“The aspect of control in Remittance Service Company activities it must be held by domestic shareholder.”
Under Article 2 letter Bank Indonesia (“BI”) Regulation No. 23/6/PBI/2021 of 2021 on PJP (“BI Reg 23/2021”), Remittance Service is included within the scope of PJP. PJP itself is defined as Banks or Non-Bank Institutions that provide services to facilitate payment transactions to service users. Which means that Remittance Service Company is a service to facilitate payment.
As stipulated in Article 6 BI Reg 23/2021, Remittance service are fund transfer activities in the form of acceptance and execution of fund transfer instruction in which the sources of funds do not originate from accounts administered by remittance service operators. Therefore, because Remittance Service is included within the scope of PJP, then, the regulations, obligations and requirements of establishment shall refer to and within the scope of BI. This is confirmed by Article 11 BI Reg 23/2021, in which Any party acting as a PJP shall obtain a license from Bank Indonesia.
Payment Service Providers ( Penyedia Jasa Pembayaran “PJP”) Categories License
Under Article 12 letter a and Article 12 letter BI Reg 23/2021, PJP of Remittance Service is included in license category one and license category three in which both categories shall have different requirements. Details of PJP license category are as follows:
- license category one includes the following activities:
- Administration of Source of Fund;
- providing information on sources of funds;
- payment initiation and/or acquiring services; and
- remittance services;
- license category two includes the following activities:
- providing information on sources of funds;
- payment initiation and/or acquiring services; and
- license category three include the following activities:
- remittance services;
- other matters specified by Bank Indonesia.
- license category two includes the following activities:
Based on the categories as explained above, if the Company wants to apply for license category one then Prospective PJP can conduct remittance services as well as other activities such as Administration of Source of Fund, providing information on sources of funds and payment initiation and/or acquiring services. Vice versa for license category two and license category three.
Capital Requirements for PJP Remittance Service Company
Under Article 24 BI Reg 23/2021, the capital ownership is included in the capital and financial aspects which include the minimum requirements for paid-up capital, feasibility analysis, and business projections. The following are minimum amount of paid-up capital (initial capital) for Prospective PJP are:
- for license category one (which include Remittance Services), at least IDR15 billion;
- for license category two, at least IDR5 billion; and
- license categories three (which include Remittance Services), at least:
- IDR500 million rupiah, for Prospective PJP who does not provide a system that can be used by other PJP with license category three; or
- IDR1 billion rupiah, for Prospective PJP who provides a system that can be used by other PJP with license category three.
Thus, Company who conducts PJP Remittance Services shall follow the minimum paid-up capital as referred above. However, fulfillment of the minimum paid-up capital (initial capital) for Prospective PJP shall also take into account to the Investment Coordinating Board / Badan Koordinasi Penanaman Modal (“BKPM”) Regulation No. 4 of 2021 on Guidelines and Procedures For Risk-Based Business Licensing Services And Investment Facilities.For Foreign Investment Company (“PMA Company”), in which the minimum capital requirements for PMA Company are issued/paid up capital of at least IDR 10 billion. Exception if the PMA Company wants to establish a PJP Remittance Services that included in license category one must have minimum amount of paid-up capital IDR15 billion.
In addition, as a PMA Company is categorized as a large business and must comply with the minimum investment value requirements, namely a total investment greater than IDR 10 billion, excluding land and buildings per business sector KBLI 5 (five) digits per project location.
Ownership Control Requirements for PJP Remittance Service Company
As stipulated in Article 19 Paragraph (1) BI Reg 23/2021, regulates in regard with the share ownership and structure of ownership for the establishment of PJP Remittance Service Company which are as follows:
- its share ownership composition shall be at least 15% (fifteen percent) of its shares are owned by:
- Indonesian citizen; and/or
- Indonesian legal entity;
- and 85% (eighty-five) percent can be held by a foreign citizen or foreign legal entity.
To sum up, the minimum 15% (fifteen percent) share composition must be owned by Indonesian citizens and/or Indonesian legal entities (which means the maximum share composition owned by foreigners is 85% (eighty five percent). If during the licensing process as a PJP there is a change in the company’s ownership structure either directly or indirectly (up to the ultimate shareholder), then the Prospective PJP must submit the change in the ownership structure.
Furthermore, under Article 20 BI Reg 23/2021, The institutional aspect in the form of control for Prospective PJP in the form of Non-bank Institutions is regulated with the following provisions:
- composition of shares with voting rights of at least 51% (fifty-one percent) shall be held by domestic parties, namely:
- Indonesian citizen; and/or
- Indonesian legal entity.
- BI’s assessment on the composition of shares with voting rights is carried out collectively to each level of ownership up to the ultimate shareholder with largest voting rights is individually owned by a domestic party;
- in the event that there is a special right to nominate a majority of the members of the board of directors and/or members of the board of commissioners, such right shall be held by the domestic party;
- in the event that there is a special right in the form of a veto to a resolution or approval in a general meeting of shareholders that has a significant impact on the company, such right shall be held the domestic party;
Therefore, to conclude, for the aspect of control in PJP activities it must be held by domestic investor. While Foreign Investors cannot hold a share with voting rights that exceeds 49% (forty-nine percent) or a voting right that exceeds the voting rights of the domestic investor and/or become the controller of the Company even if the Foreign Investors held a 85% shares of the Company. In addition, special rights to nominate a majority of the members of the board of directors and/or members of the board of commissioners and special right in the form of a veto to a resolution or approval in a general meeting of shareholders that has a significant impact on the company must be held by a domestic investor and cannot be held by foreign investors.
Requirements for Foreign Directors to Have Stay Permit (“KITAS”)
Under Article 17 BI Reg 23/2021, Non-Bank Institutions PJP shall have at least 1 (one) member of the Board of Directors (“BoD”) whose domicile is in Indonesia. Furthermore, any member of the board of directors of Non-Bank Institutions whose domicile is outside the territory of Indonesia shall continue performing its functions, duties and responsibilities as a member of the board of directors. Responsibilities as a member of the board of directors include, among others, to ensure the effectiveness of supervision performed by Bank Indonesia, including participating in physical meetings if required by Bank Indonesia.
Therefore, Non-Bank Institutions PJP must have 1 (one) director whose domicile is in Indonesia either foreign or domestic. Furthermore, based on BI, in the event that the directors/management and/or board of commissioners/supervisors are foreign nationals domiciled in Indonesia, they must submit a photocopy of a Limited Stay Permit Card (KITAS) and proof that they have been registered with the Ministry of Manpower and Transmigration of the Republic of Indonesia. And if any member of the board of directors of Non-Bank Institutions whose domicile is outside the territory of Indonesia it must continue performing its functions, duties and responsibilities as a member of the board of directors. Based on this explanation, BI gives the option that management of the Company does not have to stay in Indonesia, although for foreign director it must continue performing its functions, duties and responsibilities as well as the potential physical meetings if required by Bank Indonesia.
Although BI gives the option that 1 (one) director can be domiciled outside Indonesia. However, under Article 6 GR 34/2021, every Foreign Workers Employers who employs Foreign Workers must process Work Permit which are validated by the Minister of Manpower (“MoM”) or an appointed official. Based on GR 34/2021, Foreign Directors without a certain percentage in a Company is included as a Foreign Worker. Furthermore, under Article 27 GR 34/2021, every Foreign Workers who is employed by a Foreign Workers Employers in Indonesia must have a KITAS. Therefore, Foreign Directors without shareholding in a Company are required to have a Work Permit as well as KITAS to conduct his/her management of Company activities.
Author: Oddy Ramadhika Susmoyo
Gaffar & Co., Indonesian Boutique Law Firm which specializing and focus on commercial law areas e.g. Financial Services Company, Investment Regulatory, and Corporate Secretarial.
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