By Adhit Prasetyo, S.H., CLA
Prasetyo Law Office
Bahasa Indonesia: Baca artikel ini dalam Bahasa Indonesia
Establishing an investment in Indonesia generally follows a relatively structured process. A PT PMA exit strategy requires a different set of decisions because each exit route produces distinct corporate, tax, employment, and licensing consequences.
A foreign investor in a PT PMA may generally consider four principal routes:
- selling its shares;
- withdrawing part of its investment through a capital reduction;
- receiving dividends without relinquishing ownership; or
- dissolving and liquidating the company.
These four routes are not fully interchangeable. A share sale transfers ownership. A capital reduction changes the capital structure. A dividend distributes profits without changing ownership. Liquidation terminates the company’s business and legal-entity status after the entire process has been completed.
A planned exit preserves options. An exit designed too late may reduce the options available.
Route 1: Share Sale
A share sale is commonly used when a foreign investor wishes to transfer all or part of its ownership without dissolving the PT PMA.
Requirements for a Transfer of Rights over Shares
Article 57 of Law Number 40 of 2007 concerning Limited Liability Companies, or the Company Law, permits the articles of association to require that a transfer of rights over shares:
- must first be offered to shareholders holding a particular class of shares or to other shareholders;
- requires approval from a company organ; and/or
- requires approval from the competent authority in accordance with applicable laws and regulations.
A pre-emptive offer right does not arise automatically in every share sale. Its existence must be checked against the articles of association, the shareholders’ agreement, and the applicable sectoral regulations.
A shareholders’ agreement may also regulate a right of first refusal, right of first offer, tag-along, drag-along, lock-up, and other exit mechanisms. Those contractual provisions must, however, be aligned with the articles of association and the corporate procedures required by the Company Law.
Transfer Deed and Registration
Article 56 paragraph (1) of the Company Law provides that a transfer of rights over shares must be made by a deed of transfer. The deed or a copy of it must be delivered to the company in writing.
The Board of Directors must then record the transfer in the register of shareholders or special register and notify the change in shareholder composition to the Minister of Law no later than 30 days after the registration, as stipulated in Article 56 paragraphs (2) and (3) of the Company Law.
If the notification has not been made, Article 56 paragraph (4) of the Company Law requires the Minister to reject an application for approval or notification submitted on the basis of the shareholder composition that has not been notified.
This provision does not freeze all company activities. Nevertheless, inconsistent shareholder data may obstruct subsequent amendments to the articles of association, changes to the Board of Directors or Board of Commissioners, and other corporate-administration processes.
Foreign Ownership Limits
A share sale to a foreign investor must be reviewed against the investment business-field requirements under Presidential Regulation Number 10 of 2021, as amended by Presidential Regulation Number 49 of 2021.
The post-transaction ownership composition must not conflict with foreign ownership limits, licensing requirements, or sectoral provisions applicable to the company’s business activities.
If all foreign ownership is transferred to domestic shareholders, the change in investment status and the corresponding licensing-data adjustments must be analysed and processed according to the company’s circumstances.
Route 2: Capital Reduction
A capital reduction may be used to return part of an investment to shareholders or to adjust the company’s capital structure.
A capital reduction is not merely a payment to shareholders. It changes the company’s capital structure and is subject to a resolution of the General Meeting of Shareholders, or GMS, creditor protection, an amendment to the articles of association, and approval from the Minister of Law.
GMS Resolution
Article 44 paragraph (1) of the Company Law provides that a capital reduction must be carried out pursuant to a GMS resolution.
The resolution is subject to the quorum requirements under Article 89 of the Company Law. The GMS must be attended by shareholders representing at least two-thirds of all shares carrying voting rights, and the resolution must be approved by at least two-thirds of the votes cast, unless the articles of association prescribe a higher requirement.
Creditor Protection
The Board of Directors must announce the capital-reduction resolution to all creditors in one or more newspapers no later than seven days after the GMS resolution, as stipulated in Article 44 paragraph (2) of the Company Law.
Under Article 45 paragraph (1) of the Company Law, a creditor may submit a written objection no later than 60 days after the announcement date. The company must respond no later than 30 days after receiving the objection.
If an objection is rejected or remains unresolved, the creditor may file a claim with the district court under Article 45 paragraph (3) of the Company Law.
Ministerial Approval
Under Article 46 of the Company Law, the Minister may approve a capital reduction only if:
- no written objection has been submitted by a creditor;
- the creditor’s objection has been resolved; or
- the creditor’s claim has been rejected by a final and binding court decision.
Capital-Reduction Mechanisms
Article 47 of the Company Law provides that a reduction of issued and paid-up capital may be implemented by withdrawing shares or reducing their nominal value.
Implementation must comply with the GMS resolution, the amendment to the articles of association, the applicable share classifications, and the principle of equal treatment for shares within the same class.
For a PT PMA, the capital reduction must also be reviewed against the investment plan, business licences, foreign ownership composition, OSS data, investment activity reporting, and beneficial ownership reporting.
Route 3: Dividend Distribution
A dividend is not an exit route in the sense of relinquishing shares. It is a mechanism for distributing profits to shareholders without changing the ownership structure.
Article 71 paragraph (1) of the Company Law provides that the use of net profits, including allocations to reserves, must be determined by the GMS.
All net profits after the mandatory reserve allocation are distributed as dividends unless the GMS determines otherwise. Dividends may be distributed only if the company has a positive retained earnings balance, as provided in Article 71 paragraphs (2) and (3) of the Company Law.
Interim Dividends
Interim dividends are governed by Article 72 of the Company Law. A distribution may be made only if permitted by the articles of association, the company’s net assets will not become less than its issued and paid-up capital plus the mandatory reserve, and the distribution will not disrupt the fulfilment of obligations to creditors or the company’s activities.
An interim dividend distribution is determined by a resolution of the Board of Directors after obtaining approval from the Board of Commissioners.
If the company subsequently records a loss at the end of the financial year, shareholders must return the interim dividends distributed to them. If they are not returned, the Board of Directors and Board of Commissioners are jointly and severally liable for the company’s loss under Article 72 paragraphs (5) and (6) of the Company Law.
Route 4: Dissolution and Liquidation
Dissolution and liquidation are used when the company’s activities and legal-entity status are to be terminated.
Under Article 143 paragraph (1) of the Company Law, dissolution does not immediately terminate the company’s legal-entity status. The company remains a legal entity until the liquidation has been completed and the liquidator’s accountability has been accepted by the GMS or the court.
Dissolution Resolution
One basis for dissolution is a GMS resolution under Article 142 paragraph (1) of the Company Law.
A GMS resolving on dissolution is subject to Article 89 of the Company Law. It must be attended by shareholders representing at least three-quarters of all shares carrying voting rights, and the resolution must be approved by at least three-quarters of the votes cast, unless the articles of association prescribe a higher requirement.
Appointment of a Liquidator
Article 142 paragraph (2) of the Company Law requires a dissolution to be followed by liquidation conducted by a liquidator or receiver.
If the GMS resolves to dissolve the company but does not appoint a liquidator, the Board of Directors acts as the liquidator under Article 142 paragraph (3) of the Company Law.
Announcements and Creditor Claims
Article 147 of the Company Law requires the liquidator to announce the dissolution to creditors through a newspaper and the State Gazette of the Republic of Indonesia, and to notify the Minister, no later than 30 days after the dissolution date.
Creditors have 60 days from the announcement date to submit their claims.
The liquidator must then inventory and collect the company’s assets, determine and settle its liabilities, prepare a plan for distributing the remaining assets, and distribute those assets to shareholders under Article 149 of the Company Law.
After the liquidator’s accountability has been accepted, the final liquidation results must be notified to the Minister and announced in accordance with Article 152 of the Company Law. The Minister then records the termination of the company’s legal-entity status and removes its name from the company register.
There is no single completion period applicable to every liquidation. Its duration depends on the assets, liabilities, creditor claims, employment matters, taxes, contracts, disputes, and licensing-administration processes involved.
Comparison of the Four Routes
| Aspect | Share sale | Capital reduction | Dividends | Liquidation |
|---|---|---|---|---|
| Primary result | Ownership is transferred | The capital structure is reduced | Profits are distributed | The company is terminated |
| Principal legal basis | Articles 56 to 59 of the Company Law | Articles 44 to 47 of the Company Law | Articles 70 to 72 of the Company Law | Articles 142 to 152 of the Company Law |
| GMS | Depends on the articles of association and transaction structure | Required | Required for final dividends | Required if dissolution is based on a GMS resolution |
| Creditors | No special Company Law procedure for an ordinary share sale | 60-day objection period | No special objection procedure | 60-day claim-submission period |
| Minister of Law | Notification of shareholder changes | Approval of the amendment to the articles of association | No special approval required for the dividend payment | Notification of the dissolution and final liquidation results |
| Company status | Continues | Continues | Continues | Terminates after liquidation is completed and the company is removed from the register |
| Implementation period | Depends on the transaction and approvals | Depends on creditor objections and approval | Depends on the resolution and financial position | Depends on the settlement of all obligations |
Tax Consequences
The tax consequences cannot be determined solely from the name of the exit route. The analysis must consider the recipient’s status, country of residence, acquisition cost, profit history, payment structure, and the applicable double taxation agreement, or tax treaty.
Share Sale
For a sale of shares in a non-listed PT PMA by a foreign taxpayer other than a permanent establishment, Article 238 of Minister of Finance Regulation Number 81 of 2024, as amended, imposes income tax at 20 percent of the deemed net income.
The deemed net income is set at 25 percent of the selling price, resulting in an effective final tax rate of 5 percent of the gross selling price.
Under Article 239 of Minister of Finance Regulation Number 81 of 2024, the tax is withheld by a buyer designated as a withholding agent. If the buyer is a foreign party, the Indonesian company whose shares are transferred acts as the collecting agent.
Article 240 requires evidence of tax payment before the company records the transfer of rights over the shares.
For shares traded on a stock exchange, Article 244 imposes final income tax at 0.1 percent of the gross transaction value. A founding shareholder may be subject to additional final income tax at 0.5 percent of the value of the founder shares under Article 246.
The application of a tax treaty must be assessed under the treaty between Indonesia and the seller’s country of residence. The OECD Model Tax Convention is only a reference and is not a source of law that applies directly in Indonesia.
The administrative requirements for claiming treaty benefits must be satisfied under Minister of Finance Regulation Number 112 of 2025, including the use of a valid DGT Form or Certificate of Domicile for a Foreign Taxpayer.
Capital Reduction
The tax treatment of a payment made through a capital reduction cannot be determined solely by comparing the payment amount with the nominal value of the shares.
The elucidation of Article 4 paragraph (1) letter g of the Income Tax Law treats certain payments to shareholders as dividends, including a repayment of capital where retained profits from previous years exist. The provision distinguishes payments arising from a lawfully implemented reduction of authorised capital.
The tax characterisation must be examined by reference to the corporate mechanism, source of funds, profit history, acquisition value of the shares, transaction documentation, and applicable tax treaty.
If the payment is classified as a dividend to a foreign shareholder, Article 26 of the Income Tax Law generally requires withholding tax at 20 percent of the gross amount, unless a tax treaty provides a lower rate and its requirements are satisfied.
Dividends
Dividends paid to a foreign taxpayer are generally subject to Article 26 income tax at 20 percent of the gross amount, unless an applicable tax treaty provides a lower rate.
The dividend exemption under the reinvestment provisions of the Income Tax Law and Articles 14 and 15 of Government Regulation Number 9 of 2021 applies to domestic taxpayers. It does not apply directly to foreign shareholders.
Liquidation
The elucidation of Article 4 paragraph (1) letter g of the Income Tax Law classifies liquidation proceeds exceeding paid-up capital as dividends.
If the payment is received by a foreign shareholder, Article 26 withholding and the relevant tax treaty must be considered.
Liquidation does not automatically extinguish tax obligations. The company must continue to settle tax payments, withholding, collection, and filing obligations until its activities have ceased.
Cancellation of the taxpayer identification number, or NPWP, is a separate process under Articles 46 to 49 of Minister of Finance Regulation Number 81 of 2024, as amended. The application must be accompanied by dissolution or liquidation documents and may be processed through a tax audit.
Neither the Company Law nor Minister of Law Regulation Number 49 of 2025 identifies a tax-clearance certificate as a separate requirement for terminating legal-entity status. Nevertheless, completion of the legal-entity administration does not extinguish any outstanding tax debt or obligation.
Employment and BPJS
A share sale, capital reduction, or dividend distribution does not by itself terminate an employment relationship.
Where liquidation is accompanied by a company closure, the termination of employment relationships must be handled separately from the corporate process.
Article 36 of Government Regulation Number 35 of 2021 recognises company closure as a ground for employment termination. The employees’ entitlements depend on the reason for the closure.
Under Article 37 of Government Regulation Number 35 of 2021, written notice of termination and its reasons must be properly delivered to the employee and/or labour union no later than 14 business days before the termination.
An employee who objects may submit the objection and its grounds no later than seven business days after receiving the notice. If bipartite negotiations do not result in an agreement, the dispute proceeds through the industrial-relations dispute mechanism under Article 39.
For a closure caused by losses, Article 44 paragraph (1) provides an entitlement equal to 0.5 times the severance pay, one time the long-service award, and compensation of rights. For a closure not caused by losses, Article 44 paragraph (2) provides one time the severance pay, one time the long-service award, and compensation of rights.
The company must also reconcile contributions and report changes to or termination of participation to BPJS. The Company Law does not make a BPJS clearance certificate a formal condition for terminating legal-entity status. Nevertheless, contribution obligations, reporting, and employee rights must still be resolved and documented.
Licensing and Beneficial Ownership Implications
Share Sale
Changes to shareholders must be aligned across the deed, register of shareholders, AHU system, OSS system, sectoral licences, and beneficial ownership data.
If the change results in a shift of control or investment status, its implications for foreign ownership and licensing must be assessed specifically.
Capital Reduction
A change in capital must be reflected in the articles of association, AHU data, OSS data, and the relevant investment and licensing documents.
The PT PMA must also ensure that its post-reduction structure continues to satisfy the investment and licensing requirements applicable to its business activities.
Dividends
A dividend payment does not change the company’s shareholders or capital. The GMS resolution, financial statements, tax withholding, and payment evidence must nevertheless be documented.
Liquidation
The company must resolve the status of its business activities, licences, investment reporting, contracts, employment matters, taxes, and other administrative data before closure is declared complete.
A share sale or capital reduction that changes the natural person who owns or controls the company also requires an update to the beneficial ownership data under Minister of Law Regulation Number 2 of 2025.
Beneficial ownership reporting does not replace the shareholder register. They serve different functions and must both remain consistent with the actual circumstances.
Conclusion
No single exit route is always the best option for every investor.
A share sale separates the investor from its ownership without terminating the company, but depends on a buyer, the required approvals, and the compliance of the post-transaction structure.
A capital reduction may return part of the investment, but requires creditor protection and Ministerial approval.
Dividends realise an investment return without changing ownership, but may be distributed only from profits and under financial conditions that comply with the Company Law.
Liquidation terminates the company only after its assets, creditors, employees, taxes, licences, and all other obligations have been resolved.
In practice, an exit may use more than one route. Dividends may be distributed before a share sale. A capital reduction may occur before liquidation. Each stage must nevertheless have a clear commercial purpose, consistent documentation, and a separate tax and regulatory analysis.
Prasetyo Law Office
Prasetyo Law Office is a law firm based in Jakarta, Indonesia, providing integrated legal services to clients across a range of matters, from commercial transactions to cross-sector litigation. Drawing on years of experience, we understand not only the regulatory framework but also the industry dynamics and business characteristics of our clients. We provide comprehensive legal advice and strategic solutions to help clients manage legal risks across their business challenges.
If you require further information regarding this issue, please contact us:
Prasetyo Law Office
Indonesia Stock Exchange Building, Tower 1 Level 3 Suite 304,
Sudirman Central Business District (SCBD),
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DKI Jakarta, 12190
Phone: +6221 5890 5002 (ext. 105)
E-mail: info@prasetyolawoffice.com
Main sources: Law Number 40 of 2007 concerning Limited Liability Companies, as amended; Law Number 7 of 1983 concerning Income Tax, as amended from time to time; the Law concerning General Provisions and Tax Procedures, as amended from time to time; Law Number 25 of 2007 concerning Investment, as amended; Presidential Regulation Number 10 of 2021, as amended by Presidential Regulation Number 49 of 2021; Government Regulation Number 35 of 2021; Government Regulation Number 9 of 2021; Minister of Finance Regulation Number 81 of 2024, as amended; Minister of Finance Regulation Number 112 of 2025; Minister of Law Regulation Number 49 of 2025; and Minister of Law Regulation Number 2 of 2025.
Disclaimer: This publication is provided for general informational and educational purposes based on the regulations and materials available as of 29 September 2026. It does not constitute legal advice or a formal legal opinion and must not be used as the sole basis for any particular filing, licensing matter, transaction, or dispute. Indonesian regulations, OSS system functions, and administrative practices may change. Advice tailored to the relevant 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.
