Foreign Owned Company VS Representative Office

Commonly misinterpreted and overlapping their own details, Foreign-Owned Company and Representative Office might confuse the business owners to start their activities in Indonesia. This might help you give better insights on what to expect when you pick one of the available options for setting up a new business in the country.

General Overview : Foreign Owned Company

The recognized legal entities in Indonesia are provided in three (three) forms, according to Indonesian law: Limited Liability Company (Perseroan Terbatas / PT), Cooperative / Union (Koperasi), and Foundation (Yayasan). Though, each entity has its own types and variations; the most well-known and variative is the Limited Liability Company (Perseroan Terbatas / PT).  Known internationally as one of the most famous business/legal entities, the Limited Liability Company in Indonesia is under the regulated Company Law of Law No. 40 years 2007. Several of its types are : Local Company (Perseroan Terbatas Lokal / PT Lokal), Foreign-Owned Company (Perseroan Penanaman Modal Asing / PT PMA), and Publicly Listed Company (Perseroan Terbatas Terbuka / PT Tbk.). Surely, the difference between Local and Foreign-Owned Companies is on the ownership of shares.

      However, due to the regulations and various investment laws, setting up a Foreign-Owned Company in Indonesia might be a hassle to those new to the Indonesian market. This is where Representative Office comes to the rescue. Serving the role of its own name, a Representative Office is an office of representative presence from the foreign principal companies overseas.

General Overview : Representative Office

Having a different form than the Limited Liability Company, a Representative Office (Kantor Perwakilan Perusahaan Asing / KPPA) is more suitable for the initial step of establishing your business. If you have a fully established business overseas, with a status similar to the definitions of Indonesia’s Company, then your business can enter the Indonesian market in the form of a Representative Office. While Company is a more free to roam legal entity and Representative Office is limited to market research and support activities to the foreign principal companies overseas.

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Roles : What are the differences?

Limited Liability Company is allowed to perform its intended business activities, with having (at least) one Director, one Commissioner, and two Shareholders upon establishment. The requirements may vary depending on the business activities. Whereas Representative Office is only required to have one Chief of Representative Office (whose role does not overlap with the Directorial-level position in the principal foreign company overseas). The Representative Office, unlike a Limited Liability Company, is unable to perform any profit-related activities. Its ability is limited to only supervise, research, coordinate and support the principal foreign company.

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