Foreign Direct Investment and the PT PMA
Referring to Article 1 point 3 of Law No.25 of 2007 on Investment Law, Foreign Direct Investment (Penanaman Modal Asing or “PMA”) refers to investment activities conducted within Indonesian territory by foreign investors, whether using foreign capital entirely or in partnership with domestic investors.
Under Indonesian investment regulations, PMA must take the form of a limited liability company (Perseroan Terbatas or “PT”) established under Indonesian law and domiciled within Indonesian territory, except where otherwise provided by law (Article 5(2), Investment Law). PMA is generally directed toward large-scale business activities and may enter into partnership with cooperatives and micro, small, and medium enterprises.
In terms of capital requirements, a PT PMA must have a total investment value of at least IDR 10 billion, excluding land and buildings, per business activity (5-digit KBLI business field) per project location. The minimum paid-up capital is IDR 2,5 billion, which may not be withdrawn or transferred from the company’s account for a minimum of 12 months from the date it was first placed or paid in (Article 26(2) and Article 26(10) and 27(2), Regulation of the Minister of Investment and Downstreaming/Head of Investment Coordinating Board (BKPM) No.5 of 2025 (“BKPM Reg 5/2025”)).
Legal Validity of a PT PMA
As a company required to take the form of a PT, a PT PMA automatically carries the status of a legal entity (badan hukum) that is legally separated from both its shareholders and its management organs. A PT PMA is considered legally valid once it has satisfied the incorporation requirements under the Company Law (Law No. 40 of 2007, as amended by Government Regulation in Lieu of Law No. 2 of 2022 on Job Creation (“Perppu Cipta Kerja”) and the applicable investment regulations.
In this case, incorporation required at least 2 people and must be executed by way of a notarial deed in the Indonesian Language (Article 109(2) of Perppu Cipta Kerja, amending Article 7(4) of the Company Law). From that moment, the company has existed as an independent legal subject.
When a PT PMA’s Sole Foreign Director is Deported
A PT PMA, like any other PT, operates through three corporate organs: the General Meeting of Shareholders (Rapat Umum Pemegang Saham or “RUPS”), the Board of Directors (Direksi), and the Board of Commissioners (Dewan Komisaris). The Board of Directors holds full authority and responsibility for the management of the company in furtherance of its purposes and objectives, and represents the company both in and out of court in accordance with the articles of association.
On the question of director qualifications, Article 93(1) of the Company Law provides that a director must be an individual person (natuurlijk persoon) with legal capacity, and must not have certain disqualifying circumstances within the five years preceding their appointment, such as having been declared bankrupt, having caused a company to become bankrupt, or having been convicted of an offence causing loss to state of finances or the financial sector. Notably, the Company Law does not impose any nationality or residency requirement for directors. A foreign national may therefore serve as a director of an Indonesian company, including PT PMA. This view is consistent with the position of Mr. Yahya Harahap in Hukum Perseroan Perbatas (p.355), who confirms that Article 93(1) of the Company Law does not regulate the nationality or place of residence and does not require Indonesian citizenship.
Nevertheless, in our view, the involvement of a foreign director in the management of a company is not without certain legal consequences. In addition to the more complex employment and stay permit requirements, there is also a risk of immigration enforcement measures, including deportation.
Under Article 106(1) of Perppu Cipta Kerja, which amends Article 1(36) of the Immigration Law (Law no.6 of 2011), deportation is defined as a coercive measure to remove a foreign national from Indonesian territory. It may be imposed on a range of grounds, including: appearance on the re-entry ban (penangkalan) list, absence of valid travel documents, use of false documents, absence of a valid visa, provision of false information to obtain a visa, and involvement in criminal conduct or activities threatening public security and order.
Given the potential risk of deportation, certain legal implications should be carefully considered in the context of corporate management. If a foreign director is subjected to deportation, such circumstances may, in practice, hinder the performance of the director’s management and representative functions on behalf of the company. This gives rise to the question of whether the deportation of a foreign director of a PT PMA due to an immigration violation would legally prevent the company from continuing its business activities.
In addressing this question, we assume that the foreign director in question serves solely as a member of the management and does not hold any shares in the company. It is also important to understand that a PT PMA is a separate legal entity, distinct from its directors and the other corporate organs. As such, the legal existence and continuity of the company are independent of the personal status of its management.
This is reinforced by the realistic theory (inherence theory) articulated by M. Yahya Harahap (Hukum Perseroan Terbatas, pp. 54–55), which holds that a company’s activities and conduct receive separate legal recognition from those of the individuals involved in it, reflecting the law’s acknowledgment of the distinction and separation between the personality of the company and the personalities of the individuals who are bound within it.
Accordingly, the deportation of a director from a PT PMA does not automatically affect the legal status of the company as a legal entity. The company and its directors are two legally distinct entities that do not mutually affect one another’s legal standing.
Practical Implications and Legal Solutions
While the deportation of a director does not affect the PT PMA’s status as a legal entity, the absence of the sole registered director who was performing management functions may give rise to practical difficulties in the company’s day-to-day operations.
To address the vacancy in the directorship and ensure continuity of business operations, the Board of Commissioners may temporarily assume management functions in certain circumstances for a specified period (Article 118(1) of the Company Law). Such circumstances include situations where the Board of Directors is incapacitated or temporarily removed from office, as further determined by the company’s articles of association (Article 107 letter c of the Company Law). Following this interim measure, a new director should be appointed through a General Meeting of Shareholders (RUPS) to fill the vacancy on a permanent basis.
The Importance of Foreign Workers Compliance in Indonesia
While the deportation of a director does not directly affect the existence of the PT PMA as a legal entity, compliance with the applicable regulations governing the use of foreign workers (tenaga kerja asing or “TKA”) remains a critically important obligation for the company.
Violations of work permit or stay permit requirements applicable to foreign workers may result in administrative immigration measures, including deportation. Such an outcome does not only affect the individual concerned, it may also impact the company’s reputation and operational stability, particularly where the foreign worker occupies a strategic management position such as, in this case, the sole registered director.
Every company that employs foreign workers must therefore ensure that the entire process of utilising TKA has been carried out in an orderly manner and in full compliance with the applicable laws and regulations in Indonesia, covering both manpower licensing and immigration requirements.
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Read our article regarding Deportation of Foreign Investors During PT PMA Establishment here https://murzallawfirm.com/deportation-of-foreign-investors-during-pt-pma-establishment-legal-grounds-and-available-remedies/
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