Share Transfer Agreement Template for Indonesia
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What is a Share Transfer Agreement?
The Share Transfer Agreement is a crucial document used in Indonesian corporate transactions when ownership of shares in a company needs to be legally transferred between parties. This document is essential for both private and public companies operating under Indonesian law, particularly complying with Law No. 40 of 2007 on Limited Liability Companies. It contains detailed provisions covering the sale terms, warranties, regulatory compliance requirements, and completion mechanics. The agreement is particularly important in Indonesia due to specific local requirements for share transfers, including mandatory involvement of an Indonesian notary, potential foreign investment restrictions, and specific corporate and regulatory approvals. The document serves multiple purposes: it protects both parties' interests, ensures legal compliance, provides clarity on the transaction terms, and creates a binding record of the share transfer that can be relied upon for corporate, regulatory, and tax purposes.
About the Share Transfer Agreement
A Share Transfer Agreement is your essential legal document for transferring company shares in Indonesia. Under Law No. 40 of 2007 on Limited Liability Companies, this agreement ensures your transaction complies with Indonesian corporate law while protecting both buyer and seller interests throughout the transfer process.
When do you need this document?
You need a Share Transfer Agreement whenever you're buying or selling shares in an Indonesian company. This includes situations where you're divesting from a business partnership, bringing in new investors, restructuring company ownership, or completing mergers and acquisitions. The agreement is mandatory for both private limited companies (PT) and public companies, regardless of transaction size. Foreign investors particularly need this document to navigate Indonesia's complex foreign ownership regulations and sector-specific investment restrictions under Law No. 25 of 2007 on Investment.
Key legal considerations
Your Share Transfer Agreement must address several critical legal elements to ensure enforceability. The document should clearly specify the number of shares being transferred, the purchase price and payment terms, and any conditions precedent that must be satisfied before completion. You'll need comprehensive warranties from the seller regarding their legal ownership, the company's financial status, and absence of encumbrances on the shares. The agreement should also include detailed representations about regulatory compliance, pending litigation, and material contracts. Consider including tag-along and drag-along rights, pre-emption rights for existing shareholders, and specific dispute resolution mechanisms. Indonesian law requires particular attention to foreign ownership caps in restricted sectors, which can affect the validity of your transfer.
Legal requirements in Indonesia
Indonesian law imposes specific mandatory requirements for share transfers that you must incorporate into your agreement. Under Law No. 40 of 2007, all share transfers must be executed before an Indonesian notary public and recorded in the company's shareholders' register. You'll need board of directors' approval and, in some cases, shareholders' meeting approval depending on your company's articles of association. Foreign investors must comply with the Negative Investment List (DNI), which restricts foreign ownership in certain business sectors. Government Regulation No. 29 of 2016 requires specific procedures for capital changes that may accompany share transfers. Your agreement must also address Indonesian Civil Code requirements for contractual capacity and consent. Additionally, you may need approvals from regulatory bodies such as the Investment Coordinating Board (BKPM) for foreign investment transactions, and banking authorities if your transaction involves financial institutions.
GOVERNING LAW
Applicable law
This Share Transfer Agreement is drafted to comply with Indonesia law. Key legislation includes:
Law No. 25 of 2007 on Investment: Regulates foreign and domestic investment in Indonesian companies, including restrictions on foreign ownership in certain business sectors
Indonesian Civil Code (Kitab Undang-undang Hukum Perdata): Provides the basic principles of contract law that apply to share transfer agreements, including provisions on legal capacity, consent, and contractual obligations
Government Regulation No. 29 of 2016 on Changes in Capital in Limited Liability Companies: Specifies procedures and requirements for changes in company capital structure, including share transfers
Law No. 8 of 1995 on Capital Markets: Relevant if the shares being transferred are of a public company, governing public trading and reporting requirements
Law No. 7 of 2011 on Currency: Regulates the use of currency in transactions, including requirements for using Indonesian Rupiah in domestic transactions
Income Tax Law (Law No. 36 of 2008): Governs the tax implications of share transfers, including capital gains tax obligations
Bank Indonesia Regulation on Foreign Exchange Transactions: Regulates foreign exchange aspects of transactions, particularly relevant if the share transfer involves international parties or payments
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