Acquisition in Indonesia

Private mergers and acquisitions in Indonesia: overview, Practical Law Country Q&A...
Private mergers and acquisitions in Indonesia:

overview
by Miranti Malikus–Ramadhani and Dian Lindajanti, Mochtar Karuwin Komar
Country Q&A | Law stated as at 01-Aug-2017 | Indonesia, International
Q&A guide to private mergers and acquisitions law in Indonesia.
The Q&A gives a high level overview of key issues including corporate entities and acquisition methods, preliminary
agreements, main documents, warranties and indemnities, acquisition financing, signing and closing, tax, employees, pensions,
competition and environmental issues.
To compare answers across multiple jurisdictions, visit the Private Acquisitions Country Q&A tool.
This Q&A is part of the global guide to private mergers and acquisitions law. For a full list of jurisdictional Q&As visit
www.practicallaw.com/privateacquisitions-guide.
Corporate entities and acquisition methods
1. What are the main corporate entities commonly involved in private acquisitions?
In private acquisitions, the buyer and the seller are most commonly limited liability companies (perseroan terbatas
or PT), which can be a private company or a public listed company.
2. Are there any restrictions under corporate law on the transfer of shares in a private company? Are
there any restrictions on acquisitions by foreign buyers?
Restrictions on share transfer

Law No. 40 of 2007 on Limited Liability Companies (Company Law) provides the following options for restricting
a share transfer which can be set out in the company's articles of association:
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• Right of first refusal from non-selling shareholders.

• Prior approval from certain bodies (general meeting of shareholders, board of commissioners or board of
directors).
The above are optional and not mandatory. Accordingly, a review of the target company's articles of association is
necessary, to identify whether it has any share transfer restrictions.
In addition, the Company Law provides that an acquisition of a company (by share purchase) cannot proceed if an
objection from the creditors has not been settled.
A shareholders agreement or joint-venture agreement, if any, will also need to be reviewed, to identify the rights the
other shareholders may have in a share transfer.
There may also be a prior approval requirement from the relevant government authority.xxx
Foreign ownership restrictions

The government issues a negative list periodically, which lists the relevant sectors (other than banks and companies
in the financial sector) that are restricted or prohibited for foreign investment.
Other restrictions on the ownership of shares in Indonesian companies apply as follows:
•Where Indonesian control is regarded as being in the national interest (in industries such as publishing,
broadcasting, telecommunications, horticulture and public utilities).
• The maximum percentage of voting shares which a foreign person can acquire in a bank incorporated in
Indonesia is 99%, subject to certain ownership restrictions for banks and non-bank financial institutions,
non-financial institutions and individuals. If acquiring at least 25% of the total issued shares or less, but
obtaining control over the bank, approval from the Financial Services Authority (Otoritas Jasa Keuangan,
OJK) is required.
• Approval from the Financial Services Authority is required before acquiring voting shares in finance
companies (multi-finance, insurance, factoring, and leasing companies) and securities companies.
• Foreign individuals and corporations are prohibited from owning certain types of title to land.
3.What are the most common ways to acquire a private company? What are the main advantages and
disadvantages of a share purchase (as opposed to an asset purchase)?
Share purchases: advantages/asset purchases: disadvantages

When doing a share purchase, the buyer will be acquiring all assets and liabilities of the target company. Therefore
there is no post-acquisition process for a transfer of title to the assets or liabilities. In addition, the seller is only
liable for income tax on the capital gain received from the sale of shares.

In an asset purchase, a post-acquisition process is required, depending on the assets being transferred, to formally
execute the transfer of title to the asset. Each asset has to be transferred subject to the particular legal requirements.
For some assets, this means simply signing the transfer agreement and handing over the asset (physical delivery)
or signing the assignment agreement for intangible assets (for example, receivables). Others require transfer
documents and registration in the Land Title Registry (for example, real property). Particularly for transfers of real
property, both the seller and buyer are subject to tax. The transfer of other assets may be subject to value added tax.
Share purchases: disadvantages/asset purchases: advantages

In a share acquisition, as the buyer also assumes liabilities of the target company, the buyer must conduct a more
extensive financial and legal due diligence on the target company, which may be costly and time consuming. In
addition, a share acquisition requires disclosures/announcement to the public before obtaining approval from the
company's general meeting of shareholders.
An asset purchase does not usually require disclosures/announcement to the public, unless it involves a public listed
company. It still requires approval from the general meeting of shareholders, attended by more than three quarters
of the total voting shares and approved by more than three quarters of the votes cast at the meeting.
4. Are sales of companies by auction common? Briefly outline the procedure and regulations that
apply.
Sales of companies by auction are not common in Indonesia.
Preliminary agreements
5. What preliminary agreements are commonly made between the buyer and the seller before
contract?
Letters of intent
As in other jurisdictions, a letter of intent is the basis of the buyer's intent to acquire shares and initiate due diligence
on the target company, and to start negotiation on the terms and conditions of the share acquisition. Normally,
it is not legally binding (except for the confidentiality and exclusivity obligations, if included), unless specifically
provided in it.
Exclusivity agreements

Agreement on exclusivity in an acquisition can be in the letter of intent/memorandum of understanding, or in a

separate agreement. Generally, an exclusivity agreement or provision in an acquisition will prevent the seller from
receiving offers from other parties for a specific short period of time, normally the time needed for the buyer to
conduct the necessary due diligence and negotiation.
For such an agreement or provision to be valid and enforceable, it must comply with with the basic requirements
under the Civil Code for a contract to be valid and binding, that is, consensus between the parties, legal competency of
the parties, definite object for which a contract is drawn, and legal purpose of the contract. There are no requirements
relating to the form of an exclusivity agreement or other technical requirement. However, if an Indonesian party is
involved, based on Law No. 24 of 2009 on National Flag, Language, Emblem and Anthem, the agreement must be
made in Indonesian or at least be bilingual, to avoid the agreement being deemed invalid.
Remedies for breach of an exclusivity agreement/provision can include recovery of expenses incurred by the
aggrieved party, and any foreseeable losses. The aggrieved party may also obtain an injunction to stop breach of
the agreement.
Non-disclosure agreements
Similar to an exclusivity agreement, a non-disclosure agreement can be in a separate agreement or in a letter
of intent/memorandum of understanding. It usually provides for determining what information is considered
confidential, and a prohibition on the party receiving the confidential information from disclosing it.
The requirements for the agreement to be valid and binding are the same as for an exclusivity agreement (see above,
Exclusivity agreements). The agreement usually provides exemptions for a regulatory requirement to disclose
confidential information to the authorities, and/or based on a court order.
A non-disclosure agreement can provide remedies for a breach of it, including damages and injunctive relief, or
specific performance for any threatened or actual breach of the non-disclosure agreement/provision.
Asset sales
6. Are any assets or liabilities automatically transferred in an asset sale that cannot be excluded from
the purchase?
In an asset sale, the relevant asset(s) are usually not automatically transferred. Each asset has to be transferred
subject to the particular legal requirements (see Question 3).
7. Do creditors have to be notified or their consent obtained to the transfer in an asset sale?

Generally there is no legal requirement to notify creditors, unless the seller and/or the buyer is a public listed
company, in which case public disclosure of the asset sale may be required in a newspaper and the websites of the
stock exchange and the company.
However a review of third party contracts may need to be done, to identify whether an obligation to notify and/or
obtain consent is required under the contract, or whether the asset is subject to a security interest.
Approval from the general meeting of shareholders attended by more than three quarters of the voting shares and
approved by more than three quarters of the votes cast in the meeting is also required.
Share sales
8. What common conditions precedent are typically included in a share sale agreement?
Conditions precedent normally included in a share sale agreement generally cover the following:
• Corporate approvals.
• Government authority approval or pre-consultation.
• Approval from the creditors/third party.
• Procedural matters under the applicable laws and regulations, for example public disclosures, settlement of
liabilities (such as tax obligations, if any), and allocation of liability for employees' severance obligations.
• No material adverse change.
Seller's title and liability
9. Are there any terms implied by law as to the seller's title to the shares in a share sale? Is any specific
wording necessary and do buyers normally impose a higher standard than is implied by law?

There are no specific terms implied by law as to the seller's title to the shares or assets. Normally, covenants relating
to the seller's title to the shares or assets are set out in the representation and warranties provisions in the sale
agreement, for example:
• The seller has good and valid title to the shares/assets, free and clear of all encumbrances.
• The seller has not authorised or granted power of attorney to another party to dispose of or represent and act
on behalf of the seller in casting votes using the shares.
10.Can a seller and its advisers be liable for pre-contractual misrepresentation, misleading statements
or similar matters?
Seller
Either the buyer or the seller can be liable for pre-contractual misrepresentation, misleading statements or similar
matters, depending on the negotiation history. However, it is common for a sale agreement to have an entire
agreement clause. This expressly supersedes all prior understandings, agreements or representations by or between
the parties, both written and oral, to the extent they relate to the subject matter of the agreement.
Advisers
In theory, advisers can be liable for any pre-contractual misrepresentation or misleading statements, as aider or
abettor to their principal. As advisers do not undertake any responsibility to the counterparty, direct liability is rare.
The preliminary letter of intent usually disclaims a party's reliance on pre-contractual matters.
Main documents
11. What are the main documents in an acquisition and who generally prepares the first draft?
In a share sale, the documents normally include:
• A (conditional) share sale and purchase agreement attaching, for example, a disclosure letter executed by the
seller qualifying the representations and warranties.
• Shareholders resolution approving the share sale and other related matters necessary for the share sale (for
example, approving the change of board members, amending the articles of association, and change of name
of the target company).

• A share sale and purchase deed (deed of transfer).
In an asset sale, the documents normally include:
• A (conditional) asset sale and purchase agreement, attaching for example a disclosure letter executed by the
seller qualifying the representations and warranties.
• Shareholders resolution and any other board resolution (as required by the articles of association of the
target) approving the asset sale.
• The relevant asset transfer document(s), depending on each asset to be transferred, for example, assignment
agreement for receivables, and sale and purchase deed for land title.
In a share sale, the transfer document must be in a notarial deed form. In an asset sale, the transfer document can
be in a private form, unless the asset is real property, in which case the transfer document must be in a specific form,
that is, a land deed official (Pejabat Pembuat Akta Tanah, PPAT) deed form.
Acquisition agreements
12. What are the main substantive clauses in an acquisition agreement?
A (conditional) share sale and purchase agreement normally has provisions on the following:
• Definition and interpretation.

• General obligation to sell and purchase the shares.
• Description of the sale shares and purchase price.
• Conditions precedent and closing requirements (and conditions subsequent, if appropriate).
• Representations and warranties of the seller and the buyer.
• Indemnification and remedies.
• Non-compete restrictions.
• Confidentiality restrictions.
• Termination and dispute resolutions.
• Governing language and translation.
• Governing law and jurisdiction clauses.
• General provisions relating to expenses, fees and stamp duties, notices, waiver, assignments and
amendments, entire agreement, successors, severability and further assurance and counterpart execution, if
applicable.

A share sale and purchase agreement also normally attaches:
• Disclosure schedules/letter listing all material information relating to the representations and warranties,
and exceptions and qualifications to them.
• Detailed representations and warranties, if not included in the agreement.
• Form of the share transfer deed (to be executed before a notary).
• Detailed closing mechanism, if not included in the agreement.
An asset sale and purchase agreement will contain similar provisions, but will also contain provisions relating to:
• Assignment/transfer and/or novation of contracts.

• Assumption of liabilities.
• Apportionments of prepayments.
• Mechanism to transfer each asset, for example land title and intellectual property (details of which may also
be further detailed in the relevant schedules).
• Mechanism on transfer of registration, licences and permits.
• Employee matters relating to the transfer of the workforce (including agreements with trade unions,
severance and other payments).
The asset sale and purchase agreement normally also attaches schedules listing all the assets, liabilities and
transferred employees, and detailed information or mechanisms/steps and agreements necessary to transfer each
asset (for example, land title registration).
13. Can a share purchase agreement provide for a foreign governing law? If so, are there any provisions
of national law that would still automatically apply?
The parties' choice of governing law, including a foreign law, in a share purchase agreement should be upheld by
the Indonesian courts, if there is a sufficient connection between the parties or the transaction and the choice of
foreign law is not against public order.
In practice however, the Indonesian courts have sometimes not applied a chosen foreign governing law, or have
declared that the courts do not have jurisdiction over the matter due to the choice of foreign law.
Regardless of a choice of a foreign law, certain Indonesian laws will still apply, such as requirements for a share/
asset transfer and employment matters.

Warranties and indemnities
14. Are seller warranties/indemnities typically included in acquisition agreements and what main
areas do they cover?
Seller warranties/indemnities are normally provided in an acquisition agreement, whether a share sale or asset sale.
Under Indonesian practice, an indemnity refers to a hold harmless from third party claims.
In a share sale, warranties normally include the following:
• Existence and capacity of the seller to sell and enter into the transaction documents (including no duress and
no conflict, and seller's solvency).
• The target's share capital (including valid title to the shares, and no options).
• Representation and warranties relating to the assets (including title to assets and encumbrances), material
contracts, licences and the target's business operations).
• Financial accounts and records.
• Environmental compliance.
• Employee-related matters.
• Insurance.
• Compliance with laws and regulations.
• Disputes/litigation matters.
• Tax matters.
• Intellectual property rights.
• Accuracy of information.
• Insolvency of the target company.
Warranties in an asset sale are similar, but focus more on the assets/business being acquired.
15. What are the main limitations on warranties?

Limitations on warranties
Normally, limitations on warranties include:
• Matters disclosed in the disclosure schedules/letter or documents provided in the data room during the due
diligence.
• Time limits set out in the agreement, during which the warranties remain applicable.
• Provisions on how to assert claims and conduct a dispute that may arise relating to a breach of warranty
and/or third party claim.
Qualifying warranties by disclosure

Representation and warranties are usually qualified by disclosure schedules/letter that state the relevant exceptions,
or disclose certain information/facts which qualify the warranties. No claim can be made in relation to the warranties
to the extent of the disclosure.
16. What are the remedies for breach of a warranty? What are the time limits for bringing claims under
warranties?
Remedies
Remedies for breach of warranties in a sale and purchase agreement are provided under the Civil Code, which
includes return of the purchase price, related costs and damages.
Time limits for claims under warranties

The statute of limitation under the Civil Code is 30 years. The parties normally negotiate the time limits for claims,
which may vary depending on the subject matter of the warranties (for example time limits for tax and environmental
warranties are normally longer than for other warranties).
Consideration and acquisition financing
17. What forms of consideration are commonly offered in a share sale?
Forms of consideration
Cash is the common form of consideration.

Factors in choice of consideration

Usually, the choice of consideration is influenced by the buyer and seller's tax position.
18. If a buyer listed in your jurisdiction raises cash to fund an acquisition by an issue of shares, how is
the issue typically structured? What consents and regulatory approvals are likely to be required?
Structure
The relevant company can issue new shares to raise funds by a rights issue (to existing shareholders with pre-emptive
rights) or without a rights issue (as long as the issue of the new shares is no more than 10% within a two year period).
Consents and approvals

An issue of new shares by a rights issue must be registered with the Financial Services Authority, disclosed to the
public and approved by the general meeting of shareholders.
An issue of new shares without a rights issue requires disclosure to the public and the Financial Services Authority,
and approval from the general meeting of shareholders.
If the proceeds from the issue of new shares are to be used to acquire shares or assets from an affiliated party,
additional disclosure of an affiliated transaction and/or a conflict of interest transaction is required. Further, if
the acquisition value exceeds 20% of the listed company, the acquisition is considered a material transaction, and
requires additional disclosure.
Requirements for a prospectus

In a rights issue, a prospectus is required. The form and content of the prospectus must follow the applicable
securities regulations and be registered with the Financial Services Authority.
19. Can a company give financial assistance to a potential buyer of shares in that company?
Restrictions
A company cannot give financial assistance to a potential buyer of shares in that company. Under the Company
Law, tangible value must be received by a company for an issue of its shares and the value must be retained by the
company. There cannot be a return of capital or taking of value, except in a company liquidation or a reduction in
company capital.

Exemptions
There are no exemptions.
Signing and closing
20. What documents are commonly produced and executed at signing and closing meetings in a
private company share sale?
Signing
A (conditional) sale and purchase agreement is commonly produced and executed at signing.
Closing
The following documents are commonly produced and executed at closing:
• Shareholders resolution appointing new members of the boards or amending the articles of association, if
any.
• A share sale and purchase deed or a sale and transfer deed, drawn up and executed before a notary.
• Notation/registration of the new shareholders in the Share Registry.
21.Do different types of document have different legal formalities? What are the formalities for the
execution of documents by companies incorporated in your jurisdiction?
In a share sale, a (conditional) sale and purchase agreement is usually made in private deed form. If the amounts
involved are substantial, the greater presumptive validity of a notarial deed may be preferred. Further, the actual
transfer document (a share sale and purchase deed or a sale and transfer deed) must be drawn up and executed
before a notary (in a notarial deed form) in Indonesian.
In an asset sale, the (conditional) sale and purchase agreement and the transfer documents are usually made in
private form. However, for a sale and transfer of real property, the sale and transfer document must be drawn up
before a land deed official (PPAT) in a specific deed form.

22. What are the formalities for the execution of documents by foreign companies?
In a share sale or a sale of real property, since the execution of the transfer documents must be before a notary or land
deed official in Indonesia, a power of attorney may be required for a representative of the foreign company to execute
the documents. The notary or land deed official normally requires the relevant power of attorney to be notarised by
a notary where the foreign company is domiciled, and legalised at the relevant Indonesian consulate/embassy.
23. Are digital signatures binding and enforceable as evidence of execution?
In theory, digital signatures are generally binding and enforceable for private documents, but not for execution of
documents in a notarial deed form or a land official deed form. However, even for private documents, when the
amounts involved are substantial, a notarial deed is usually recommended, or a private document with notarised
signatures.
24. What formalities are required to transfer title to shares in a private limited company?
Transferring title to shares in a private limited company requires execution of a share sale and transfer deed in
notarial deed form (see Question 21) followed by registration/notation of the transfer in the target company's
shareholder register.
Tax
25. What transfer taxes are payable on a share sale and an asset sale? What are the applicable rates?

Share sale
There is no transfer tax in Indonesia for the sale and transfer of shares in a non-listed/private Indonesian company.
A sale and transfer of public listed shares (listed on an Indonesian stock exchange) is subject to a final withholding tax
of 0.1% of the total amount of the transaction value, if the shares are crossed through the Indonesian stock exchange.
Asset sale
There is no transfer tax in an asset sale, except for the transfer of a land title, where the transferee pays 5% of the
transfer price and the transferor pays 5% income tax.
26. What are the main transfer tax exemptions and reliefs in a share sale and an asset sale? Are there
any common ways used to mitigate tax liability?
Share sale
A sale and transfer of public listed shares on the Indonesian stock exchange is subject to a 0.1% final withholding
tax, regardless of any treaty exemptions. A non-Indonesian resident of a tax treaty country may be exempt if the
treaty provides capital gains tax protection for a share sale, if the tax treaty and domestic tax requirements are met.
Indonesian tax authorities have a general rule on refunds, which may be used where there is a treaty exemption.
Asset sale
There are no transfer tax exemptions in an asset sale (unless the transfer satisfies certain strict tax neutral merger
conditions).
27.What corporate taxes are payable on a share sale and an asset sale? What are the applicable rates?
Share sale
Income from a share sale by a corporate Indonesian resident taxpayer is subject to corporate income tax at 25%.
This also applies to capital gains from an over-the-counter sale of public listed shares (off exchange transaction).
A sale of shares in a non-listed/private Indonesian company by a non-Indonesian resident (including a corporate

non-resident) is subject to a final withholding tax of 20%, on a deemed profit of 25% of the gross sale proceeds

(effective tax rate of 5% of the gross sales proceeds). However, for sellers from certain tax treaty jurisdictions, there
is no tax due if Indonesia's requirements are satisfied.
Asset sale
Income from an asset sale by a corporate Indonesian resident taxpayer is subject to corporate income tax at 25%.
Income from the sale or transfer of certain assets in Indonesia (including antiques, paintings, automobiles,
motorcycles, yachts, and light aircraft) received by a non-Indonesian resident is subject to a final withholding tax at
20%, on a deemed profit of 25% of the gross sales proceeds (effective tax rate of 5% of the gross sales proceeds). In
certain cases, an exemption may be available under a tax treaty.
28. What are the main corporate tax exemptions and reliefs in a share sale and an asset sale? Are there
any common ways used to mitigate tax liability?
Share sale
The tax payable may be reduced if an Indonesian resident corporate shareholder has tax losses to absorb the gains.
There are possible tax treaty benefits for a non-Indonesian resident taxpayer in a tax treaty country (see Question
26).
Asset sale
The tax payable may be reduced if the Indonesian resident corporate seller has a tax loss balance to absorb the
proceeds.
The final withholding tax on certain assets will not apply if the seller is a non-Indonesian resident in a tax treaty
country, and the tax treaty does not allocate the right to tax the gain to Indonesia.
29. Are other taxes potentially payable on a share sale and an asset sale?
In an asset sale VAT may apply at 10%, depending on the types of assets and other details. There are no other taxes
applicable to a share sale and an asset sale.

30. Are companies in the same group able to surrender losses to each other for tax purposes? For
example, can interest expenses incurred by a bid vehicle incorporated in your country be set off against
profits of the target before tax?
Taxes of one company in a group cannot be used by another group member.
Employees
31. Are there obligations to inform or consult employees or their representatives or obtain employee
consent to a share sale or asset sale?
Asset sale
Under the Company Law, there is no requirement to consult the employees or their representatives or obtain their
consent with regard to an asset sale, unless the asset sale involves transferring or dismissing the relevant employees.
In practice, the seller of a business must notify the affected employees and their trade unions of:
• The fact that the transfer is taking place, the approximate date on which it will take place and the reasons for
it.
• The implications of the transfer and the measures that the seller plans to take in relation to the affected
employees in connection with the transfer (or if no measures will be taken).
Share sale
Under the Company Law and applicable regulations, mergers, consolidations and acquisitions of private companies
and public listed companies must take into account the interests of employees. The intended treatment of employees
in the companies concerned must be disclosed in the required transaction documentation announced to the
employees.
Additionally, the general statutory and regulatory provisions of Indonesian employment law apply. These usually
require notice to be given to the employees.

32. What protection do employees have against dismissal in the context of a share or asset sale? Are
employees automatically transferred to the buyer in a business sale?
Asset sale
Dismissal of employees following a business sale is legal if prior approval from the Industrial Relation Court is
obtained.
Terminated employees are entitled to statutory severance pay. This is triggered in certain cases on a change of
control or, in an asset transfer, even if the employees are offered employment with the acquirer with a new term
of employment.
Employees are not automatically transferred to the buyer in a business sale (asset sale). In these circumstances, the
employer can offer two options to the employees:
• Employment with the new employer on similar terms and conditions. The employee's previous service
period continues with the new employer, who inherits contractual responsibility for the employees' accrued
severance rights.
• Terminate employment with the current employer and receive severance pay, and then start work with the
new employer without an accrued past service period.
If there is a trade union, negotiation of the above options can be carried out with the trade union representing the
employees. The employees' or trade union's agreement to the plan will help with Industrial Relation Court approval.
Share sale
See above, Business sale. However in a share sale, employees are typically given the option to terminate their
employment with severance, or continue employment without severance.
Transfer on a business sale

See above, Business sale.
Pensions
33. Do employees commonly participate in private pension schemes established by their employer?
If an employee is transferred as part of a business acquisition, is the transferee obliged to honour
existing pension rights or provide equivalent rights?

Private pension schemes

A company is not required to establish a pension fund by law. However if they wish to do so, Law No. 11 of 1992 on
Pension Funds (Pension Fund Law) applies.
Under the Pension Fund Law, there are two types of private pension fund programmes:
• Company Pension Fund (Dana Pensiun Pemberi Kerja, DPPK). This is organised by the employer, with a
separate pension fund institution to manage the fund. The establishment of the institution, including the
fund, must first be approved by the Ministry of Finance.
• Third Party Pension Fund (Dana Pensiun Lembaga Keuangan, DPLK). This is a pension fund company,
established by an insurance company or bank, to manage the pension fund on behalf of the company. A
company can register its employees in a pension fund established by a DPLK, to avoid having to obtain
Ministry of Finance approval (which is required for a DPPK).
There is no obligation under prevailing laws for an employer to enrol an employee in a pension fund. The employee
can also join and become a member of a pension fund, or opt not to join it.
Pensions on a business transfer

In a business transfer, it is important that the buyer and seller agree the employment scheme that will apply to
the employees who continue their employment with the buyer. The employment scheme cannot provide salary and
benefits less than what the employees received from the seller as the former employer, including pension benefits.
The pension fund, or indirectly the employees, can have creditor rights if the pension fund is underfunded.
Competition/anti-trust issues
34. Outline the regulatory competition law framework that can apply to private acquisitions.
Triggering events/thresholds
Article 27 of the Law on Prohibition of Monopolistic Practices and Unfair Competition, Law No. 5 of 1999 (Anti-
Monopoly Law) prohibits common ownership of two or more companies in the same market if the market is highly
concentrated, that is either:
• One group company has an aggregate market share of more than 50%.
• Two or three companies have an aggregate market share of more than 75%.
Article 28 of the Anti-Monopoly Law prohibits mergers and consolidations or the acquisition of shares in other
companies that will cause monopolistic practices and/or unsound business competition.

Notification and regulatory authorities

A post-merger notification must be submitted to the Business Competition Supervisory Commission (Komisi
Pengawas Persaingan Usaha, KPPU) within 30 business days after the effectiveness of the merger, consolidation or
share acquisition, if any one of the following applies:
• The following thresholds are exceeded:

• the value of the target's Indonesian assets is at least IDR2.5 trillion (if it involves two or more parties in
the banking industry, IDR20 trillion); or
• the value of the target's Indonesian sales is at least IDR5 trillion.
• The acquisition is conducted between non-affiliated parties.

• A change of control occurs in a joint venture.
To minimise the risk of loss to the parties, KPPU allows pre-merger consultation. There is no specific timing for this,
and the party must still submit post-merger notification. However, the KPPU is committed to conducting only one
evaluation of the transaction, as long as there are no material changes to the data or market conditions provided by
the party during pre-merger consultation and at the time of post-merger notification.
Post-merger notification and pre-merger consultation also apply to transactions by parties outside Indonesia which
may affect competition in Indonesia.
Substantive test
KPPU's assessment involves an analysis of market concentration, market entry barriers, potential anti-competitive
behaviour, efficiency and bankruptcy (Government Regulation No. 57 of 2010 on Merger, Consolidation or
Acquisition which may result in Monopolistic Practices and Unfair Business Competition and its implementing
KPPU regulations).
To measure market concentration, KPPU will generally first use the Herfindahl-Hirschman Index (HHI) or, if HHI
cannot be used, the concentration ratio (CR) or other methods to reflect a market concentration.
Environment
35. Who is liable for clean-up of contaminated land? In what circumstances can a buyer inherit and
a seller retain liability in an asset sale and a share sale?
As a matter of law, the party contaminating the land is liable for the contamination. However, the landowner, or if
the land is leased, the occupier of the land (lessee), is deemed as the party contaminating the land, and therefore is
responsible for cleaning it, unless it can be proven otherwise.

It is therefore necessary in an acquisition to conduct an environmental audit to identify the environmental liability.
Online resources
Indonesia legislation
W www.peraturan.go.id
Description. Official website containing published Indonesian laws and regulations, including the
Company Law. The website does not provide English translations. The website is managed by the
Ministry of Law and Human Rights.
Contributor profiles
Miranti Malikus-Ramadhani, Partner
Mochtar Karuwin Komar
T +62 21 571 1130

F +62 21 571 1162
E mirantimr@mkklaw.net
W www.mkklaw.net
Professional qualifications. Licensed Advocate in Indonesia; Registered Capital Market Legal

Consultant with the Indonesian Financial Services Authority (OJK)
Areas of practice. M&A; capital markets
Languages. Indonesian, English
Professional associations/memberships.
•Member of the Indonesian Advocates Association (Peradi).
•Member of the Capital Market Legal Consultant Association (HKHPM).
Dian Lindajanti, Senior Associate

Mochtar Karuwin Komar
T +62 21 5711130
F + 62 21 5711162
E lindajanti@mkklaw.net
W www.mkklaw.net
Professional qualifications. Licensed Advocate in Indonesia
Areas of practice. Corporate; M&A; capital markets
Languages. Indonesian, English
Professional associations/memberships. Member of the Indonesian Advocates Association

(Peradi).
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Acquisition in Indonesia

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Acquisition in Indonesia

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Private mergers and acquisitions in Indonesia: overview, Practical Law Country Q&A...

Private mergers and acquisitions in Indonesia:

Country Q&A | Law stated as at 01-Aug-2017 | Indonesia, International

Q&A guide to private mergers and acquisitions law in Indonesia.

Corporate entities and acquisition methods

Restrictions on share transfer

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• Right of first refusal from non-selling shareholders.

Foreign ownership restrictions

Other restrictions on the ownership of shares in Indonesian companies apply as follows:

Share purchases: advantages/asset purchases: disadvantages

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Share purchases: disadvantages/asset purchases: advantages

Sales of companies by auction are not common in Indonesia.

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Agreement on exclusivity in an acquisition can be in the letter of intent/memorandum of understanding, or in a

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Seller's title and liability

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In a share sale, the documents normally include:

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• A share sale and purchase deed (deed of transfer).

In an asset sale, the documents normally include:

12. What are the main substantive clauses in an acquisition agreement?

• Definition and interpretation.

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A share sale and purchase agreement also normally attaches:

• Assignment/transfer and/or novation of contracts.

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Warranties and indemnities

In a share sale, warranties normally include the following:

15. What are the main limitations on warranties?

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Qualifying warranties by disclosure

Time limits for claims under warranties

Consideration and acquisition financing

17. What forms of consideration are commonly offered in a share sale?

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Factors in choice of consideration

Consents and approvals

Requirements for a prospectus

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Signing and closing

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23. Are digital signatures binding and enforceable as evidence of execution?

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A sale of shares in a non-listed/private Indonesian company by a non-Indonesian resident (including a corporate

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Taxes of one company in a group cannot be used by another group member.

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Transfer on a business sale

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Private pension schemes

Pensions on a business transfer

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Notification and regulatory authorities

• The following thresholds are exceeded:

• The acquisition is conducted between non-affiliated parties.

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Miranti Malikus-Ramadhani, Partner

Mochtar Karuwin Komar

T +62 21 571 1130