“As financing business company which specifically conducted through capital inclusion and/or financing for business counterparts or debtor purposes, a venture capital must fulfil legal compliances.”
Definition of Venture Capital Company
As per November 2020, Financial Services Authority (“Otoritas Jasa Keuangan” or “OJK”) has listed 61 (sixty-one) venture capital companies which registered under OJK authority.
Regulation of OJK No. 34/POJK.05/2015 on Business Licensing and Institutional of Venture Capital Company (“ROJK 34/2015”) has defined Venture Capital Company (“VCC”) as business entity that conducted venture capital business activity, management of venture’s fund, fee-based service activities, and other activities with approval from OJK.
Furthermore, and similar with the other financial service institutions, VCC can be divided into conventional VCC and sharia VCC which implemented sharia principle.
Scope of Business Activities
According to the OJK financial institution statistic (November 2020), the business activities of VCC are consists of:
- Equity participation;
- Quasi-equity participation (purchasing of convertible bonds);
- Financing through purchasing of debt securities issued by business’s counterpart in the start-up stage and/or for business development purposes; and
- Financing based on profit/revenue sharing (productive purposes).
By ROJK 34/2015, VCC must fulfil the following compliances:
- VCC must be incorporated with business entities types of a limited-liability company, cooperatives, or limited partnership.
- The name of VCC must contain words “ventura” or “ventura syariah”.
- Capitalisation provisions upon incorporation, as follows:
- Paid-up capital minimum IDR 50,000,000,000 and IDR 20,000,000,000 (sharia) for limited-liability company;
- Paid-up capital minimum IDR 25,000,000,000 and IDR 10,000,000,000 (sharia) for cooperatives;
- Paid-up capital minimum IDR 25,000,000,000 and IDR 10,000,000,000 (sharia) for limited partnership;
- Foreign ownership is allowed for limited-liability company maximum of 85% from the paid-up capital.
- Articles of Association which stated company business activity with Indonesian Standard Industrial Classification 2020 (“Klasifikasi Baku Lapangan Usaha Indonesia” or “KBLI 2020”) codes 64931 (conventional) or 64932 (sharia).
- Company’s organisational structure consists of business feasibility analysis, risk management and internal control, financial management, investment portfolio, and anti-money laundering and counter financing of terrorism.
- A foreign worker is allowed to fill experts position (one-level under Board of Directors); advisor; or consultant and must be reported to OJK.
- Registered as member of Indonesia Venture Capital Association (Asosiasi Modal Ventura Indonesia or AMVI) or Venture Capital Association for Indonesian Startup (Asosiasi Modal Ventura untuk Startup Indonesia or Amvesindo).
- Obligation to report OJK if conducted alteration of:
- Articles of association;
- Composition of Board of Directors, Board of Commissioners. Shareholders, and Sharia Supervisory Board;
- New business activity;
- Domicile/address; and
- Consolidation, merger, acquisition, and separation.
Author: Kristalia Andiani Puteri
Gaffar & Co., Indonesian Boutique Law Firm which specializing and focus on commercial law areas include Business Law.
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