Investment Contract Template for Indonesia

An Investment Contract is a comprehensive legal agreement that governs the terms and conditions when investors inject capital into Indonesian companies. Under Indonesia's Investment Law (Law No. 25/2007), this document serves as the foundation for both domestic and foreign investment transactions, ensuring all parties understand their rights, obligations, and the regulatory framework governing their investment relationship.

When do you need this document?

You need an Investment Contract when establishing any formal investment arrangement in Indonesia. This includes situations where foreign investors seek to acquire equity stakes in Indonesian companies, when domestic investors participate in funding rounds for startups or established businesses, or when structured investment vehicles like convertible bonds or preferred shares are involved. The document is particularly crucial for foreign investment exceeding USD 2.5 million, which requires BKPM (Investment Coordinating Board) approval and registration. You'll also need this contract when investors require specific governance rights, anti-dilution provisions, or exit mechanisms that go beyond standard corporate law protections.

Key legal considerations

Several critical legal elements must be addressed in your Investment Contract. Investment amount and payment terms should specify the total capital commitment, payment schedule, and currency requirements under Law No. 7/2011 on Currency. Share subscription details must clearly define the number, class, and subscription price of shares being issued, along with any preferential rights or restrictions. Corporate governance provisions should establish board representation, voting rights, and decision-making thresholds for major corporate actions. The contract must include comprehensive representations and warranties from both the investee company and existing shareholders regarding the business, financial condition, and legal compliance. Exit mechanisms such as tag-along rights, drag-along provisions, and buy-back options protect investor interests during future transactions or disputes.

Legal requirements in Indonesia

Indonesian law imposes specific requirements that must be reflected in your Investment Contract. Foreign investment must comply with Presidential Regulation No. 10/2021 on Investment Business Fields, which details the Negative Investment List (DNI) specifying sectors closed or conditionally open to foreign investors. The contract must address minimum capital requirements, which vary by sector and location, with generally higher thresholds for foreign investment. BKPM registration and licensing requirements must be clearly allocated between parties, including timelines and responsibilities for obtaining necessary permits. The agreement should incorporate Indonesian Rupiah usage requirements for domestic transactions as mandated by currency regulations. Additionally, the contract must comply with Limited Liability Companies Law No. 40/2007 regarding shareholder rights, board composition, and corporate governance standards. Tax implications under Income Tax Law No. 7/1983 should be addressed, particularly withholding tax obligations on dividends and capital gains for foreign investors.