banking financial services and also adds some new policies, which a few worth noting are: (i) additions to the number of parties that will need to take the fit and proper test to include, among others:

• “controlling shareholder” being a shareholder that owns 25% or more of the issues shares with voting rights or capital; or owns less than 25% of the issued shares with voting rights but where it is proven that the shareholder has control;

• “experts” being an individual who is qualified and/or has particular expertise and is appointed as an expert by the company; and

• “foreign employees”, being foreign citizens that hold a visa and intend to work with the company, regardless of his/her position with the company;

and (ii) acquisition of Insurance Companies, Pension Funds, Financing Companies and Credit Guarantee Companies will now be conditional upon the “potential controlling shareholder” passing the fit and proper test itself.

The Primary Parties, being the parties that will need to take the test, which consist of: (i) members of the board of directors, (ii) members of the board of commissioners, (iii) members of the Islamic Board of Supervisors (Dewan Pengawas Syariah), (iv) members of the Representatives of Board Members (Badan Perwakilan Anggota), (v) controlling shareholders, (vi) experts, and (v) foreign workers, will need to take the test every five years.



Emir Nurmansyah


Ali Budiardjo Nugroho Reksodiputro (ABNR)



About the author

Emir Nurmansyah joined ABNR in 1989 and has been a partner since 1997. He graduated from the Faculty of Law, University of Indonesia in 1989 and earned an LLM from the Faculty of Law at Bond University in Australia in 1993.

Emir has been involved in the acquisition of plantations together with finance and industry as well as capital market transactions that relate to M&A. He was intensely involved in the Paiton I, Paiton II and Paiton III Expansion, Tanjung Jati B, Cirebon, Sengkang, Newmont Batu Hijau, and in several geothermal power projects. He has also been involved in new financing projects in Indonesia including various notes issuance such as the Bumi Resources notes, Charoen Pokphand Group, and a number of Aircraft Financings. Emir has been named a leading lawyer on banking and finance, projects and energy in several publications with regional or worldwide distribution.


Oene J Marseille

Foreign counsel

Ali Budiardjo Nugroho Reksodiputro (ABNR)



About the author

Oene J Marseille has worked in Southeast Asia since 1999. He has extensive experience in working with international agencies such as the IFC and JBIC, NEXI, as well as for private investors in the region, including Cargill, General Electric, Heineken, Philips, Michelin, Oiltanking, Royal Ahold, KKR, Spinnaker, Saratoga, AT&T, Royal KPN Netherlands and several international banks and finance houses.

Oene graduated from the Faculty of Law, University of Amsterdam, The Netherlands, in 1994 and was admitted to the general courts of The Netherlands in 1995. He obtained an LLM from Duke University School of Law, Durham, North Carolina, US in 1995. Oene worked for almost six years with Nauta Dutilh in their offices in Rotterdam and New York and their associated Jakarta office, and also with White & Case in their Jakarta and Singapore offices from August 2001 until April 2005.


Giffy Pardede

Senior associate

Ali Budiardjo Nugroho Reksodiputro (ABNR)



About the author

Giffy Pardede joined ABNR as an associate in March 2009. He graduated in 2005 from the Faculty of Law, University of Indonesia, majoring in economic law. Prior to joining ABNR, he worked at two prominent Indonesian law firms as an associate. In ABNR he has assisted clients in mergers and acquisitions, banking and financing, general corporate, foreign investment, oil and gas, power projects and taxation matters.