Saturday, February 4, 2023

How-to understand startup regulations in Indonesia

Reading Time: 3 minutes
Valina Zahra





The Ministry of Communications and Information is promoting the acceleration of national digital transformation through national startup because Indonesia has a great opportunity to achieve digital economic independence. Data shows that Indonesia has experienced faster digital economic growth, compared to other Southeast Asian countries. In addition to the increasing population, the Indonesian people have shifted their consumption from offline to online. According to the Startup Ranking report, by 2022, Indonesia already had 2,346 startups.

Governing Laws and Regulations

  • Ministry of Law and Human Rights (Kemenkumham) Government Regulation (PP) No. 24/2018 concerning legal entity without legal entity status, which regulates the establishment and operation of legal entities without legal entity status, commonly known as “startup companies”;
  • Ministry of Law and Human Rights (Kemenkumham) Government Regulation (PP) No. 20/2018 concerning limited liability company, which regulates the establishment and operation of limited liability companies, a common legal structure for startups in Indonesia;
  • Ministry of Law and Human Rights (Kemenkumham) Government Regulation (PP) No. 15/2018 concerning business competition supervision, which regulates the supervision of business competition in Indonesia, including anti-monopoly and antitrust regulations;
  • Ministry of Law and Human Rights (Kemenkumham) Government Regulation (PP) No. 21/2018 concerning intellectual property right, which regulates the protection of intellectual property rights in Indonesia, including patents, trademarks, and copyrights;
  • Ministry of Law and Human Rights (Kemenkumham) Government Regulation (PP) No. 24/2018 concerning foreign investment, which regulates foreign investment in Indonesia, including the procedures for establishing a foreign-owned company in Indonesia.

Registration Requirements

The registration requirements for startups in Indonesia can vary depending on the legal structure, location and type of business, but some common requirements include:

  1. A detailed business plan outlining the proposed business activities, target market and financial projections.
  2. A unique company name that has been registered with the Ministry of Law and Human Rights (Kemenkumham).
  3. A legal entity status that has been registered with the Ministry of Law and Human Rights (Kemenkumham).
  4. A deed of establishment that has been notarized by a public notary and registered with the Ministry of Law and Human Rights (Kemenkumham).
  5. A tax ID number (NPWP) that has been registered with the Directorate General of Taxes.
  6. An article of association and financial report that have been certified by a public accountant.
  7. A domicile letter that has been issued by the local administration and verifies the address of the startup’s office.
  8. Depending on the type of business, a startup may also be required to obtain business licenses and permits from relevant government agencies.

Common Issues

There are several common issues that startups may face when registering in Indonesia. First, the registration process for startups in Indonesia can be complex and time-consuming, involving multiple government agencies and a significant amount of paperworks.

Second, there can be a lack of clarity in laws and regulations related to startups in Indonesia, which can make it difficult for startups to understand their legal obligations and navigate the registration process. So far, there is no specific regulations in Indonesia that targeted startups.

Third, they may face challenges in obtaining funding from traditional financial institutions, which can make it difficult for them to secure the capital that they need to grow their businesses. There would be lots of papers that needed to get the funding.

Fourth, they may also face difficulties in finding the right talent to support the growth of their business, particularly in terms of finding skilled and experienced professionals with relevant expertise, because there are many human resources that are not great or have enough experience to support the startup.

Fifth, Indonesia is known for their complex administration, that is why startups may face difficulties in dealing with it, which can lead to delays and increased costs in the registration process.

Sixth, startups may also lack support and mentorship to navigate the startup ecosystem and regulations, which can be challenging for new entrepreneurs. In result, startups may be able to face difficulties in managing their business or it could lead to bankruptcy.

Valina Zahra






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