A joint venture can provide a foreign investor with a structured way to enter the Indonesian market together with an Indonesian business partner.
In Indonesia, a joint venture may involve a Perseroan Terbatas (PT) with foreign and Indonesian shareholders. Where foreign investment is involved, the structure may take the form of a PT PMA (Foreign Investment Company), subject to the applicable business-field, foreign ownership, corporate, and licensing requirements.
There is no single “Joint Venture Law” in Indonesia. The legal framework is built from several regulations, including Law No. 25 of 2007 on Investment, Law No. 40 of 2007 on Limited Liability Companies as amended, Law No. 6 of 2023 on Job Creation, the investment business-field framework under Presidential Regulation No. 10 of 2021 as amended by Presidential Regulation No. 49 of 2021, and the current risk-based business licensing framework under Government Regulation No. 28 of 2025.
What Is a Joint Venture in Indonesia?
A joint venture in Indonesia is a business arrangement in which two or more parties cooperate by contributing capital, technology, expertise, networks, intellectual property, or other resources to a business.
For a foreign investor, the joint venture may be implemented through an Indonesian limited liability company, including a PT PMA, depending on the relevant business field, foreign ownership requirements, and investment structure.
A joint venture does not automatically mean that an Indonesian shareholder must hold a majority of the shares. The permitted ownership structure depends on the relevant KBLI, business field, and applicable foreign investment restrictions.
Is a Joint Venture Required for Foreign Investment in Indonesia?
Whether a foreign investor must partner with an Indonesian shareholder depends on the business field, KBLI, foreign ownership requirements, and sector-specific regulations.
Some business fields may be open to foreign investment without an Indonesian shareholder, while other activities may be subject to foreign ownership limits, partnership requirements, or other conditions.
Therefore, the first step should be determining the correct KBLI and checking the applicable investment restrictions before negotiating the shareholding structure.
Key Regulations for an Indonesian Joint Venture
| Regulation | Main relevance |
|---|---|
| Law No. 25 of 2007 on Investment, as amended | Foreign and domestic investment framework |
| Law No. 40 of 2007 on Limited Liability Companies, as amended | Corporate structure, shares, governance, and shareholder rights |
| Law No. 6 of 2023 on Job Creation | Current statutory framework affecting investment and corporate regulation |
| Presidential Regulation No. 10 of 2021, as amended by Presidential Regulation No. 49 of 2021 | Investment business fields and foreign ownership requirements |
| Government Regulation No. 28 of 2025 | Current risk-based business licensing framework |
| Indonesian Civil Code | General contractual principles and obligations |
The investment business-field framework under Presidential Regulation No. 10 of 2021 was amended by Presidential Regulation No. 49 of 2021. Both regulations are recorded as in force by the JDIH BPK database.
Check Whether the Business Is Open to Foreign Investment
Before negotiating with an Indonesian partner, identify the company’s KBLI and determine whether the proposed business is open to foreign investment.
The investment business-field framework distinguishes between business fields that are open, subject to specific requirements, or closed to investment. Sector-specific regulations may also impose additional requirements.
The foreign investor should therefore:
- Identify the correct KBLI;
- Check applicable foreign ownership restrictions;
- Determine whether an Indonesian partnership is required;
- Review sector-specific requirements;
- Check applicable investment and capital requirements; and
- Identify the licensing requirements applicable to the proposed business.
This step should be completed before finalizing the shareholding structure.
Conduct Legal Due Diligence on the Indonesian Partner
A foreign investor should conduct legal due diligence before committing capital or signing definitive transaction documents.
The review may include:
- Deed of establishment and amendments;
- Articles of Association;
- Shareholder records;
- Directors and Commissioners;
- Beneficial ownership information;
- Material customer and supplier contracts;
- Intellectual property;
- Financing and security arrangements;
- Property ownership or leases;
- Business licences and regulatory compliance;
- Tax compliance; and
- Pending disputes and potential liabilities.
The purpose is not only to determine whether the Indonesian company is legally capable of entering the transaction, but also to identify liabilities that could affect the joint venture after closing.
Negotiate the Joint Venture Agreement
The Joint Venture Agreement (JVA) sets out the contractual framework for the relationship between the investors.
The JVA may address:
- Capital contributions;
- Shareholding percentages;
- Board composition;
- Management authority;
- Voting rights;
- Reserved matters;
- Profit and dividend policy;
- Future funding obligations;
- Share transfer restrictions;
- Intellectual property;
- Confidentiality;
- Deadlock mechanisms;
- Exit rights;
- Termination; and
- Dispute resolution.
The JVA should be reviewed together with the company’s Articles of Association and other corporate documents to minimize inconsistencies between contractual arrangements and corporate governance.
Establish or Restructure the Indonesian PT
The agreed investment structure should be reflected in the company’s constitutional and corporate documents.
Law No. 40 of 2007 on Limited Liability Companies, as amended, provides the principal statutory framework for Indonesian limited liability companies, including matters concerning incorporation, capital and shares, shareholders’ meetings, directors, commissioners, and corporate actions.
Depending on the transaction, the parties may need to:
- Establish a new PT PMA;
- Acquire shares in an existing Indonesian company;
- Increase issued and paid-up capital;
- Transfer shares;
- Amend the Articles of Association; or
- Appoint or replace directors and commissioners.
The appropriate structure depends on the transaction and applicable regulatory requirements.
Complete Business Licensing
Government Regulation No. 28 of 2025 is the current framework for risk-based business licensing (PBBR) in Indonesia. It has been in force since 5 June 2025 and replaced Government Regulation No. 5 of 2021.
The licensing requirements depend on the company’s KBLI, business activity, risk classification, location, and applicable sectoral regulations.
Depending on the business, the company may need to address:
- Business Identification Number (NIB);
- Risk-based licences or certifications;
- Sector-specific approvals;
- Spatial or location requirements;
- Environmental approvals; and
- Other business-specific requirements.
Obtaining an NIB does not necessarily mean that every business can immediately conduct all operational or commercial activities. Additional licensing or approvals may apply depending on the activity and risk level.
Protect Governance and Control Rights
Shareholding percentages alone do not determine how a joint venture will operate.
The shareholders should clearly distinguish between ordinary management matters and reserved matters requiring special approval.
Reserved matters may include:
- Issuing new shares;
- Major borrowing;
- Sale of material assets;
- Changes to business activities;
- Major acquisitions;
- Related-party transactions;
- Changes to the Articles of Association;
- Appointment or removal of key management; and
- Other decisions that could materially affect the investment.
A well-designed governance framework can help reduce uncertainty when the interests of the foreign and Indonesian shareholders diverge.
Common Mistakes Foreign Investors Should Avoid
Foreign investors should avoid:
- Agreeing on the shareholding structure before checking KBLI and foreign ownership rules;
- Using a generic JVA without considering the relevant business sector;
- Failing to address deadlock scenarios;
- Leaving important governance rights outside the appropriate corporate documents;
- Skipping legal due diligence on the Indonesian partner;
- Assuming that an Indonesian nominee is required where the business is open to foreign investment; and
- Treating the JVA, corporate structure, and business licensing as completely separate matters.
Need Legal Assistance for Your Joint Venture in Indonesia?
Establishing a joint venture in Indonesia involves more than agreeing on the shareholding percentage. Foreign ownership restrictions, KBLI classification, legal due diligence, corporate governance, the Joint Venture Agreement, and business licensing should be reviewed together before the investment is completed.
Hukumku can assist foreign investors and Indonesian businesses with joint venture transactions in Indonesia, including legal due diligence, foreign investment and ownership analysis, Joint Venture Agreement review, corporate documentation, and business licensing.
Planning to establish a joint venture in Indonesia? Contact Hukumku to discuss your proposed investment structure with an Indonesian legal professional.
