The Omnibus Law (Law No. 11 of 2020 concerning Job Creation, hereinafter referred to as the “Job Creation Law”) has changed several matters related to Company Law in Indonesia, starting from the definition of the Company itself to the requirements for the establishment of a Limited Liability Company.

The definition of a Limited Liability Company has changed after the enactment of the Job Creation Law, where a Limited Liability Company is defined as a legal entity which is a capital alliance, established based on an agreement, conduct business activities with authorized capital which is entirely divided into shares or individual legal entities that meet the criteria for Micro and Small Enterprises regulated in the legislation regarding Micro and Small Enterprises (Article 1 Number 1 of Law 40/2007 as amended by Law 11/2020, hereinafter referred to as the “Limited Liability Company Law”). This change in definition provides a fundamental change to the previous concept of a Limited Liability Company, one of which is related to the “Requirements for Establishing a Limited Liability Company”, which of course shifts the meaning of “Capital Alliance” in the definition.

“Capital Alliance” can simply be understood as cooperation with the placement of capital. A cooperation should be carried out by 2 or more people, but in the definition of a Limited Liability Company this is excluded for “Micro and Small Enterprises”. Then what exactly is “Micro and Small Enterprises”?

Micro and Small Enterprises are regulated in Law No. 20 of 2008 concerning Micro, Small, and Medium Businesses which has been amended by Job Creation Law (Law 20/2008), which is then described in the implementing regulation, namely Government Regulation No. 7 of 2021 concerning Ease, Protection and Empowerment Of Cooperatives And Micro, Small And Medium-Scale Enterprises (GR 7/2021). According to GR 7/2021, Micro, Small, and Medium Enterprises are grouped based on the criteria for working capital or annual sales results, with the following details (Article 35 of PP 7/2021):

  1. Based on working capital
    1. Micro Enterprises have business capital of up to a maximum of Rp1,000,000,000.00 excluding land and buildings for business premises;
    2. Small Enterprises have business capital of more than Rp1,000,000,000.00 up to a maximum of Rp. 5,000,000,000.00, excluding land and buildings for business premises;
    3.  Medium Enterprises have business capital of more than Rp5,000,000,000.00 up to a maximum of Rp. 10,000,000,000.00 excluding land and buildings where the business is located.
  2. Based on annual sales
    1. Micro Enterprises have annual sales of up to a maximum of Rp2,000,000,000.00;
    2. Small Enterprises have annual sales of more than Rp2,000,000,000.00 up to a maximum of Rp. 15,000,000,000.00;
    3. Medium Enterprises have annual sales of more than Rp15,000,000,000.00 up to a maximum of Rp. 50,000,000,000.00.

A Limited Liability Company must have the status of a legal entity in order to meet the criteria for the definition of a Limited Liability Company as stated above. The enactment of the Job Creation Law makes it easier for prospective founders who intend to establish a Limited Liability Company. Prior to the enactment of the Job Creation Law, the Company could only obtain legal entity status on the issuance date of the Ministerial Decree concerning the legalization of the Company’s legal entity. Meanwhile, after the enactment of the Job Creation Law, the Company obtains the status of a legal entity after being registered with the Minister and obtaining proof of registration. (Article 7 Paragraph (4) Limited Liability Company Law).

The simplification of establishing a Limited Liability Company is further reflected in the expansion of the provisions for the establishment of a Company which does not have to be established by 2 or more people. Previously, this provision only applied to companies which entire shares are owned by the state or to companies that managed stock exchanges, clearing and guarantee institutions, depository and settlement institutions as regulated in the Capital Market Law. Meanwhile, after the enactment of the Job Creation Law, this provision was expanded and also applies to Regional Owned Enterprises, Village Owned Enterprises, and Companies that meet the criteria for Micro and Small Enterprises. (Article 7 Paragraph (7) Limited Liability Company Law). That is, as long as it fulfills these provisions, a Limited Liability Company does not have to be established by a minimum of 2 people and can be established by an individual.

In addition, the company for Micro and Small Enterprises are given a fee reduction related to the establishment of a legal entity and the shareholders of the Company for Micro and Small Enterprises are not personally responsible for the engagement made on behalf of the Company and are not responsible for the loss of the Company in excess of the shares owned (Article 153 I Paragraph (1) and Article 153 J Paragraph (1) Limited Liability Company Law). However, the provision that the shareholders are not personally responsible for the engagement and the loss of the Company in excess of the shares owned does not apply if the requirements of the Company as a legal entity have not been or are not met, the shareholders have bad faith in using the Company for personal gain, the shareholders are involved in actions against law carried out by the Company, or in the event that the shareholders use the assets of the Company so that the Company cannot repay the debt (Article 153 J Paragraph (2) of the Limited Liability Company Law).

Another significant change after the enactment of the Job Creation Law is the regulation on capital. Previously, it was stipulated that the authorized capital of the Company was at least Rp 50,000,000.00. Meanwhile now, the amount of authorized capital of the Company is based on the decision of the Company’s founder (Article 32 Paragraph (1) of the Limited Liability Company Law).

Based on the description above, it can be concluded that the requirements for establishing a Limited Liability Company are easier after the enactment of the Job Creation Law, which are:

  1. The company can obtain legal entity status after being registered with the Minister and obtaining proof of registration, not waiting for the Ministerial Decree regarding the legalization of the Company’s legal entity before the enactment of the Job Creation Law;
  2.  Expansion of the provisions of the Company that can be established by individuals for Micro and Small Enterprises;
  3. There is no minimum limit on the amount of authorized capital of the Company, the amount of capital is based on the decision of the Company’s founder.

Regards

Raissa

By admin

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