Acquisition or subscription of shares are options that does not promise the comforts of total control that is available when incorporating a new company. However, it does have some benefits in that the foreign investor will, as it were, ‘hit the ground running’, so long as the foreign investor is cognisant of the facts and have accepted the state of affairs of the target company at the time of transaction. Hence, conducting due diligence (“DD”) is an absolute necessity, though the extent of which could be tailored to suit different requirements, be they positive or negative, so that a commercial decision can then be made with all the facts known.

In the acquisition exercise, there are several legal considerations to take note of. Parties may want to put in place a suite of documents on non-disclosure and possibly a framework of the agreed terms, as a first step moving forward. Other legal considerations include change in control of the target company, which will trigger various manpower implications under the law, in addition to addressing claims from existing creditors, if any.

On the assumption of satisfactory DD and no prevalent red flags on the any fronts, the sale and purchase documents will need examining, particularly a Conditional Sale and Purchase Agreement (PPJB) where condition precedents to be fulfilled may be explicitly listed. In the event that there are red flags and issues to be resolved, the target company may then set out with rectification of such issues if these can be resolved. Reg flags may range from minor administrative formalities to major non-compliance. Completion, on assumption of satisfying of all necessary conditions, may be formalised in a notarised Sale and Purchase Deed (AJB) in accordance with the Company Law.

For the subscription of shares process, this could be perceived as a ‘JV-with-extra-steps’, where the foreign investor will need to take note of the various matters raised above and to prepare an acquisition plan in accordance with the requirements under the Company Law. This process will reduce tax exposure for the existing shareholders in the target company which may be a key factor in the commercial realm.

Another aspect to be mindful of, be it acquisition or subscription of shares, is to ascertain with clarity the completion mechanism and signing logistics, particularly if there are overseas signatories and notarisation and legalisation requirements have to be adhered to. As the PPJB and AJB will be signed in the presence of a Notary, parties may appoint a proxy by virtue of a power of attorney under Indonesian laws, though it is reiterated that the relevant power of attorneys will need to be notarised by a notary public of the signatory’s jurisdiction and legalised at the nearest Indonesian overseas mission. For further information about this topic, please to access the link https://kfmap.asia/research/indonesia-industrial-property-investment-guide/773

Writer : Andrew Tuah & Anthoni Tuah from Tuah & Suparto Advocates and Solicitors.

Source : https://kfmap.asia/research/indonesia-industrial-property-investment-guide/773