A regional holding company often serves as the ownership, financing and intellectual property management hub for business activities across several countries. Within this structure, an Indonesian foreign investment limited liability company (PT PMA) may receive loans, use a brand or obtain operational support from other group companies.
However, an ownership chart does not establish who is authorised to sign a transaction, which approvals are required or whether the activities undertaken have the appropriate licences. Common share ownership does not remove the need to examine each intercompany relationship separately.
This article discusses three layers that need to be aligned: corporate governance, transaction substance, and licensing and implementation evidence. It is not intended as a tax-efficiency recommendation or a guarantee of asset protection for any particular structure.
1. Ownership, management and regional holding functions
When designing the relationship between a regional holding company and a PT PMA, the initial question is not simply where the parent company is incorporated. The functions of each company need to be mapped.
Does the parent only hold shares? Does it also provide financing, supply services or control rights to use a brand? Does the PT PMA serve customers directly, or grant rights to other operators?
This mapping helps identify the legal relationships actually required. For example, a payment should not be labelled a management fee merely because that term is commonly used within the group. The services, recipient, benefits and basis for charging need to be identified.
Similarly, group interests need to be translated into decisions that can be justified at the PT PMA level. Instructions or approvals from a regional holding company do not, by themselves, replace the authority and internal procedures of the Indonesian company.
Related reading: Shareholders’ Agreements and PT PMA articles of association: lawful governance structures (Indonesian).
2. Transaction approval is not the same as authority to represent a company
The Indonesian Company Law, read together with applicable amendments, places company management and representation with the Board of Directors. Article 98 remains subject to statutory provisions, the articles of association and resolutions of the General Meeting of Shareholders (GMS).
Article 99 provides for substitute representation where a conflict of interest exists: another director without a conflict; the Board of Commissioners without a conflict if all directors are conflicted; or another person appointed by the GMS if all directors and commissioners are conflicted. Holding multiple positions within a group is a circumstance to examine, not an automatic finding of a conflict.
Related reading: Liability of Directors and Commissioners in Indonesia, including conflicts of interest.
A governance matrix may therefore be structured as follows:
| Transaction | Authority to represent the company | Approvals to examine |
|---|---|---|
| Loan from the parent | Board of Directors; examine Article 99 | Articles of association, authority limitations and internal resolutions |
| Services or licences from an affiliate | Board of Directors; examine Article 99 | Articles of association and applicable internal approvals |
| Capital increase | Representation and implementation of the resolution are examined separately | GMS under Article 41; follow-up requirements depend on the form of the change |
| Assets provided as security | An authorised representative without a conflict | Article 102: GMS approval for more than 50% of net assets in one or more transactions, subject to the exception for business activities under the articles of association |
This table is not an approval checklist that applies automatically to every company. Article 117 allows the articles of association to require approval or assistance from the Board of Commissioners. Articles 102 and 117 also protect other parties acting in good faith in the circumstances they regulate; missing approval does not always make a transaction non-binding.
In our view, the representative’s identity, basis of authority, potential conflicts and approvals should be recorded as four separate checks. A transaction may have received internal approval while still requiring the appropriate representative to be identified.
3. Loans, services and licences within a regional holding group
For transactions affected by special relationships, Minister of Finance Regulation No. 172 of 2023 regulates the arm’s length principle. Article 13 requires preliminary steps for certain transactions before applying that principle.
Consequently, contracts and invoices need to be considered alongside the facts of implementation. An initial examination framework is set out below:
| Relationship | Substance to examine | Examples of implementation evidence |
|---|---|---|
| Intercompany loan | Funding needs, the nature of the loan, enforceable repayment rights, and the ability to obtain and repay the loan | Loan documents, fund flows, use of funds and repayments |
| Intercompany services | Actual services, needs and economic benefits; not shareholder activities, duplication or incidental benefits | Scope of work, service deliverables, correspondence and charging basis |
| Licence or use of intellectual property | Existence and use of rights, ownership, development and exploitation functions, and economic benefits | Rights documentation, licences, evidence of use and records of the parties’ contributions |
Article 14 regulates the consequences where the transaction cannot be substantiated through those preliminary steps. A written agreement should therefore not be treated as the sole evidence that all arm’s length requirements have been met.
Pricing, transfer pricing documentation, tax withholding and the application of double taxation agreements require separate examination. Not every company automatically has the same documentation obligations. Legal examination needs to be coordinated with tax advisers based on the relevant facts and rules.
4. Licensing follows actual activities, not contract labels
Government Regulation No. 28 of 2025 is the risk-based business licensing framework replacing Government Regulation No. 5 of 2021. OSS procedures and investment facilities also need to be read together with Minister of Investment and Downstreaming/Head of BKPM Regulation No. 5 of 2025.
A Business Identification Number (NIB) cannot be treated as evidence that all requirements for every activity and location have been met. Identification of the Indonesian Standard Industrial Classification (KBLI), risk level, basic requirements, Business Licensing and relevant Business Licensing to Support Business Activities (PB UMKU) must follow the actual business model.
As a hypothetical example, a group establishes a PT PMA to operate a learning centre. The regional holding company supplies funding and brand access. The PT PMA then leases premises and employs teachers.
In this example, lawful incorporation alone is insufficient to conclude that the learning centre is ready to enrol students, teach and collect fees. The type of education services, location, building use and employment arrangements need to be examined against the facts of the activities.
| Layer | Examination questions | Evidence or follow-up |
|---|---|---|
| Company | Do the company structure and corporate organs conform to the applicable documents? | Corporate documents and internal resolutions |
| Activities and location | Do the KBLI classifications and licences cover the actual services and operating premises? | NIB, relevant licences or certificates, and premises documents |
| Intercompany relationships | What is the basis for financing, services and brand use? | Agreements, authority, approvals and implementation evidence |
| Operations | Have obligations before and during operations been met? | Employment documents, records and a compliance calendar |
If the brand arrangements and business model constitute a franchise, examination does not stop at a trademark licence. Government Regulation No. 35 of 2024, particularly Articles 12 to 14, regulates the Franchise Registration Certificate (STPW) for the specified parties: franchisors before entering into franchise agreements and franchisees before commencing business activities. This examination needs to take place from the initial relationship, not only when network expansion begins.
5. Regional holding implementation and documentation
In our view, an effective matrix need not be complicated. For each transaction or activity, record the responsible party, basis of authority, approvals, licensing requirements, completion evidence and timing. Distinguish work that may proceed in parallel from requirements that must be completed before signing, disbursement or operations.
For agreements between a foreign regional holding company and a PT PMA, language also needs attention. Article 26 of Presidential Regulation No. 63 of 2019 regulates the use of Indonesian for agreements involving Indonesian private institutions. Where a foreign party is involved, the agreement is also written in that party’s national language and/or English; the language of interpretation in the event of differences may be agreed. This provision should not be reduced to a conclusion that every English-language contract is automatically void.
Documentation needs to be maintained after a transaction is implemented. Payment schedules, service deliverables, use of rights, corporate changes and licensing compliance are distinct elements of control. Signing an agreement is not the end of compliance work.
Conclusion
A regional holding structure should be examined through the relationships actually implemented, not merely its ownership chart. At the PT PMA level, three questions need answers: who has authority to act, whether the transaction has adequate substance and documentation, and whether actual activities satisfy the applicable requirements.
An authority matrix and a licensing matrix serve different functions but need to be used together. Both help companies sequence decisions, implementation and evidence maintenance without treating parent approval, written contracts or an NIB as substitutes for a complete legal examination.
Prasetyo Law Office is a law firm based in Jakarta, Indonesia, providing integrated legal services across a range of fields, from commercial transactions to cross-sector litigation. Drawing on years of experience, we understand not only the regulatory framework but also industry dynamics and the nature of our clients’ businesses. We provide comprehensive legal advice and strategic solutions to help clients minimise legal risks across their business challenges.
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Primary sources:
- Law No. 40 of 2007 on Limited Liability Companies, particularly Articles 41, 92, 98, 99, 102 and 117, read together with Law No. 6 of 2023.
- Government Regulation No. 28 of 2025 on the Implementation of Risk-Based Business Licensing.
- Minister of Investment and Downstreaming/Head of the Investment Coordinating Board Regulation No. 5 of 2025 on Guidelines and Procedures for the Implementation of Risk-Based Business Licensing and Investment Facilities through the Electronically Integrated Business Licensing System (Online Single Submission).
- Minister of Finance Regulation No. 172 of 2023 on the Application of the Arm’s Length Principle to Transactions Affected by Special Relationships, particularly Articles 13 to 16.
- Government Regulation No. 35 of 2024 on Franchising, particularly Articles 12 to 14.
- Presidential Regulation No. 63 of 2019 on the Use of Indonesian, particularly Article 26.
Last verified: 17 September 2026.
Disclaimer: This publication is provided for general information and educational purposes based on regulations and materials available as of 17 September 2026. It does not constitute legal advice or a formal legal opinion and must not be used as the sole basis for a particular transaction, corporate action or dispute. Indonesian regulations, judicial interpretations and corporate practices may change. Advice tailored to the facts and verification of current requirements should be obtained before taking action. Receipt or use of this publication does not create an advocate-client relationship.
