Preliminary Share Purchase Agreement Template for Indonesia

A Preliminary Share Purchase Agreement is a foundational document that establishes the framework for corporate share acquisitions in Indonesia. You'll use this agreement to set out initial terms, protect your interests during negotiations, and ensure compliance with Indonesian company law requirements before proceeding to a full share purchase agreement.

When do you need this document?

You need this document when entering preliminary negotiations for acquiring shares in an Indonesian limited liability company. It's particularly essential when you've agreed on basic transaction terms but require time to conduct due diligence, obtain regulatory approvals, or finalize detailed conditions. The agreement is crucial for foreign investors navigating Indonesia's investment restrictions under Law No. 25 of 2007, as it provides legal protection during the extended negotiation period typically required for complex cross-border transactions. You'll also need this document when dealing with publicly listed companies subject to OJK regulations, where material transaction disclosures and shareholder approvals may take considerable time to complete.

Key legal considerations

Your preliminary agreement must carefully distinguish between binding and non-binding provisions to avoid unintended legal obligations. Binding elements typically include confidentiality clauses, exclusivity periods, and good faith negotiation requirements, while non-binding elements cover indicative purchase price and transaction structure. You must include comprehensive due diligence provisions that specify scope, timelines, and access rights, as Indonesian corporate records and regulatory compliance can be complex to verify. The agreement should address material adverse change provisions to protect you from significant deterioration in the target company's condition during negotiations. Consider including termination rights with clearly defined conditions and any applicable break-up fees. Intellectual property and employment considerations are particularly important in Indonesia, where local regulations may affect post-acquisition operations.

Legal requirements in Indonesia

Your agreement must comply with Law No. 40 of 2007 on Limited Liability Companies, which governs share transfer procedures and requires specific board approvals and shareholder consents. Under this law, you must ensure proper corporate authorization from the target company's Board of Directors and Board of Commissioners before proceeding. Foreign investment transactions must comply with Law No. 25 of 2007 on Investment and BKPM Regulation No. 4 of 2021, which may impose sector restrictions, minimum investment amounts, and local partnership requirements. If the target company is publicly listed, you must follow OJK Regulation No. 42/POJK.04/2020 regarding affiliated transactions and material transaction disclosures. The agreement must be executed in Indonesian language to ensure enforceability under Law No. 24 of 2009, though English versions may be prepared for reference. Consider notarization requirements and potential need for legalization if foreign parties are involved. Ensure compliance with any sector-specific regulations that may apply to the target company's business activities.