It is not uncommon to register a business in Bali using a nominee company. Foreign companies are subject to higher requirements and because of that, alternatives like using a local nominee shareholder (an inherently unsafe way) and special purpose vehicles (a much safer option) are used.
In this article, we describe common scenarios when special purpose vehicles, i.e. nominee companies, are a suitable alternative.
Common scenarios when you should consider using a nominee company or special-purpose vehicle
The following are scenarios when a foreigner and a foreign-owned company can benefit from using a nominee company in Bali.
When the law restricts foreign ownership
When registering a company in Indonesia, a negative investment list determines which business classifications (KBLI) are open, partially open, and closed for foreign ownership.
For example, below are business classifications that are partially open and closed for 100% foreign ownership based on the newest regulation.
|Business activities||KBLI number||Maximum foreign ownership|
|Domestic sea transportation for tourism||50113||49%|
|Manufacturing of traditional medicinal products for humans||21022||0%|
|Manufacture of traditional cosmetics||20232||0%|
|Coffee processing industry||10761||0%|
|Manufacture of wooden buildings goods||16221||0%|
If you wish to engage in a business activity that restricts foreign ownership, consider registering using a nominee company in Bali.
Not disclosing the actual owner of the business
There can be various reasons why you’d not want to disclose yourself as the shareholder of a company. The most common (legitimate) reason is that large companies often have strict policies about where and how they can conduct overseas businesses and a special purpose vehicle gives more flexibility.
When you want to get around capital requirements
The required paid-up capital is IDR 10 billion (USD 700.000) for foreign-owned companies. Whereas for local companies, the required capital depends on the scale of the company.
While setting up a nominee company costs more than a regular PT PMA registration in Bali, it allows you to not tie up as much capital.
To illustrate, below are the paid-up capital requirements for local companies.
|Size of company||Minimum capital requirement||Foreign shareholders allowed?|
|Small||>50 million IDR||No|
|Medium||>500 million IDR||No|
|Large||>10 billion IDR||Yes|
When you want to combine several small lifestyle businesses into one company
Companies must do their investment reporting separately for each of its business classifications. There is no required investment per business classification for local companies.
But for foreign-owned companies, the required investment is IDR 10 billion per business classification.
If you register three different business classifications, the total investment will be IDR 30 billion. It is a relatively hefty sum for smaller lifestyle businesses.
The function of a nominee company in Bali
A nominee company will act as the registered owner of your local company’s shares on behalf of you or your foreign-owned company.
Nonetheless, as the actual owner of the local company, you can still protect and control all of the assets and businesses.
You can do that by having professionally drafted agreements. Additionally, by being the president director where you will be the leading decision-maker of the local company.
Safety of using a nominee company in Bali
Using an individual nominee is not a safe way to register a local company in Bali. Especially if you are considering having your Indonesian acquaintance or family as shareholders.
In case the individual dies, there can be problems with the successors. Moreover, unlike a person, a nominee company cannot disappear as easily dissolving a company is quite a process.
A nominee company or a special-purpose enterprise will provide nominee service with a solid set of legal agreements. For instance, the following legal agreements:
- Agreements on cooperation
- Loan agreement
- Indemnity agreement
- Pledge of shares agreement
- Assignment of dividends agreement
With this in mind, it will be a professional relationship between you or your company and a nominee company. There will be no hard feelings if you want to end the service.
As for its bank account and tax compliance, they will be under your control. It means you can safely handle your local company’s financials and pay dividends once a year.
You or your foreign-owned company will be the beneficiary of the local company registered by the nominee company in Bali. Beneficial owners are specifically structured above the shareholders of the local company.
Working at the local company and getting a KITAS as the beneficiary owner
A local company must have one resident director who is an Indonesian citizen. But, your local company can appoint you as the president director despite being the beneficial owner.
That is only if your local company has had IDR 1 billion capital. It is since the company’s capital must be at least IDR 1 billion per hired foreigner. In that case, you can get a temporary stay permit (KITAS) for work.
The working KITAS is valid for a year. It can be renewed annually up to five times. Afterward, you will need to cancel your KITAS and reapply.
Otherwise, you can upgrade your KITAS to a permanent stay permit (KITAP). Besides, it is one of the major benefits of the director position. Advisor or manager positions, namely, do not allow proceeding with the KITAP after five years.
Transforming the local company into a foreign-owned company
Suppose your business classification can finally have 100% foreign ownership. Or, you finally have enough money for the required capital of a foreign-owned company.
Transforming your local company into a foreign-owned company in Bali is very doable. Your local company will need to increase the capital to be no less than IDR 10 billion. Then, you or your foreign-owned company can buy the shares of the local company.
Thus, you will become the shareholder and can become the director. Your local company will automatically become a foreign-owned company. In addition, you can appoint a family member as commissioner. It is to have relevant people as shareholders.
Reach out to our consultants for more answers on nominee companies in Bali. You can submit your inquiry to [email protected] or fill the form below.