“According to Bank Indonesia Regulation on Payment System Provider and Payment System Infrastructure Provider, the licensed applicant required legal due diligence from an independent law consultant.”
Starting from 1 July 2021, Bank Indonesia, through Bank Indonesia Regulation No. 22/23/PBI/2020 on Payment System (“PBI 22/2020”), has reformed the payment system provisions digitalization and innovation of payment systems. The reformation has reclassified the payment systems based on their activities and risk, including the licensing process (entry side).
Within this licensing process, specifically regulated in Bank Indonesia Regulation No. 23/6/PBI/2021 on Payment Service Provider (“PBI 6/2021”) and Bank Indonesia Regulation No. 23/7/PBI/2021 on Payment System Infrastructure Provider (“PBI 7/2021”), the license applicant required legal due diligence from an independent legal consultant for institutional aspect.
Definition of Legal Due Diligence (“LDD”)
According to Profession Standard of Indonesian Capital Market Legal Consultant Association, LDD is defined as an activity of precise examination from a legal point of view conducted by a legal consultant upon the company or transaction’s object in accordance with the purposes of the transaction, to obtain information or material facts that can describe the condition of the company or transaction’s object.
The information and material facts can be obtained by conducting documents examination, interview, on-site visit, cross-checking with other authorities and association, and other activity allowed by prevailing laws and regulations in Indonesia.
After the legal consultant, the legal consultant conducts LDD, they must describe their result upon examination in the form of LDD Report. Further, the said LDD will be the basis of the legal opinion issued by the legal consultant.
Payment System Licensing, which Required LDD
By PBI 22/2021, Bank Indonesia has divided payment system providers into 2 (two) categories, which are:
- Payment Service Provider (“PSP”), which consists of activities of information provider of sources of funds, payment initiation and/or acquiring service, administration of sources of funds, and remittance service; and
- Payment System Infrastructure Provider (“PSIP”), which consists of activities of clearance and/or final settlement.
All parties that act as PSP and PSIP must previously obtain the license from Bank Indonesia. The license is proposed through licensing front office (electronic system).
Further, the licensing applicant of PSP and PSIP must fulfil the following requirement aspects:
- Institution;
- Capital and Finance;
- Risk Management; and
- Information System Capabilities.
Scope of LDD in the Payment System Licensing Process
Specifically regulated in PBI 6/2021 and PBI 7/2021 for Institution requirement aspect, the licensing applicant of PSP and PSIP require to have LDD result from an independent legal consultant. The Institution requirement aspect consists of the legality of a legal entity, ownership, controlling, and management.
In briefly, the scope of LDD, which must cover the Institution requirement aspects, can be found in the following table:
| Institution Requirement Aspect | PSP | PSIP |
| Legality of Legal Entity | Fulfillment of legality documents of the limited-liability company (Establishment Deed, Amendment Deed, NIB, etc)Company’s condition (if there are process of court proceedings or imposition of sanctions) | Fulfillment of legality documents of the limited-liability company (Establishment Deed, Amendment Deed, NIB, etc)Company’s condition (if there are process of court proceedings or imposition of sanctions) |
| Ownership | Identification of shareholders composition For foreign investment company (PT PMA), Limitation on foreign shareholder ownership as of 85% (fifteen percent) | Identification of shareholders composition For foreign investment company (PT PMA), Limitation on foreign shareholder ownership as of 20% (fifteen percent) |
| Controlling | Fulfillment of integrity aspects for controlling shareholderIdentification of controlling shareholdersShareholders composition with voting right must owned by Indonesian citizen and/or Indonesian legal entity at least 51% (fifty one percent)Shareholders composition with special rights must be owned by domestic party | Fulfillment of integrity aspects for controlling shareholderIdentification of controlling shareholdersShareholders composition with voting right must owned by Indonesian citizen and/or Indonesian legal entity at least 80% (fifty one percent)Shareholders composition with special rights must be owned by domestic party |
| Management | Minimum 1 (one) Director domiciled in IndonesiaFulfillment of integrity aspects for Board of Directors and Board of CommissionersReadiness of human resources and company organization | Minimum 1 (one) Director domiciled in IndonesiaFulfillment of integrity aspects for Board of Directors and Board of CommissionersReadiness of human resources and company organization |
Author: Kristalia Andiani Puteri
Gaffar & Co., Indonesian Boutique Law Firm which specializing and focus on commercial law areas e.g. Capital Market & Financial Services.
For further queries and information, contact us:
+62 21 2271 5060 | info@gaffarcolaw.com | www.gaffarcolaw.com
