business law:Types of Business Organizations:

Types of Business Organizations: 

business law:Types of Business Organizations:

Indonesia’s commercial sector recognizes three principal 

categories of business organizations: sole proprietorship, 

partnership (general or limited) and company. Sole proprietorship is 

generally used in the informal sector, since its nature and activities 

are of the informal sector. For example, it does not require formal 

registration to Indonesian authorities.   

There are three types of partnership:  persekutuan perdata 

(maatschap or private association), persekutuan firma (venootschap 

onder firma or firma, “FA”) and  persekutuan komanditer 

(commanditaire vennootschap, “CV”). The Indonesian Civil Code 

governs the first type of partnership whereas the rest are governed 

by both the Indonesian Civil Code and the Indonesian Commercial 

Code. It is not easy to determine absolute equivalents between these 

partnerships and partnerships under common law tradition; 

however, the maatschap and firma closely resemble the concept of 

a general partnership under the  common law system whereas the 

commanditaire venootschap resembles limited partnership under 

common law.  

The last type of business organization is under the 

Indonesian Company Law takes the form of Perseroan Terbatas 

(“PT”). It is similar to the incorporated limited liability company 

under the common law system. Historically, this was referred to as 

the Dutch corporate model known as the  naamloze venootschap 

(“NV”). However, since the enactment of the new Indonesian 

Company Law, which repealed the provisions governing the 

company, many companies started to use the abbreviation “PT”.  

There was also another form of an Indonesian incorporated 

company, which was intended to be used by indigenous 

Indonesians, so-called “the Maskapai Andil Indonesia” 

(Indonesische Maatschappij of Aandelen or IMA). It was 

governed by separate regulations,  i.e. Ordinances 886.  However, 

the promulgation of the new Indonesian company law in 1995 

abolished the dualism of the Indonesian company structure - PT 

under the Commercial Code and PT under IMA, and brought the 

Indonesian company structure into one common corporate regime: 

the (New) Indonesian Company Law.  

Until now, there are three types of companies in Indonesia. 

The most common is “PT Biasa” or local companies. Even though it 

only has Indonesian shareholders, directors and commissioners, it is 

still subject to regulation by the  UUPT. It is required to have a 

minimal capital, as stated in the UUPT. Although Government 

Regulation No.20 of 1994 (“PP20”) states that foreigners may 

acquire shares in this type of company, in practice,  it is closed to 

foreign investment and foreign  citizens are not allowed to hold 

positions of director or commissioner, unless the field of business is 

not listed on a negative list, in which a specific written approval 

from the relevant Minister is given. The second type is a domestic 

investment company referred to as “PT PMDN” (PMDN Company), 

which has certain regulatory advantages and tax concessions 

compared to a PT Biasa. Originally, a PT PMDN company was 

reserved to Indonesian shareholders, but following the enactment of 

PP20, the Decree of Chairman of BKPM (Investment Coordinating 

Board) 15/SK/1994 (“SK15”) and the current practice of BKPM, it 

became possible for foreign parties to acquire up to 95% of the 

shares in the company. Such a company with a foreign shareholder 

may have foreign directors and/or commissioners. To obtain status 

as a PMDN company, the company has to have BKPM approval for 

the line of business it is operating as and is required to have a 

minimum investment equivalent to the exchange rate as stated in 

BKPM’s letter of approval (specifically in rupiah) set by BKPM. 

Finally, there is the foreign investment company incorporated in the 

Foreign Investment Law of 1967 Law No. 1 of 1967 also known as 

the “PT PMA” (PMA Company). It may have foreigners as its 

shareholders so long as it has at least two shareholders, but it has an 

obligation to invest an unspecific percentage to Indonesia within 15 

years. It may have foreigners as director and commissioner, enjoy 

certain advantages and protections against expropriation of the

investment. However, it has an  obligation to report its activities 

regularly to BKPM. BKPM will approve the minimum investment 

plan of this company that is specified in both US dollars and rupiah.

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