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The Indonesian government has recently introduced a new investment policy following the issuance of Government Regulation No. 28 of 2025 concerning the Implementation of Risk-Based Business Licensing. The technical provisions are further elaborated under Regulation of the Minister of Investment and Downstream Industry/Chairman of the Indonesia Investment Coordinating Board No. 5 of 2025 concerning Guidelines and Procedures for the Implementation of Risk-Based Business Licensing and Investment Facilities through the Electronically Integrated Business Licensing System (Online Single Submission) (“BKPM Regulation No. 5/2025”), which has been in effect since 2 October 2025. A. Key Changes to Paid-Up Capital Requirements Through the regulation, the Indonesian government introduces significant adjustments to the requirements for foreign investment companies (“PT PMA”), particularly concerning the minimum paid-up and issued capital. Previously, PT PMA were required to have a minimum paid-up capital and issued capital of IDR10 billion (approximately USD600,000); however, under BKPM Regulation No. 5/2025,  this minimum threshold has been reduced to IDR2.5 billion (approximately USD150,000). Nevertheless, it is essential to note that the requirement for a total investment value exceeding IDR10 billion—excluding land and building value—remains applicable. Furthermore, as a form of ensuring investor commitment to their investment activities, the paid-up and issued capital may not be withdrawn from the company’s account for a minimum period of 12 (twelve) months from the date of payment, except for asset acquisition, building construction, and/or company operations. Any investors fail to comply with this commitment may result in administrative sanctions, which may include: (i) written warnings; (ii) temporary suspension of business activities; (iii) administrative fines; (iv) coercive enforcement measures; (v) revocation of licenses, certifications, or approvals; and/or (vi) revocation of basic requirements, business licensing, and/or business licensing to support business activity (Perizinan Berusaha untuk Menunjang Kegiatan Usaha or PB UMKU). Additionally, BKPM Regulation No. 5/2025 also introduces specific provisions governing certain business sectors. One notable example is the business activity of developing and operating public electric vehicle charging stations, which was not specifically regulated previously. Under the new regulation, however, it is expressly provided that the minimum investment value for such business activity shall exceed IDR 10 billion (excluding land and building value) within one province. b. Licensing Simplifications BKPM Regulation No. 5/2025 outlines several simplifications to the business licensing process, as summarized in the table below. Simplification of Procedures for Obtaining Business Licenses Without the Requirement to Issue Basic Requirements If a business activity is carried out within a building or a commercial/service area that is jointly used, and the manager or operator of such building or area has already obtained the following permits: ●        Conformity of Spatial Utilization Activities (Kesesuaian Kegiatan Pemanfaatan Ruang or “KKPR”); ●        Environmental Approval (Persetujuan Lingkungan or “PL”); ●        Building Approval (Persetujuan Bangunan Gedung or “PBG”); and ●        Certificate of Feasibility (Sertifikat Laik Fungsi or “SLF”), The business actor may utilize the KKPR, PL, PBG, and SLF issued under the name of the manager or operator of the building/area to apply for a Business Identification Number (Nomor Induk Berusaha or “NIB”) and a Business License (Perizinan Berusaha). Simplification of Business Licensing Without Spatial Utilization Conformity For the following business activities: a.       business activities involving the addition of new business lines that require additional facilities and infrastructure, such as buildings and supporting facilities, for an existing business activity; b.      business activities involving the increase of production capacity for an existing business activity; or c.       business activities that are integrated with an existing business activity, A new KKPR is not required, provided that a KKPR and a land title have already been issued, the business activities are conducted within the same contiguous area, and are carried out by the same business actor. Simplification of Basic Requirements for Supporting Business Activities Supporting business activities may now serve as a source of income or generate profit for the business actor, whereas previously they were categorized as non-revenue-generating activities.   Such supporting business activities must be included in the company’s deed of establishment or amendment thereof, and approvals must be obtained from the relevant institution.   In addition, supporting business activities located within the same site as the main business activity may utilize the KKPR and PL already obtained for the main business activity, provided that such supporting activities are covered within the existing environmental documents. C. Extension of Investment Reporting Deadline PT PMA is required to submit its Investment Activity Reports (Laporan Kegiatan Penanaman Modal or “LKPM”) for each business activity and location after obtaining its NIB. Under the new provisions of Article 286 paragraph (5) of BKPM Regulation No. 5/2025, the reporting schedule for LKPM submission has been adjusted as follows: Quarter I: no later than 15 April of the current year; Quarter II: no later than 15 July of the current year; Quarter III: no later than 15 October of the current year; and Quarter IV: no later than 15 January of the following year. It is interesting to see whether the new minimum paid-up capital and issued capital requirements would result in foreign investors withdrawing their idle investment previously put in the PT PMA due to the old regulation. Nevertheless, the regulation marks a new chapter in Indonesia’s investment landscape, reflecting the government’s strategic move toward stronger control and oversight of investment activities. While the regulatory requirements for foreign investors have become more detailed, the government’s involvement has also grown more proactive—not only in attracting greater investment inflows, but also in ensuring smoother post-investment compliance and governance.   For further information, please contact the authors:   Ferry F. Rajagukguk Partner [email protected]   Sagung Dewi Tarastya Y. P. Associate [email protected] www.fknk.co.id

Indonesia’s insolvency landscape is mainly governed by Law No. 37 of 2004 on Bankruptcy and Suspension of Debt Payment Obligations and supplemented by Supreme Court procedural guidelines that provide a structured framework for courts and practitioners. Despite being relatively young compared to regimes in mature jurisdictions, Indonesia’s restructuring system has evolved rapidly. Successive court practice, judicial guidance, and selective reforms have fostered a more predictable and standardized regime for managing financial distress. For foreign lenders and debtors, Indonesia’s system can initially appear complex, particularly given that the country does not recognise foreign insolvency judgments. Yet, the experience of recent cross-border restructurings demonstrates that Indonesian courts are increasingly cooperative and open to international engagement. Foreign creditors hold equal legal standing with domestic creditors, and with the proper counsel, can effectively leverage Suspension of Debt Payment Obligations (Penundaan Kewajiban Pembayaran Utang or “PKPU”) to restructure distressed exposures or preserve value. As practitioners deeply involved in landmark restructurings such as Garuda Indonesia, Pan Brothers, and other multi-jurisdictional cases, we have witnessed firsthand how Indonesia’s regime can serve as a credible and sophisticated platform for both domestic and foreign stakeholders. This article highlights the key legal architecture, procedural features, and strategic insights that enable creditors and debtors to navigate Indonesian restructuring proceedings: Legal Framework and Creditor-Oriented Design Under Indonesian law, creditors are categorised as preferred, secured, or unsecured, under the overarching principle of par condicio creditorum (equal treatment). Foreign creditors stand on an equal footing with domestic creditors, a reflection of Indonesia’s non-discriminatory insolvency framework provided in Law No. 37/2004. Both bankruptcy and PKPU can be initiated by either the debtor or a creditor. To file a petition, the applicant must show the existence of at least two creditors with one due and unpaid debt, regardless of the debtor’s overall solvency. There is no statutory minimum debt threshold and no formal insolvency test. Consequently, even small or disputed debts may expose a debtor to proceedings, a feature that underscores the regime’s creditor-protective orientation. While this low threshold underscores the regime’s creditor-protective orientation, it also demands careful case strategy to prevent tactical filings. PKPU: Indonesia’s Debtor-in-Possession Restructuring Tool The PKPU mechanism has become the preferred route for resolving corporate distress. It allows a debtor to propose a court-supervised composition plan (comparable to a U.S. Chapter 11 reorganisation) while remaining in control of its business operations (a debtor-in-possession model aimed at preserving company value). Procedurally, the court must render a decision on a PKPU petition within 20 days (for a creditor-initiated petition), or 3 days (for a debtor-initiated petition). If granted, the court imposes an initial temporary PKPU period of 45 days and appoints court-supervised administrators. Where additional time is required, the temporary PKPU can be extended, up to a statutory maximum of 270 days, subject to creditor consent. These fixed timeline introduces predictability and procedural discipline. During the temporary PKPU, creditors are invited to file and verify claims, supported by relevant documents such as contracts and/or invoices, sworn translated into Bahasa Indonesia (if such documents are in a foreign language). The administrators classify claims as preferred, secured, or unsecured, based on the supporting evidence submitted. Under Indonesian law, the composition plan must be submitted by the debtor to the court-appointed administrators, who will provide it to the creditors for their review and approval. A composition plan is an essential component of the PKPU process, as it enables the debtor to avoid bankruptcy through a negotiated restructuring. The plan typically includes debt rescheduling, interest rate reductions, and debt-to-equity conversions aimed at restoring the debtor’s financial stability. To be approved, the composition plan must secure a dual-majority vote of the creditors present before the court, as follows: A simple majority in number and at least two-thirds in value of the unsecured creditors; and A simple majority in number and at least two-thirds in value of the secured creditors. Once these thresholds are met and the court grants homologation (ratification), the plan becomes final and binding on all creditors, providing a structured path for debt resolution while preserving business continuity. A breach of a court-homologated composition plan may expose the debtor to bankruptcy proceedings upon a subsequent petition, underscoring the binding and enforceable nature of a court-approved restructuring. PKPU statistics from the five commercial courts highlight its popularity. In 2024, there were 538 PKPU filings compared with 92 bankruptcy petitions, a pattern consistent with previous years and reflecting creditors’ growing preference for restructuring over winding up as a means of resolving financial distress. Cross-Border Considerations and Judicial Developments Indonesia adheres to the territoriality principle, meaning that foreign insolvency judgments are not recognised or enforceable in Indonesia. Hence, creditors who obtain judgments abroad must re-litigate their claims in Indonesia through local proceedings. In practice, several cases have demonstrated increasing openness toward cross-border cooperation frameworks. One notable example is the Singapore International Commercial Court (SICC) recognition of Garuda Indonesia’s PKPU composition plan, which the Indonesian Commercial Court had ratified. In doing so, the SICC confirmed that foreign insolvency orders could be recognised under Singapore’s adoption of the UNCITRAL Model Law on Cross-Border Insolvency. The Garuda case signifies a growing alignment between Indonesian and Singaporean courts, even though Indonesia has not yet formally adopted the Model Law. This bilateral jurisprudence enhances predictability and investor confidence in regional restructurings. Practical Guidance for Creditors and Debtors When Filing in Indonesia: Establish jurisdiction and substantiate the debt: Before initiating the proceedings, a creditor must ensure that the debtor maintains a permanent establishment and domicile within Indonesian territory, as this determines the jurisdiction of the Indonesian Commercial Court. Creditors must present clear, verifiable evidence of at least one due and unpaid obligation, supported by authentic documentation (e.g., contracts and/or invoices and/or acknowledgments of debt, sworn translated into Bahasa Indonesia - if such documents are in a foreign language). Proper documentation and legal argumentation are critical, as procedural defects or ambiguous evidence may lead to the rejection of the petition. Engage qualified local counsel: Representation by an Indonesian-licensed advocate is mandatory. Given the highly procedural nature of PKPU and bankruptcy cases, engaging experienced local counsel is essential to navigate effectively legal ground, claim verification, classification disputes, and court proceeding interactions. A competent legal counsel can also provide strategic advice on the timing of filings and liaise with the court-appointed administrators or receiver/curator. For foreign stakeholders, success in Indonesian insolvency/restructuring proceedings requires more than procedural compliance. It demands strategic coordination, thorough documentation, and cross-border foresight. By combining local legal expertise with proactive engagement, foreign stakeholders can navigate the Bankruptcy/PKPU process effectively while maximising recovery and maintaining commercial relationships in Indonesia’s evolving insolvency landscape. Develop a cross-border strategy: Where the debtor’s operations or assets span multiple jurisdictions, creditors should adopt a comprehensive cross-border enforcement strategy. This may include filing parallel or coordinated proceedings in other jurisdictions to preserve claims and maximise asset recovery. The Garuda Indonesia case illustrates how foreign recognition, specifically by the SICC under the UNCITRAL Model Law, can extend the protection of a PKPU restructuring and enhance cross-border enforceability. Early alignment between Indonesian and foreign counsel ensures procedural consistency and can mitigate jurisdictional conflicts. When Evaluating a Composition Plan:   Assess the commercial and financial terms: Conduct a comprehensive analysis of the proposed restructuring plan, focusing on the economic viability and long-term sustainability of the debtor’s repayment structure. Typical measures include maturity extensions, interest rate reductions, principal haircuts, or debt-to-equity conversions designed to stabilise cash flow and restore solvency. Creditors should also evaluate the impact of these measures on both secured and unsecured claims, ensuring that recoveries remain proportionate and commercially acceptable. Develop a coordinated voting and negotiation strategy: As discussed above, approval of a composition plan requires a dual-majority vote. To optimise the outcomes, creditors should strategically coordinate their voting positions, form committees if necessary, and engage in collective negotiations to secure improved recovery terms or stronger covenants. Early alignment among creditor classes can significantly influence the restructuring dynamics and ensure a balanced plan that preserves value for all parties. Ensure post-homologation monitoring and compliance: Once homologated (ratified) by the court, the composition plan becomes final, binding, and enforceable on all creditors. However, non-performance or material breach of the plan may trigger a conversion into bankruptcy proceedings. Accordingly, creditors should maintain continuous monitoring of the debtor’s compliance through mechanisms such as periodic financial reporting, independent audits, or management oversight. Proactive surveillance allows early detection of default risks and facilitates timely enforcement action, ensuring that the integrity of the court-approved restructuring is preserved. Assessing the Regime’s Effectiveness Despite criticism over inconsistent jurisprudence and the absence of an insolvency test, Indonesia’s PKPU system has proven commercially effective. The process’s predictable timetable, creditor-protective orientation, debtor-in-possession structure, and judicial supervision have made it the instrument of choice for preserving value and facilitating consensual restructuring outcomes. Statistical trends affirm that PKPU petitions consistently outnumber bankruptcies, underscoring creditor confidence in restructuring as a means of achieving repayment while maintaining business continuity. Indonesia’s restructuring and insolvency framework has matured into a viable, credible, and internationally relevant mechanism for managing financial distress. While the regime still runs within a territorial model, its judicial adaptability, procedural integrity, and growing cross-border recognition reflect a legal system in evolution. For debtors and creditors alike, Indonesia now presents not an opaque risk, but an emerging opportunity. It serves as a strategic platform where effective advocacy, coordinated strategy, and cross-border alignment enable stakeholders to achieve fair and sustainable restructuring outcomes.   For further information, please contact the author: Martin Patrick Nagel (Partner of FKNK Law Firm) [email protected] www.fknk.co.id