Business Agreement Between Two Companies Template for Indonesia

A Business Agreement Between Two Companies is a legally binding contract that establishes formal commercial relationships between corporate entities operating in Indonesia. Under Indonesian law, particularly the Civil Code and Company Law No. 40 of 2007, these agreements provide the foundation for various business arrangements including supply chains, service partnerships, distribution networks, and joint ventures between companies.

When do you need this document?

You need this agreement when establishing any formal business relationship between companies in Indonesia. This includes situations where a manufacturing company partners with a distribution company, when a technology company provides services to multiple corporate clients, or when foreign-owned companies (PT PMA) collaborate with local Indonesian companies (PT). The document is essential for supply agreements where one company regularly provides goods to another, service contracts for ongoing professional services, and partnership arrangements that involve shared resources or expertise. State-owned enterprises (BUMN) also require formal agreements when engaging with private companies, ensuring transparency and compliance with government procurement regulations.

Key legal considerations

Several critical legal elements must be addressed in your business agreement. Corporate capacity and authority provisions ensure both companies have the legal right to enter the contract and that authorized representatives are acting within their scope of authority. Payment terms and conditions must clearly specify amounts, schedules, and consequences for late payment, while intellectual property clauses protect proprietary information and define ownership rights. Termination provisions should outline grounds for ending the agreement and procedures for winding down business operations. Risk allocation and liability limitations help protect both parties from excessive exposure, while confidentiality clauses safeguard sensitive business information shared during the partnership.

Legal requirements in Indonesia

Indonesian law imposes specific requirements that your business agreement must address. Under Law No. 40 of 2007, companies must ensure their corporate documents and registration certificates are current and valid. Foreign investment agreements involving PT PMA companies must comply with Law No. 25 of 2007 on Investment, which may restrict certain business activities or require specific approvals. The agreement must specify governing law as Indonesian law and designate Indonesian courts for dispute resolution, unless both parties agree to arbitration under Indonesian arbitration rules. Companies must also consider Law No. 7 of 2014 on Trade when the agreement involves trading activities, and the recent Omnibus Law (Law No. 11 of 2020) may affect licensing and operational requirements. Tax obligations, including Value Added Tax (PPN) and Corporate Income Tax implications, should be clearly addressed to ensure compliance with Indonesian tax regulations.