Establishing Single-Member Private Limited Liability Company

Single-Member Private Limited Liability Company (Indonesia: Perseroan Perorangan), hereinafter referred to as SMC, has been introduced as a new form of Indonesian legal entity under the recent Omnibus Law of Job Creation (Indonesia: Undang-Undang Cipta Kerja). Although being classified as a limited liability company, SMC only has one shareholder. It also differs from the previous Indonesian sole proprietorship, i.e. Usaha Dagang (UD), that the latter is categorized as a non-legal business entity thus can not legally enter into a contract on its own behalf.

Definition and Characteristics of SMC

SMC is defined as an individual legal entity established by 1 (one) person and qualified as a Micro and Small Enterprise (MSE). The founder must be an Indonesian citizen, at least 17 years old, and legally competent. He can only establish one SMC per year. To be qualified as an MSE, an SMC should have capital up to a maximum of Rp.1 billion excluding land and buildings (for Micro Enterprise) or more than Rp. 1 billion up to a maximum of Rp. 5 billion excluding land and buildings (for Small Enterprise).

Establishment of SMC

The establishment of an SMC is based on a statement of establishment made in Bahasa Indonesia. The statement should electronically be registered to the Minister of Law and Human Rights and contain information about:

1. the name of SMC and place of domicile;
2. the period of establishment;
3. the purposes, objectives, and business activities;
4. the amount of authorized, issued, and paid-up capital;
5. the nominal value and number of shares;
6. the address of SMC; and
7. full name, place and date of birth, occupation, place of residence, ID number, and tax identification number of the founder.

Capital and Responsibilities

To establish an SMC, the amount of authorized capital is determined based on the founder’s decision, except for certain business activities whose capital amount is regulated by other provisions. It must be issued and fully paid up at least 25%. The deposit document must be submitted electronically to the Minister of Law and Human Rights within a maximum period of 60 (sixty) days from the statement of the establishment’s filling date. Similar to other limited liability companies, the capital of SMC is separated from the assets of the founder.

The founder is not personally responsible for the engagement made on behalf of the SMC. He is also not responsible for the loss exceeding his shares. However, these provisions do not apply if:

1. the requirements of an SMC as a legal entity have not been met;
2. the founder, either directly or indirectly, utilizes the SMC for personal gain in bad faith;
3. the founder is involved in an unlawful act committed by the SMC; or
4. the founder, either directly or indirectly, unlawfully uses the assets of the SMC, which is resulted in the assets of the SMC being insufficient to pay off the debts.

Financial Reporting

The director of SMC is required to prepare a financial report consisting of a statement of financial position, an income statement, and notes to the financial statements. The financial report is then reported electronically to the Minister of Law and Human Rights no later than 6 (six) months after the end of the current accounting period. If the financial report is not submitted, the SMC will be subject to administrative sanctions in the form of written notice, termination of access to government’s services, or revocation of its legal entity status.

Changes and Liquidation

Any changes to the data of the SMC, based on the founder’s decision, should be reported by filling in the electronic form for the amendment in the statement of establishment. However, when changes have resulted from the shareholder becomes more than 1 (one) person and/or the SMC no longer meets the criteria as an MSE, the SMC has to change its status through a notarial deed and should register it electronically. Note that to remain qualified as an MSE, the SMC should have annual sales up to a maximum of Rp.2 billion (for Micro Enterprise) or more than Rp. 2 billion to a maximum of Rp. 15 billion (for Small Enterprise).

The SMC is liquidated based on a statement of liquidation. Thus the statement is required to be notified electronically to the Minister of Law and Human Rights. The SMC may be liquidated due to:

1. the founder’s decision;
2. the period of establishment stipulated in the statement of establishment has expired;
3. the court order;
4. Its assets are not sufficient to pay the bankruptcy costs when there is a revocation of bankruptcy status under the decision of a commercial court;
5. the bankruptcy declaration and its assets are in a state of insolvency; or
6. the revocation of Its business license, thus requiring the SMC to liquidate under the provision regulations.

References:

1. Law Number 11 of 2020 concerning Job Creation.
2. Government Regulation Number 7 of 2021 concerning Ease, Protection, and Empowerment of Cooperatives and Micro, Small and Medium Enterprises.
3. Government Regulation Number 8 of 2021 concerning Company’s Authorized Capital and Registration of Establishment, Amendment, and Liquidation of Companies that Meet the Criteria for Micro and Small Businesses.