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Indonesia: New Company Law

(Nov. 2, 2007) According to the INTERNATIONAL FINANCIAL LAW REVIEW, in August 2007 a new Company Law (Law 40/2007), on limited liability companies, was signed into law in Indonesia. The Law prescribes that the takeover or acquisition of a controlling interest in a privately-held Indonesian company must now be approved by the shareholders and published in an Indonesian newspaper. Objections that creditors may have to the acquisition must also be settled, but the Law does not address how such objections are to be handled. The new Law, like the former law, contains no definition of acquisition of control. If the company itself is involved in the takeover, a different regime applies to the acquisition. Implementing regulations to be issued in accordance with Law 40/2007 may provide more details on such takeovers and on identity disclosure requirements for the purchaser and seller, among other matters. (Theodoor Bakker & Emir Nurmansyah, Indonesia: M&A, INTERNATIONAL FINANCIAL LAW REVIEW (Oct. 2007), available at http://www.iflr.com/?Page=10&PUBID=33&ISS=24205&SID=695005&TYPE=20.)

The World Bank is reported to be of the view that Law 40/2007 should be amended, especially in regard to minimum capital requirements, which is one indicator of ease of doing business in a country. Based on the IFC's DOING BUSINESS 2008 REPORT, Indonesia ranks 123rd in ease of doing business, out of 178 countries surveyed. According to Hans Shrader, General Manager of advisory services of the International Finance Corporation (IFC), the World Bank's private investment organization, "I think amending the minimum capital requirement from the current position to zero level is the step that must be taken." However, because the Law stipulates a minimum core capital requirement of IDR50 million (about US$5,537), it would be difficult to revise the implementing regulations, Shrader stated. (WB Suggests Indonesia Amend Limited Liability Company Law, ANTARA [Indonesian National News Agency], Sept. 26, 2007, available at http://www.antara.co.id/en/arc/2007/9/26/wb-suggests-indonesia-amend-limited-
liability-company-law/
.)