“Based on the currently prevailing laws of Indonesia, licenses which are required to be obtained by construction companies in Indonesia have been modified, and the procedure of obtaining such licenses has been changed accordingly.”
Overview of Company Establishment in Indonesia
The abolishment of Law No. 11 of 2020 concerning Job Creation (“UUCK”) which has been replaced with the ratification of Government Regulation in Lieu of Law No. 2 of 2022 concerning Job Creation Law (“Perppu No. 2/2022”) has changed several things related to the company establishment including business licensing.
According to Law No. 4 of 2007 concerning Limited Liability Companies (“UUPT”) Article 1 para. 1, a limited liability company is a legal entity which is a capital partnership, established based on an agreement, conducting business activities with authorized capital which is entirely divided into shares and fulfills the requirements stipulated based on the law.
The Investment Coordinating Board Regulation No. 4 of 2021 concerning Procedure for Risk-Based Business Licensing Services and Investment Facilities (“BKPM Regulation No. 4/2021”) stated that the business scale for company establishment consists of: Micro, Small, Medium and Large enterprises. This categorization is based on the asset (capital) of the company. Due to minimum capital requirements, foreign investment companies in Indonesia are included as large enterprises in Indonesia.
To establish a company in Indonesia, Business Actor should know their business sector which is classified in Standard Classification of Indonesian Business Fields (“KBLI“) in accordance with Central Bureau of Statistics Regulation No. 20 of 2020 concerning Standard Classification of Indonesian Business Fields (“BPS Regulation No. 2/2020”). Every KBLI has different risk level and the risk as stipulated determines the procedure to obtain Business Identification Number (“NIB”), which is explained further in Perppu No. 2/2022.
Required License for Construction Companies
Business license of construction companies is divided into several sectors as described in Article 80 para. (1) and (2) of Government Regulation No. 5/2021 concerning Risk-Based Business Licensing Implementation (“Government Regulation No. 5/2021”) which stated:
“(1) Business License in the public works and public housing sector consists of the following sub-sectors:
- Construction service;
- Water resources; and
- Highway Construction and Maintenance.
(2) Business Licensing in the construction services sub-sector as referred to in paragraph (1)(a) which is determined based on the results of an analysis of the risk level of business activities consists of:
- Construction Consulting Services;
- Construction Work; and
- Integrated Construction Work.”
Government Regulation No. 5/2021 made modifications regarding procedure for Business License in Construction Service which include the abolishment of Construction Service Business License (“SIUJK”) that was previously regulated in Law No. 2 of 2017 concerning Construction Services (“UUJK”) and other regulations regarding construction services. The modification is also reinforced by a request letter regarding the termination of Construction Service Business Permit (“IUJK”) at the One Stop Service Investment Service (“DPMPTSP”) issued by the Directorate General of Construction Development of the Ministry of Public Works and Public Housing through Letter No. BK04.01-Dk/349 as a follow-up to the promulgation of UUCK and Government Regulation No. 5/2021.
Through this letter, it is confirmed that IUJK are no longer issued and therefore, Business Actors are required to have Business Identification Number (“NIB”) and Standard Certificates under Article 99 of Government Regulation No. 5/2021, which include:
- Business Entity Certificate (“SBU”) Construction;
- Construction Competency Certificate (“SKK”); and
- lisence.
Business Licensing Procedure for Construction Companies
There are several procedures for Construction Companies to obtain the business license:
- Construction Service Business Entity (Badan Usaha Jasa Konstruksi or “BUJK”) Submits Construction Business Entity Certificate (“SBU”)
Under Article 100 of Government Regulation No. 5/2021, BUJK are obliged to have SBU in construction. BUJK can apply for SBUto the Minister of Public Works and Public Housing through the Business Entity Certification Agency (“LSBU”) according to Article 100 para. (3) of Government Regulation No. 5/2021. The validity period is 3 (three) years and can be extended.
- BUJK Submits Construction Competence Certificate (Sertifikat Kompetensi Kerja or “SKK”) for its Persons in Charge
The SKK of Construction must be obtained by the construction workers based on Article 101 of Government Regulation No. 5/2021. According to Article 101 para. (2) and (3) of PP No.5/2021, this certificate can be obtained through a competency test which held by a professional certification agency in the field of construction.
Furthermore, it is stated in Article 101 para. (4) and (5) that SKK of Construction is registered by the Ministry of Public Works and Public Housing which is valid for a period of 5 (five) years.
- Licensing Through the Online Single Submission (“OSS”) System
According to Article 102 para. (1) of Government Regulation No. 5/2021, the submission of SBU of Construction and SKK of Construction is applied through the OSS system. The stages of the certification include:
- Application;
- Payment of fees;
- Verification and Validation; and
- Approval/Rejection of SBU of Construction Application.
As stated in Article 103 para. (2) jo. Article 85 para. (1) of Government Regulation No. 5/2021, the application through OSS system is done by completing documents which consist of:
- Annual Sales Document;
- Documents of Financial Capability;
- Construction Labor Availability Documents; and
- Documents in regards to the Ability to Provide Construction Equipment.
- Verification, Validation and Payment of Business Licensing Submission
The BUJK must pay the registration fee no later than 7 (seven) days. Furthermore, the verification and validation can be carried out after the submitted documents have been declared complete according to Article 103 para. (4) and (5) of Government Regulation No. 5/2021.
- The Acceptance of the Business Licensing Submission
Based on Article 106 para. (6) and (7), the certificate will be issued if it has been approved no later than 15 (fifteen) days. And if it is not approved, BUJK cannot claim any compensation from the LSBU.
This licensing provision also applies to the Representative Offices (“RO”) of Foreign Construction Services Business Entities (Bada Usaha Jasa Konstruksi Asing or “BUJKA”) who intend to apply for a SBU under Article 104 of Government Regulation No. 5/2021.
Author: Naomi Catherine Felencia and Muhammad Faishal Hakim
Gaffar & Co., an Indonesian Boutique Law Firm specializing and focusing on commercial law areas e.g. Investment Regulatory and Corporate Secretarial.
For further queries and information, contact us:
+62 811 877 216 | info@gaffarcolaw.com | www.gaffarcolaw.com
