What Is a Perseroan Terbatas (PT)?
PT is an acronym for Perseroan Terbatas, a term that represents a limited liability company in Indonesia. Also known as a foreign investment limited liability company, a Perseroan Terbatas (PT) is a business entity that allows foreign investors to conduct commercial activities in Indonesia. The PT is a legal entity that acts per commercial Indonesian law.
Any Indonesian company that directly receives foreign investments must take the form of a PT. The Indonesian Perseroan Terbatas may be classified as an open, closed, domestic, foreign, individual, or a general public PT. Most are a limited liability company (LLC) offering shares to the public.
- A Perseroan Terbatas (PT) is a legal business entity that allows foreign investors to run a revenue-generating business in Indonesia.
- While the structure of a Perseroan Terbatas (PT) is similar to a limited liability company found in the United States, there are significant differences regarding Indonesian government regulations that foreign investors must follow.
- Some PTs sell shares on stock exchanges, allowing individual investors the opportunity to participate in company ownership.
- There are different types of PTs in Indonesia, including open, closed, domestic, individual, and general public.
Understanding Perseroan Terbatas (PT)
The Indonesian term Perseroan Terbatas translates as a "limited company" or "joint-stock company" in English. Shareholders of a PT are legally liable for a company's debts if it files for bankruptcy. However, an investor in an Indonesian limited liability company (LLC) or PT is liable only for the amount of their original investment. The articles of association of a PT outline share ownership and the portion of the whole of shares ownership.
Indonesian law governs the types of businesses that can operate as a Perseroan Terbatas (PT). Governance and administration of Perseroan Terbatas (PTs) are handled on a regional basis and the rules may vary for each region of the country. The license requirements for each business will depend on the type of work in which they will be involved. While the United States has business entities similar to Indonesia's Perseroan Terbatas (PT), the specific rules and guidelines for a PT adhere to Indonesian law regarding business entities.
Countries often define their business in different terms and with various stipulations. Although a Perseroan Terbatas mirrors the limited liability company of the United States, there are fundamental differences attributed to the governing laws. Comparatively, a PT in Indonesia is the equivalent to a public limited company (PLC) in the United Kingdom and the Republic of Ireland.
Types of Perseroan Terbatas (PTs) in Indonesia
The Perseroan Terbatas (PT) is the legal entity a foreign company, foreign government, or foreign individual must use to run a revenue-generating business in Indonesia. There are a few basic types of PTs.
An open PT is an LLC that offers shares to the public. Typically, this type of LLC offers ownership shares available for purchase by most investors. Thus, buying and selling stocks is relatively straightforward.
A closed PT is an LLC that offers only private shares and restricts the sale of those shares to specific individuals or groups. This limitation is most common for family-owned and operated companies.
A domestic PT is an LLC that physically exists and offers its goods or services in Indonesia. These types of PTs must strictly comply with rules governing businesses in the Republic of Indonesia.
An individual PT is an LLC with shares issued to and owned by only one person. This person, typically the owner or director of the company, has sole authority within this type of business structure.
A foreign PT is an LLC that is incorporated in, and subject to, the laws of a foreign country. When an external company establishes a PT in Indonesia, the business is also subject to the laws and regulations of Indonesia.
General Public PT
A general public PT is an LLC that has a free-share type ownership system. Any entity may own shares of this type of company. The structure is similar to an open PT. However, shares of this type of company can also be listed on the stock exchange.
Foreigners interested in starting or investing in an Indonesian business will need to navigate the country's complex rules regarding foreign investment. While a PT is a legal form for foreigners to engage in business, setting up a foreign investment company in Indonesia can require a significant amount of time and expertise to comply with government regulations and receive final approval.
Not all sectors are open to foreign investment in Indonesia. Some sectors require partial domestic ownership, which means the foreign investor will need to work with a local partner if they want to form a PT.
In some cases, establishing a representative office might be a better option for a foreign investment company looking to do business in Indonesia. This allows the company to explore business opportunities through local networking and market research. After performing such due diligence, the company will be better informed before taking the next step of forming a Perseroan Terbatas.