“The development of information technology has greatly impacted the financial services industry, leading to the emergence of securities crowdfunding as an alternative funding source for SMEs and start-ups. In Indonesia, these activities are regulated by the Financial Services Authority (OJK) under Regulation No. 57/POJK.04/2020, amended by No. 16/POJK.04/2021. The regulations mandate business licenses, minimum capital requirements, and restrict certain activities, such as affiliations with issuers and providing investment advice.”
Overview
The current development of information technology is impacting various aspects of life, including the financial services industry with the emergence of Crowdfunding based on information technology. The emergence of securities crowdfunding is expected to provide an alternative for small and medium-sized enterprises as well as start-ups to obtain the necessary funding to grow their businesses. In Indonesia, crowdfunding activities fall under the regulatory scope of the Financial Services Authority (OJK). This is regulated through Regulation of the Financial Services Authority No. 57/POJK.04/2020 of 2020 concerning Securities Offering through Technology-Based Crowdfunding as has been recently amended by Regulation of the Financial Services Authority No. 16/POJK.04/2021 of 2021 concerning Amendment of Regulation of the Financial Services Authority No. 57/POJK.04/2020 of 2020 concerning Securities Offering through Technology-Based Crowdfunding (“POJK Crowdfunding”).
Definition of Crowdfunding Company
According to POJK Crowdfunding, crowdfunding services are the offering of securities conducted by issuers to sell securities directly to investors through an open electronic network system. The service is organized by an entity in the form of an Indonesian legal entity that provides, manages, and operates Crowdfunding Services.
KBLI Code and Capital Requirement
To establish a crowdfunding service business, the organizer must be in the form of a legal entity such as a Limited Liability Company or a Cooperative. If the business actor is a foreign investor, the organizer must be in the form of a Limited Liability Company and is subject to regulations related to foreign investment in Indonesia.
To conduct business activities in the field of crowdfunding services, the organizer may choose KBLI code 66118, which corresponds to the Organizer of Securities Offerings Through Information Technology-Based Crowdfunding Services (Securities Crowdfunding). Considering the high business risks, conducting activities under this KBLI code requires a license issued by the relevant regulatory institution. According to POJK Crowdfunding, the organizer must obtain a business license from the Financial Services Authority, making OJK the relevant regulatory institution.
While applying for the business license, the Organizer shall have a minimum paid-up capital in the amount of IDR2,500,000,000 (two billion and five hundred rupiah) for the Organizer in the form of Limited Liability Company or IDR2,500,000,000 (two billion five hundred rupiah) of own capital for the Organizer in the form of Cooperative.
If the Organizer is a Foreign Investment Company, it shall comply to the prevailing laws and regulations regarding foreign investment in Indonesia. The Organizer must be in the form of a Limited Liability Company and shall have a minimum paid-up capital of IDR10,000,000 (ten billion rupiah) excluding land and building. Article 9 of the POJK Crowdfunding also stipulates that maximum foreign ownership limit for a Crowdfunding Service Organizer in Indonesia is 49% (forty-nine percent) – directly or indirectly
Prohibitions for Crowdfunding Company
According to Article 21 of POJK Crowdfunding, there are several prohibitions for the Organizer to conduct their business, such as:
- Conducting business activities aside from Crowdfunding Services activities, except:
- As Organizer of Technology Information-based financial services that has permit from the OJK
- Activities in the capital market sector that according to the laws and regulations in the capital market sector can carry out business activities as the Organizer.
- Having an affiliation relationship with Issuer that using the Crowdfunding Service;
- Giving financial aid to the Investor to Invest on Issuer Security that using the Crowdfunding Service
- Giving Investment Advice and/or Recommendation to the Investor and/or Investor candidate to Invest on Issuer
- Provide gifts or compensation to party that giving information on potential Investor
- Receive and/or holding Investor’s Fund
- Treat User Differently
- Publishing incorrect information regarding the Crowdfunding Services being held
- Offering Crowdfunding Services to users and/or the public via private communication means without the User’s consent; and
- Charge any fees to Users for submitting complaints.
Author: Daffa Zidan
Gaffar & Co. is an Indonesian Boutique Law Firm specializing and focusing in Commercial Law, including Capital Market & Financial Services.
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