In the past year, Joint Venture (JV) activity in Indonesia has evolved alongside global economic and geopolitical shifts. Inflation, interest rate volatility, the conflicts in Ukraine and the Middle East, and shifting US trade policies have made investors more cautious. Globally, these uncertainties are pushing companies to pursue JVs and strategic alliances as lower-risk alternatives to full acquisitions. Despite this challenging backdrop, Indonesia has seen increasing JV interest, particularly in the electric vehicle (EV) and mineral processing sectors. This is driven by government support for downstream development of critical minerals like nickel, copper and bauxite. Key regulations, including Presidential Regulation No 55 of 2019 as amended by Presidential Regulation No 79 of 2023, provide a roadmap for EV development and local battery production. Indonesia’s net-zero emissions target by 2060, along with global supply chain disruptions, has further accelerated JV activity in energy and green technology. International players are partnering with local companies to secure long-term access to critical resources and supply chains. Looking ahead to 2026, JV trends are expected to remain strong in strategic sectors such as renewable energy, EVs and digital infrastructure, with a growing focus on regional resilience and policy alignment.

In 2024–25, several sectors in Indonesia have experienced an increase in JV activity, supported by national development goals and technological advancements. One of the most active sectors is renewable energy. As Indonesia continues to pursue its energy transition and climate targets, investors are increasingly forming partnerships to develop solar, wind and geothermal projects. The government’s focus on sustainability and reducing reliance on fossil fuels has made this sector attractive for both local and foreign players.

The EV sector is also gaining momentum. Indonesia’s rich reserves of nickel, bauxite and copper are essential for battery production, drawing significant interest from global companies. Government support through incentives and infrastructure plans has led to multiple JVs in battery and EV manufacturing, helping position Indonesia as a key player in the regional EV supply chain.

Technology is another growing sector. Joint ventures in fintech, e-commerce and digital services have surged due to rising internet penetration and consumer demand for convenient digital solutions. The increased use of artificial intelligence (AI) and data-driven platforms is pushing companies to partner in ways that combine local market understanding with technological expertise. As digital transformation continues, JV activity in the tech sector is expected to remain strong, especially in areas where compliance with emerging regulations is key.

JV arrangements in Indonesia can generally be categorised into two types, namely: (i) corporate JVs, where the JV partners typically enter into a Joint Venture Agreement (JVA) or Shareholders Agreement (SHA) to establish a separate business entity (Corporate JV); and (ii) contractual JVs, where the JV partners contractually co-operate without forming a separate business entity, typically through co-operation agreements or joint operation agreements (Contractual JV).

Corporate JV

Limited liability companies (perseroan terbatas, or PT)

The most common form of JV in Indonesia is a Corporate JV structured as a PT. As a form of legal entity, PT offers several advantages, including its limited liability status, meaning that the shareholders’ personal assets are protected from the company’s liabilities. A PT also has a separate legal identity, which allows it to enter into contracts, own assets, and sue or be sued in its own name. In addition, Indonesian law provides a clear regulatory framework for PTs, offering certainty in terms of their governance and decision-making processes.

Pursuant to Article 5 (2) of Law No 25 of 2007 regarding Capital Investment, as amended by Government Regulation in Lieu of Law No 2 of 2022 regarding Job Creation, which was further enacted into law by Law No 6 of 2023 on the Enactment of Government Regulation No 2 of 2022 regarding Job Creation (the “Omnibus Law”) (collectively, the “Investment Law”), capital investment by foreign parties must be made in the form of a PT. Therefore, in the context of Corporate JV involving foreign parties, such Corporate JV must be established in the form of a PT.

Partnerships (commanditaire vennootschap, or CV and Firm)

Partnerships such as CVs and Firms provide an alternative JV structure, particularly for smaller businesses or industries. In a CV, there are two types of partners: active partners, who are responsible for managing the business operations of the CV, and passive partners, who only provide capital contributions to the CV. In a CV, the liability of passive partners is limited to the amount of their capital contribution to the CV. There are no different types of partners in a Firm.

The main disadvantage of partnerships such as CVs and Firms is the unlimited liability borne by the partners of the CVs and Firms due to their non-legal entity status. Unlike shareholders in a PT, partners in a CV or a Firm are personally liable for the debts and obligations of the CV or the Firm in question, which can pose significant financial risk. In addition, partnerships lack the clear governance framework that PTs have, leading to potential conflicts in management and decision-making if not carefully structured.

Contractual JV

Co-operation agreements or joint operation agreements

Some JVs in Indonesia can also be structured as a contractual collaboration between the JV partners, without the need to form a separate business entity. In these arrangements, the parties agree to work together for a specific purpose or project, while each party retains its legal identity. Contractual JVs are often used for specific term project-based collaborations and are common in industries such as construction and infrastructure, where the parties can pool resources or share expertise without forming a formal JV entity. A Contractual JV is typically created through a co-operation agreement or a joint operation agreement.

Recently, Contractual JVs were increasingly being used in other industries after the issuance of Decree of the Minister of State-Owned Enterprises (SOE) No SK-315/MBU/12/2019 of 2019 regarding the Arrangement of Subsidiaries or Joint Venture Companies within SOE (the “SOE Decree 315/2019”). The SOE Decree 315/2019 regulates the temporary suspension (moratorium) on the establishment of subsidiaries or joint venture companies by SOEs until the Minister of SOEs revokes the moratorium policy. As a result, Contractual JV methods are commonly used in many instances of co-operation between SOEs and private companies.

Generally, the primary drivers in determining the suitable JV vehicle are as follows.

Risk Sharing and Liabilities

One of the main differences between a PT and a Firm, CV and Contractual JV is the limited liability nature of a PT (see 2.1 Typical JV Structures). For a Firm, CV and Contractual JV, there is no limited liability protection for the parties, and therefore each party may be directly liable for any debts and financial losses of the JV. The difference between a Firm, a CV and a Contractual JV lies in the risk sharing between the partners. According to the Indonesian Commercial Code, the partners of a Firm and a CV are jointly liable for any obligations and/or liabilities of the Firm or CV to third parties. In a Contractual JV, such joint liability can only arise if the partners have agreed to such joint liability in the co-operation agreement or joint operation agreement.

Management and Operations

A PT offers a formal management structure, with a Board of Directors (BOD), a Board of Commissioners (BOC) and General Meetings of Shareholders (GMS) as its organs. Each organ plays a distinct role in a PT (see 6.2 Governance and Decision-Making and 7.2 Duties and Functions of JV Boards and Directors for further elaboration on the role of each organ in a PT). This structured governance framework provides clarity on decision-making processes and may prevent conflicts, but it also requires adherence to certain formal procedures under Law No 40 of 2007 regarding Limited Liability Companies, as last amended by the Omnibus Law (the “Company Law”). Partnerships are often more flexible in their governance, with the JV partners directly managing the operations of the CV or Firm (except for passive partners of a CV, who do not have control over the management and day-to-day operations of the CV). Similarly, in a Contractual JV, the management and operation of the JV are directly carried out by each of the JV partners according to their respective obligations set forth in the co-operation agreement or joint operation agreement. Accordingly, each partner will be responsible to their respective assigned obligations pursuant to the agreement. This flexibility in partnerships and Contractual JV, however, can also lead to disputes if the roles and responsibilities of each partner are not clearly defined.

The principal authorities overseeing JV activities in Indonesia are the Ministry of Law (MOL) (formerly the Ministry of Law and Human Rights) and the Ministry of Investment/Investment Co-ordinating Board (Badan Koordinasi Penanaman Modal, or BKPM). In particular, the MOL is responsible for approving or registering the establishment of JV entities in Indonesia, including PTs, Firms and CVs. The BKPM is authorised to oversee foreign and domestic investment, including the realisation of investment plans. Aside from the MOL and the BKPM, JVs may also be subject to different sectoral authorities depending on the business sector in which they engage.

The primary laws and regulations governing JVs in Indonesia include the following.

• Indonesian Civil Code (ICC) – The foundation of civil law in Indonesia.
• Indonesian Commercial Code – Outlines the legal framework for forming and operating business entities in the form of partnerships such as CVs and Firms.
• Company Law – Provides the framework for the establishment, administration and dissolution of PTs in Indonesia.
• Investment Law – Sets out the parameters for domestic and foreign capital investment.
• Presidential Regulation No 10 of 2021 regarding Business Fields for Capital Investment, as amended by Presidential Regulation No 49 of 2021 (the “PR 10/2021 as Amended”) – Governs business fields that are open for domestic and foreign capital investment in Indonesia.
• Government Regulation No 28 of 2025 regarding the Implementation of Risk-Based Business Licensing (the “GR 28/2025”) – Provides guidelines for the implementation of risk-based business licensing in Indonesia. It provides a framework for categorising businesses into various risk levels (low, medium, medium-high and high), each with distinct licensing requirements and procedures. The regulation also mandates the use of the Online Single Submission Risk-Based Licensing (OSS RBL) system to streamline the licensing process.
• BKPM Regulation No 4 of 2021 regarding Guidelines and Procedures for Risk-Based Business Licensing Services and Investment Facilities (the “BKPM Reg 4/2021”) – Provides further guidelines and procedures for risk-based business licensing through the OSS RBL system.
• BKPM Regulation No 5 of 2021 regarding Guidelines and Procedures for Risk-Based Business Licensing Supervision – Regulates the supervision of risk-based business licensing, outlining the responsibilities of the government in monitoring and evaluating compliance with licences, including the post-licensing phase, to ensure adherence to relevant laws and regulations.

In Indonesia, Law No 8 of 2010 regarding the Prevention and Eradication of Money Laundering Crimes (the “Money Laundering Prevention Law”) sets out the framework to combat money laundering, establishing the framework for AML efforts and requiring certain entities to report suspicious financial transactions to the Indonesian Financial Transaction Reports and Analysis Centre (Pusat Pelaporan dan Analisis Transaksi Keuangan, or PPATK). The law mandates due diligence and reporting requirements for entities, especially those involved in financial transactions, including joint ventures. The Money Laundering Prevention Law’s implementing regulation, Government Regulation No 43 of 2015 regarding Reporting Party in the Prevention and Eradication of Money Laundering Crimes (the “GR 43/2015”), further regulates the entities that are required to report suspicious financial transactions to the PPATK.

Law No 9 of 2013 regarding the Prevention and Eradication of Criminal Acts of Terrorism Financing (the “Terrorism Financing Prevention Law”) complements the Money Laundering Prevention Law and its implementing regulation by specifically targeting financial support for terrorist activities. The Terrorism Financing Prevention Law prohibits every individual and entity from financing terrorism within Indonesian territory and outside Indonesian territory. Collectively, the Money Laundering Prevention Law, GR 43/2015, and the Terrorism Financing Prevention Law require joint ventures to ensure their partners are not committing money laundering and terrorism financing, and that the business activities of these joint ventures adhere to the aforementioned legal requirements.

In Indonesia, there are no specific national security regulations or sanctions laws that regulate restrictions on the co-operation with or formation of joint ventures. However, the regulatory framework established under the Investment Law and PR 10/2021 as Amended outlines certain business sectors where foreign investment is prohibited or restricted. Sectors fully closed to foreign ownership include those tied to cultural heritage and national identity, such as the batik industry, traditional cosmetics and medicine, and coffee processing with registered geographical indications. Strategic sectors related to defence and security, including the weapons, warship and military aircraft industries, are partially restricted to foreign ownership.

While there is no formal national security screening for JV formation, the BKPM regulates and oversees compliance with foreign investment rules. Foreign investors should conduct early legal review to ensure their proposed JV structure aligns with sectoral restrictions and regulatory requirements.

In Indonesia, JVs are subject to antitrust regulations primarily governed by Law No 5 of 1999 regarding the Prohibition of Monopolistic Practices and Unfair Business Competition, as amended by the Omnibus Law (the “Competition Law”). The Competition Law is enforced by the Indonesian Competition Supervisory Commission (KPPU), which monitors and regulates business practices to prevent anti-competitive behaviour. JVs can raise antitrust concerns, particularly if they result in market concentration, reduce competition or create barriers to entry. The Competition Law prohibits agreements between business actors that may result in monopolistic practices or unfair competition, which can include certain JV arrangements if they significantly impact market dynamics.

JVs formed through mergers, acquisitions or consolidations may also be subject to post-transaction notification to the KPPU if they meet certain thresholds, as regulated under Government Regulation No 57 of 2010 regarding Mergers, Consolidations and Acquisitions of Shares that May Result in Monopolistic Practices and Unfair Business Competition. The KPPU will assess whether the JV could lead to a significant lessening of competition in the market. As such, companies should evaluate potential antitrust risks early and seek legal advice to ensure compliance with Indonesian antitrust laws.

In Indonesia, there are no restrictions for publicly listed companies to be a participant in a JV. However, additional obligations may apply, particularly if the participation of the listed company in the JV is classified as a material transaction, affiliated transaction and/or conflict of interest transaction.

Publicly listed companies that are listed on the Indonesia Stock Exchange (IDX) are subject to the authority of the Indonesian Financial Services Authority (Otoritas Jasa Keuangan, or OJK). In this regard, OJK Regulation No 17/POJK.04/2020 of 2020 regarding Material Transactions and Changes of Business Activities (the “OJK Reg 17/2020”) defines a material transaction as a transaction conducted by listed companies or controlled companies (of the listed companies) that exceeds certain value thresholds. For transactions in the form of participation in business entities, such as establishing a JV company, the applicable value threshold is equal to or more than 20% of the listed company’s equity. If this value threshold is met, the participation in and establishment of a JV company by a publicly listed company shall be subject to a public disclosure requirement.

OJK Regulation No 42/POJK.04/2020 regarding Affiliated and Conflict of Interest Transactions (the “OJK Reg 42/2020”) may also provide additional obligations for publicly listed companies in participating in a JV company. In this context, an affiliated transaction refers to any activities and/or transactions that are carried out by listed companies or companies controlled by the listed companies (the “Controlled Companies”) with (i) affiliates of the listed company or (ii) affiliates of members of the BOD or BOC, principal shareholders or controllers of the listed company. A conflict of interest transaction is a transaction carried out by a listed company or Controlled Company with any party, either an affiliate or non-affiliate, that has a conflict of interest, namely a difference between the economic interests of the listed company and the personal economic interests of members of its BOD or BOC, principal shareholders or controllers that may result in the listed company incurring losses.

Based on OJK Reg 42/2020, if the transaction is an affiliated transaction or involves a conflict of interest, the publicly listed company is required to engage an independent appraiser to determine the fair value of the object of the transaction and/or the fairness of the transaction concerned. Public disclosure of such transactions and the approval of independent shareholders are also mandatory.

Every company is required to identify and register its ultimate beneficial owners with the MOL during the time of incorporation, as provided under Presidential Regulation No 13 of 2018 regarding the Implementation of Know Your Beneficial Owners of the Corporation for the Purpose of Prevention of Criminal Acts of Money Laundering and Terrorism Financing (the “PR 13/2018”) and Ministry of Law and Human Rights Regulation No 15 of 2019 regarding the Procedures for Implementing Know Your Beneficial Owner Principles by Corporations (the “MOLHR Reg 15/2019”). These regulations define a beneficial owner as an individual who meets any of the following criteria:

• owns more than 25% of shares in the company as provided in the company’s Articles of Association (AOA);
• owns more than 25% of the total voting rights as provided in the company’s AOA;
• receives more than 25% of the profit generated by the company per year;
• has the authority to appoint, replace or dismiss members of the BOD and BOC;
• has the authority to control the company without obtaining any authorisation from any other party;
• receives benefit from the company; and/or
• is the actual owner of the funds used to issue the company’s shares.

To strengthen the investment climate in Indonesia, the Indonesian government has introduced several key regulations aimed at attracting investors. Notably, Presidential Regulation No 10 of 2021, as amended, significantly liberalised foreign investment by reducing the number of sectors subject to foreign ownership restrictions. In parallel, the government streamlined business registration and licensing procedures through the Omnibus Law and GR 28/2025, with the aim of making it easier for investors to start and operate businesses in Indonesia.

The documents used for negotiations between potential JV partners will be subject to the nature of the collaboration/transaction between the JV partners. Broadly speaking, such documents are typically as follows.

Non-Disclosure Agreement (NDA)

The potential JV partners may enter into an NDA, which governs the obligations of the JV partners to maintain the confidentiality of the potential JV arrangement as well as any sensitive information related thereto to protect the information from being disclosed to third parties or used for unauthorised purposes. The NDA is typically executed before the parties conduct due diligence on each other.

Due Diligence Request List (DDRL) or Due Diligence Questionnaire (DDQ)

The DDRL or DDQ is a comprehensive set of questions and requests for information and documents that the parties exchange during the due diligence process. It helps both parties assess each other’s financial, legal, operational and other aspects relevant to the potential joint venture.

Term Sheet

A term sheet is a concise preliminary document that outlines the key terms and conditions that will form the basis of the final JVA, SHA or co-operation agreement/joint operation agreement. It is typically used in the early stages of negotiations to ensure that all parties agree on the fundamental aspects of the JV before drafting a comprehensive and legally binding agreement. While the term sheet is generally non-binding, it serves as a critical tool to align the expectations of all parties and to identify and resolve any potential areas of disagreement early in the process.

Generally, the disclosure requirements will arise after the JV’s establishment. A JV in the form of a PT, CV and Firm will be bound to the disclosure requirements of the MOL following the execution of the JV’s Deed of Establishment (DOE) containing the JV’s AOA. Specifically for a JV in the form of a PT, if the JV is created through a merger, acquisition or consolidation of an existing PT, then disclosure through newspaper announcements and disclosure to employees must be made at the latest 30 days prior to the notice to all shareholders to convene the GMS to approve such merger, acquisition or consolidation.

Additional disclosure requirements may also apply depending on the business sector of the JV. Further, companies listed on the IDX participating in a JV may be bound by additional disclosure requirements set out under OJK Reg 17/2020 and OJK Reg 42/2020. As elaborated in 3.5 Listed Companies and Market Disclosure Rules, the additional disclosure requirements will be triggered if the participation of the publicly listed company in the JV is considered a material transaction, affiliated transaction and/or conflict of interest transaction.

JV agreements in Indonesia commonly include conditions precedent (CPs) that must be met before closing.

For agreements to establish a new JV entity, common CPs include completion of corporate approvals from the parent companies (such as board and shareholder approvals) prior to the establishment of the JV entity. Once the JV entity has been established and the required capitals have been injected, the JV parties typically co-operate to secure the necessary business licences and regulatory approvals required for the JV entity to operate. As such, licensing requirements are generally treated as a shared responsibility rather than a condition imposed solely on one JV partner. That said, a JV partner with specific expertise or prior operational experience in the relevant industry may be expected (or formally obligated under the JVA/SHA) to take a lead role or provide substantial assistance in the licence obtainment process.

In JVs involving pre-existing entities –such as JVs formed through share transfers, mergers or acquisitions – the CPs to closing are often tailored to the findings of legal, financial, tax and technical due diligence. These may include the obtainment of outstanding licences, completion of regulatory filings or reporting obligations, rectification of corporate governance deficiencies, or renewal of agreements with key customers or vendors.

Where included, a Material Adverse Change (MAC) clause typically provides a right to delay or terminate the agreement if an event occurs that significantly affects the business, financial condition or operations of one of the parties or the JV itself prior to closing. Force majeure provisions are more commonly found and generally follow the standard approach of excusing parties from performance and protecting them from liability due to unforeseeable events beyond their control (eg, natural disasters, war, regulatory changes), as permitted under Articles 1244 and 1245 of the ICC.

Parties setting up a JV in Indonesia shall first determine the type of JV vehicle that they opt for: eg, a PT, CV, Firm or Contractual JV.

Parties opting for a PT will typically need to enter into a JVA/SHA, followed by establishing the PT according to the provisions of the Company Law, including preparing and executing the DOE containing the AOA of the PT (which shall reflect the terms of the JVA/SHA), and submitting the DOE to be approved by the MOL. Similar with a PT, the establishment of a JV in the form of a CV or Firm includes preparing and executing the DOE containing the AOA of the CV or Firm in question, and submitting the DOE to be registered with the MOL.

If the PT is a foreign capital investment company (PT Penanaman Modal Asing, or PT PMA), BKPM Reg 4/2021 provides that the minimum issued and paid-up capital of a PT PMA is IDR10 billion, unless otherwise specified by the prevailing laws and regulations. However, it is expected that this provision will be amended in the near future following the issuance of GR 28/2025.

Parties opting to set up a Contractual JV will have to enter into an agreement (typically structured as a co-operation agreement or a joint operation agreement). After the signing of the co-operation agreement or joint operation agreement, it is common for the Contractual JV to open a joint bank account to manage the finances of the joint operation.

Corporate JVs

As mentioned, the terms governing Corporate JVs are usually specified in a JVA or SHA entered into by the JV partners. Under Indonesian law, there is no rigid structure in drafting a JVA/SHA and the terms of a JVA/SHA may vary depending on the complexity of the JV and the varying contributions from the partners. Notwithstanding the foregoing, a JVA/SHA would generally contain provisions regarding:

• purpose and objectives of the JV entity;
• capitalisation structure;
• further funding;
• BOD;
• BOC;
• GMS;
• transfer of shares;
• deadlocks;
• breach of contract;
• tag along/drag along;
• non-competition and non-solicitation;
• governing law and dispute resolution; and
• general boilerplate clauses.

Contractual JVs

Contractual JVs are typically governed under a co-operation agreement or a joint operation agreement. Similar to a JVA/SHA, Indonesian law does not provide a fixed structure for preparing a co-operation agreement or a joint operation agreement. While the terms of the co-operation agreement or joint operation agreement may vary according to the complexity of the co-operation/joint operation, the general terms contained in such agreements include:

• scope of co-operation/joint operation;
• period of the agreement;
• rights and obligations of the parties;
• share of participation of the parties;
• financing and budget;
• management of co-operation/joint operation;
• breach of contract;
• governing law and dispute resolution; and
• general boiler plate clauses.

JV entities are typically set up as a PT, and the primary legal framework governing the decision-making process within a PT is the Company Law. The Company Law mandates that every PT in Indonesia have three organs, namely the BOD, the BOC and the GMS. Each organ plays a distinct role in the decision-making of a PT.

As elaborated in 7.2 Duties and Functions of JV Boards and Directors, the BOD has the function to carry out the management of the PT, while the BOC is responsible for supervising and advising the BOD on the management of the PT. The GMS is vested with the right to make significant corporate decisions for the PT. Pursuant to the Company Law, the authority of the GMS includes making decisions regarding the following key matters:

• appointment of BOD and BOC members;
• amendment of the AOA;
• mergers, acquisitions, consolidations and spin-offs;
• submission of application for the PT to be declared bankrupt;
• extension of duration of the PT, if the AOA provide that the PT was established for a fixed term;
• dissolution of the PT; and
• transfer or encumbrance of the PT’s assets with a value of more than 50% of the total net assets of the PT in one or more transactions.

Generally, under the Company Law, the quorum required for a GMS to be validly convened necessitates the presence or representation of more than 50% (simple majority) of the total shares with voting rights, whereby any resolution passed during such GMS shall be considered as valid if it is approved by more than 50% of the total votes legally cast at the meeting. However, certain matters under the Company Law require higher quorum and voting requirements for the GMS, such as (i) amendment to the AOA, which can only be passed by the GMS if attended by at least two thirds of the total shares with voting rights issued by the company, and approved by at least two thirds of the total votes legally cast at the meeting; and (ii) mergers, acquisitions, consolidations and spin-offs, which can only be approved by the GMS if attended by at least three quarters of the total shares with voting rights issued by the company, and approved by at least three quarters of the total votes legally cast at the meeting.

The AOA may stipulate higher quorums and voting requirements than the Company Law, but not lower. Hence, if the AOA of the JV entity does not stipulate higher quorum and voting requirements for the GMS, a shareholder holding three quarters (ie, 75%) or more of the shares in the JV entity would effectively have the power to unilaterally pass any GMS resolution, without the participation and consent of the other shareholders. Consequently, such shareholder would be able to unilaterally steer the JV entity’s direction. Accordingly, the shareholding composition in a PT plays a pivotal role in the decision-making of a PT.

In addition to shareholding composition, the composition of the BOD and BOC plays a central role in the decision-making process. The composition of the BOD and BOC is often reflective of the shareholding composition, with each JV partner typically having the right to appoint a certain number of directors and commissioners in the JV entity. See 7.1 Board Structure for further elaboration on the BOD and BOC structure.

In this context, a crucial step in regulating decision-making in a PT is the formulation of clear and detailed reserved matters, which are important matters that require the consent of specific corporate organs and are subject to certain quorum and voting requirements. These typically include matters such as capital expenditure, changes to the company’s business activity, and dissolution of the company. Reserved matters usually can only be passed by unanimous consent. This approach is designed to ensure that no single party can unilaterally control the JV entity’s direction or make critical decisions, thereby maintaining a balance of power within the JV entity. Reserved matters may be created at the BOD, BOC or GMS level.

Typically, JVs in Indonesia are financed through a combination of debt and equity, with the specific proportion between debt and equity funding depending on the nature of the business, the financial capability of the JV partners and their strategic objectives.

Equity funding, provided by the JV partners, establishes the ownership structure of the entity. If there is no classification of shares, each JV partner’s equity contribution is directly proportional to their shareholding percentage in the JV.

The JVA/SHA also typically includes clauses detailing the policies for future funding. These policies can vary significantly, ranging from no obligation or commitment for the shareholders to provide future funding proportional to their shareholding percentage, to commitments and obligations to always provide future funding proportional to their shareholding percentage (with penalties to be imposed if one shareholder fails to provide its portion of future funding and the other shareholders need to cover for the funding shortfall, as a form of disincentive for the parties to fund unproportionately). Additionally, parties may also determine the order of priority that the JV entity will follow in acquiring additional funding, for example:

(1) shareholder loan;

(2) third-party financing;

(3) issuance of new shares to shareholders; and

(4) issuance of new shares to third parties.

Future funding in the form of equity funding by a JV partner can significantly impact the ownership structure of the JV. If one partner contributes additional equity while the others do not, this could lead to a dilution of the non-contributing partners’ shares, shifting control within the entity. To address this, the Company Law provides pre-emptive rights to the shareholders, which give existing shareholders the right to subscribe to new shares to be issued by the JV entity in proportion to their shareholding percentage in the JV entity. Only if there is a balance of shares not being subscribed by a JV partner do the other JV partners (who have successfully subscribed and paid their portion of new shares) have the right to subscribe and pay for the unsubscribed portion. This ensures that the balance of control is preserved unless all parties agree to a change.

Deadlocks at the BOD, BOC or shareholders level are common challenges in JVs in Indonesia.

At the BOD or BOC level, in the event of a tie vote or deadlock in a BOD or BOC meeting, one common method to resolve the same is to grant the President Director or President Commissioner (as applicable) an additional vote/determining vote in the JVA/SHA, enabling them to break the tie and resolve the deadlock. Alternatively, the JVA/SHA may also provide that any deadlock in a BOD meeting is to be resolved in a BOC meeting and, subsequently, any deadlock in a BOC meeting is to be resolved in a GMS. The rationale for this escalation is that higher-level management may have a broader perspective and greater flexibility to negotiate a resolution.

On the other hand, deadlocks between the shareholders/JV partners usually occur during the GMS. In most JVA/SHAs, a deadlock between the shareholders/JV partners is typically deemed to occur when there are certain matters proposed by a shareholder which require the approval of the other shareholders (typically, reserved matters which require unanimous approval of the shareholders) but fail to be approved by the other shareholders for several consecutive occasions. In such an event, the JVA/SHA typically provides that the shareholders shall appoint a representative (usually a member of each shareholder’s senior management) to further discuss and negotiate in good faith for a certain period of time to resolve the deadlock. If the deadlock is not resolved within the agreed period of time, each shareholder may make an offer to the other shareholders to purchase or sell all (and not some) of their respective shares in the JV at a price determined by an independent appraiser. If no shareholder makes an offer to purchase or sell the shares, or if the shareholders are equally willing to purchase or sell their respective shares, the JVA/SHA may provide that the shareholders must sell all of their shares to a third-party buyer via an independent broker.

As a last resort, the SHA may include a provision for the dissolution of the JV if the deadlock still cannot be resolved (including if the shareholders fail to sell all of their shares to a third-party buyer). While this is generally seen as a measure of last resort, dissolution of a JV provides a clear exit strategy for the parties involved, preventing prolonged disputes that could harm the JV’s operations and value.

The supplementary documentation that the parties may require based on the nature of the JV are (among others) as follows.

• AOA – The AOA is a statutory document required for the incorporation of a Corporate JV (eg, PT, CV, Firm) in Indonesia, outlining the entity’s governance, management structure and internal regulations, and is publicly filed with the MOL. Different from a JVA/SHA, which is a private agreement between the JV partners and also addresses the commercial and operational terms between the JV partners, the AOA focuses on the general framework and compliance with Indonesian law and is a public document. The contents of the AOA must be consistent with the terms of the JVA/SHA agreed by the JV partners.
• IP licence agreement – Often, JVs involve the utilisation of IP, especially trade marks and patents from one or more JV partners. An IP licence agreement plays a crucial role in formalising the JV entity’s right to use IP while protecting the IP owner’s rights, ensuring that such utilisation is clearly regulated.
• Secondment agreement – This agreement facilitates the temporary assignment of employees from the JV partners to the JV entity, allowing the JV partners to contribute expertise and personnel without permanently transferring staff. This agreement outlines the roles, compensation and obligations of the assigned personnel during the secondment period.

Generally, the rights and obligations of each of the JV partners correspond to their respective shareholding percentage in the JV entity. JV partners are entitled to receive dividends in proportion to their shareholding percentage in the company, which may be distributed annually, subject to fulfilment of certain conditions and requirements under the Company Law.

Shareholders also have the right to access to essential company information, including financial statements. In practice, JVA/SHA often contain explicit provisions granting shareholders ongoing access to operational and financial information, enabling them to monitor performance of the JV entity effectively.

Moreover, JVA/SHA may designate certain governance matters to require the approval of a specific quorum of the GMS, widely known as shareholders’ reserved matters. Reserved matters typically relate to material corporate actions such as M&A transactions, asset encumbrances or the incurrence of debt beyond a certain threshold. While shareholders are not personally liable for losses and liabilities arising from such actions, these provisions serve as an important contractual safeguard to ensure indirect control over critical decisions.

Though minority shareholders are entitled to limited decision-making power, various protective measures can be negotiated to safeguard their interests. One common approach is securing the right to nominate certain members of the BOD and/or BOC. This ensures minority representation in the governance and strategic direction of the JV. To further strengthen their position, minority shareholders may also negotiate for specific matters – particularly those deemed as critical corporate actions – to require their consent. This is commonly achieved by setting the quorum and voting thresholds at the GMS for such specific matters to be unanimous, or as high as possible, so that these matters cannot be passed without the minority’s approval.

As an additional safeguard, minority shareholders often negotiate exit rights, such as put options, tag-along rights or other exit mechanisms. These provisions offer a means of protection in the event of deadlock, misalignment or other situations that compromise the viability of continued participation in the JV. In parallel, Indonesian law also provides a statutory remedy in the form of share buy-backs under Article 62 of the Company Law, which may be exercised when minority shareholders dissent from corporate actions they deem detrimental to their interests, namely:

• amendment to the AOA;
• transfer or encumbrance of the company’s assets with a value exceeding 50% of the company’s net assets; or
• merger, consolidation, acquisition or spin-off.

However, buy-backs are limited to a maximum of 10% of the issued and paid-up shares and must not reduce the company’s net assets below the sum of its issued and-paid up capital and mandatory reserves.

JV parties are generally free to determine the governing law of their JVA/SHA. However, choosing a law other than Indonesian law to govern the JVA/SHA of a JV entity established in Indonesia is uncommon, as key aspects of the JV arrangement – such as the entity’s corporate governance, employment relationships, and matters like land ownership – are mandatorily governed by Indonesian law, regardless of the parties’ choice of governing law. As such, selecting a foreign governing law may introduce certain complexities into the arrangement.

Dispute resolution mechanisms are also subject to party autonomy. JV parties may elect to resolve disputes through courts or arbitration. In practice, arbitration is commonly preferred, particularly under the rules of the Singapore International Arbitration Centre (SIAC) or Indonesia’s domestic arbitration body, Badan Arbitrase Nasional Indonesia (BANI). While Indonesian courts remain an available forum, they are rarely chosen by foreign investors due to concerns over unpredictability, language barriers, perceived lack of neutrality, and the lengthy process required to obtain a final and binding judgment.

Indonesia is a party to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Accordingly, foreign arbitral awards are enforceable in Indonesia upon obtaining an exequatur (enforcement order) from the Central Jakarta District Court, provided they comply with procedural requirements and do not violate Indonesia’s public policy.

Number of Board Members

Generally, the Company Law does not provide a limit regarding the maximum number of BOD and BOC members that the shareholders can appoint in a PT. However, Articles 92(3) and 108(3) of the Company Law provide that a PT must have at least one BOD member and one BOC member. Notwithstanding the foregoing, PTs engaged in certain business sectors may be subject to different BOD and BOC requirements. For example, PTs engaging in peer-to-peer lending business activities are required to have at least two BOD members and at least one BOC member, and the number of BOC members must not exceed the number of BOD members.

Nomination of Board Members

The number of BOD members and BOC members each party is entitled to nominate usually depends on the shareholding composition in the JV company. Generally, a party having a majority of the shareholding in the JV company would be entitled to nominate more BOD and BOC members compared to the minority shareholder(s). Alternatively, the majority shareholder and the minority shareholder may be given the right to nominate the same number of BOD or BOC members, but the majority shareholder is given the right to nominate the President Director or President Commissioner. These BOD and BOC nomination rights will have an effect on the decision-making process in the BOD and BOC meetings.

The nomination of BOD and BOC members must comply with requirements under Articles 93(1) and 110(1) of the Company Law. Board members must be individuals who are capable of performing legal acts and free from disqualifying circumstances, namely:

• having been declared bankrupt;
• having been held personally liable for a company’s bankruptcy while serving on a board; or
• having been convicted of a criminal offence causing state financial loss or relating to the financial sector, within the past five years.

JV parties are free to elect either Indonesian or foreign nationals for these positions, except for roles involving human resource functions, which remain strictly reserved for Indonesians.

Quorum and Voting Requirements

In respect of the quorum and voting requirements for BOD and BOC meetings, the Company Law is silent and therefore the shareholders have the liberty to regulate these provisions in the JVA/SHA and AOA. The JVA/SHA and AOA may regulate that a BOD or a BOC meeting can be held if attended by more than fifty percent (50%) (simple majority) of the total members of the BOD or BOC, whereby any resolution passed during such meeting shall be considered as valid if it is approved by more than fifty percent (50%) (simple majority) of the directors or commissioners attending the relevant meeting. In cases of tie votes, the JVA/SHA may provide that the President Director or the President Commissioner will have a second vote as the tie breaker in the relevant BOD or BOC meeting. Therefore, in such a case, the relevant shareholder with the right to nominate the President Director and the President Commissioner will have greater control over the BOD and BOC meetings.

Regulation of weighted voting rights

In connection to the above, while companies are allowed to issue different classifications of shares (for example, shares with or without voting rights), the Company Law does not allow weighted voting rights to be given to shareholders. Under the Company Law, shareholders are only entitled to one voting right per share with voting rights. Exemptions may apply in publicly listed companies. Under OJK Regulation No 22/POJK.04/2021 regarding the Implementation of Shares Classification with Multiple Voting Rights by Issuers with High Innovation and Rate of Growth which Conduct a Public Offering of Equity Securities in the Form of Shares, innovative and fast-growing publicly listed companies that meet the eligibility criteria may issue a classification of shares whereby one share has multiple voting rights. This regulation is part of Indonesia’s effort to create a more flexible capital market environment, particularly for fast-growing and innovative companies such as companies in the technology sector, to create a structure allowing founders or key stakeholders to retain control despite holding a smaller equity stake.

The Company Law mandates different duties for the BOD and BOC based on their respective roles and functions in the company. Article 93 of the Company Law provides that the principal duty of the BOD is to carry out the management of the company in the best interest of the company and in accordance with the company’s purpose and objectives. In performing its management duty, the BOD is authorised to:

• represent the company both in and out of court;
• enter into contracts with third parties on behalf of the company; and
• manage the company’s day-to-day operations.

Notwithstanding the foregoing, the authority of the BOD is subject to certain restrictions and requirements under the Company Law, the company’s AOA, and the JVA/SHA (for example, if the AOA provides certain BOC/shareholders reserved matters, then these matters can only be carried out by the BOD if these matters have been approved by the BOC/GMS).

Among the statutory obligations of the BOD is the preparation of annual report and submission to the GMS within six months after the fiscal year ends, subject to prior review by the BOC, as required under Article 66 of the Company Law. The report must include (among other things):

• the financial statement;
• company activity report;
• Corporate Social Responsibility (CSR) implementation;
• issues arising during the year;
• supervisory duty report;
• name of the BOD and BOC members; and
• salaries and allowances of the board in the preceding year.

The report must be signed by all members of the BOD and BOC prior to its submission to the GMS.

If the BOD has more than one member, the GMS may determine the division of duties and responsibilities among them (or, in absence of any determination by the GMS, the BOD may determine the division of duties and responsibilities among themselves). Nonetheless, all members of the BOD remain collectively responsible for the overall management of the company. In the course of day-to-day operations, the BOD may internally delegate specific functions to designated subcommittees, which are required to report to the relevant directors. Where appropriate, the BOD may also appoint employees or external third parties, through a power of attorney, to represent the company both in and out of court.

In occurrences where all members of the BOD are absent or otherwise suspended, management and representation of the company shall be temporarily assumed by other parties as designated in the AOA, which typically includes members of the BOC. Under normal circumstances, the BOC is vested with the duty and responsibility to supervise and advise on the management of the company by the BOD, particularly ensuring that such management by the BOD is aligned with the company’s purpose and objectives.

The Company Law prohibits a member of the BOD from representing the company in situations where the member has a conflict of interest with the company. In such cases, the authority to represent the company shall be vested in:

• other members of the BOD who do not have a conflict of interest with the company;
• the BOC, if all the members of the BOD have a conflict of interest with the company; or
• other parties appointed by the GMS, if all the members of the BOD and BOC have a conflict of interest with the company.

One common approach to manage conflicts of interest in a JV company is to establish clear conflict-of-interest policies within the JVA/SHA and the AOA. These policies often require board members to disclose any potential conflicts and to recuse themselves from voting on decisions where their impartiality might be compromised.

One of the ways to disclose any potential conflicts is by preparing a Special Register. Under the Company Law, the BOD is required to prepare a Special Register, which is a source of information regarding the share ownership of members of the BOD and BOC or their family (ie, their spouses and children) in the company or in another company. The Company Law specifically mentions that the purpose of having a Special Register is to curb potential conflicts of interest in a company.

Additionally, although it is common for individuals from the JV partners to be appointed as members of the BOD or BOC of the JV company, in certain circumstances it may be inappropriate for such individuals to take a seat on the BOD or BOC of the JV company solely due to their position within a JV partner. This is particularly true when the individual’s duties within the JV partner could conflict with their fiduciary responsibilities to the JV company. For example, if the JV partners and the JV company are involved in the same market and potentially compete for resources or customers, it may create an untenable conflict of interest for the individual. In such cases, appointing an independent director who can act solely in the interests of the JV company may be a more appropriate solution.

Defining IP Assets

In establishing a JV entity, intellectual property (IP) issues are critical and require careful consideration, especially in businesses which rely heavily on IP such as manufacturing and technology. The IP contributed to the JV entity by each partner, such as patents, trade marks, copyrights and trade secrets, can be essential assets that drive the venture’s success. The ownership, use and protection of these IP assets should be clearly defined in the JVA/SHA and related documents to prevent future disputes and ensure that each party’s interests are adequately safeguarded.

Determining Ownership and Control

One of the key IP issues in establishing a JV entity is determining the ownership and control of pre-existing IP and newly developed IP. Pre-existing IP refers to the IP that each partner brings into the JV entity. The JVA/SHA should specify whether the IP will remain the property of the contributing party or be transferred to the JV entity. In cases where IP is to be licensed rather than transferred, the terms of the licence, including duration, scope, exclusivity, and any royalties or fees, should be clearly outlined in a separate licensing agreement between the licensor and the JV entity, which shall also be recorded with the MOL’s Directorate General of Intellectual Property (DGIP). For newly developed IP created during the joint venture period, the JVA/SHA should address whether the JV entity will own the IP or if it will be jointly owned by the JV partners, including how the IP will be managed and commercialised.

Contractual JV

In a Contractual JV, IP issues are equally important. Agreements between the JV partners should clearly define the ownership of any IP generated during the collaboration and include provisions for the protection of confidential information. Additionally, agreements should address the use of each party’s pre-existing IP, ensuring that it is used only for the purposes intended by the collaboration and does not inadvertently benefit the other party outside the scope of the agreement. Clauses related to IP warranties, indemnities and dispute resolution should also be included to protect against potential IP infringement or misuse claims.

Cross-Border Issues

From a cross-border perspective, Indonesian law does not prohibit the assignment or licensing of IP to or from foreign parties. In parallel, both types of arrangements are subject to recordation requirements with the DGIP. Specifically for trade mark rights, Indonesia is a member state of the Madrid Protocol, which introduced an international system that simplifies the registration and management of trade marks across multiple jurisdictions. This framework enables more efficient protection and transfer of trade mark rights among member states.

One of the pivotal decisions concerning IP when structuring a JV is whether pre-existing IP rights owned by the JV partners should be licensed or assigned to the JV entity.

Licensing

Under a licensing arrangement, the JV is allowed to use the IP while the ownership remains with the original owner. This structure is often preferred when the IP has broader value beyond the JV itself as it offers room for the licensor to exploit the IP elsewhere. The licensing terms are rather flexible, as the licensor can tailor the licence to the specific needs of the JV, including restrictions on the scope, exclusivity, duration and territory of use. However, the licensor may also retain the power to terminate the licence under certain conditions, potentially jeopardising the JV entity’s continuity if the IP is central to its operations.

Assignment

In contrast to licensing, assigning IP rights involves the transfer of ownership from the original owner to the JV entity. This option may be preferable when the IP is central to the JV’s operations and success, as it gives the JV complete control over the IP, including the right to further develop, commercialise or transfer the IP without the need for ongoing negotiations with the original owner. Assignment can also simplify governance within the JV by consolidating IP ownership, thereby reducing the risk of conflicts between the partners. However, the assigning party forfeits its ownership rights, which can be a significant drawback if the IP has substantial standalone value or if the JV’s future is uncertain.

Recording Agreement

It is noteworthy that the agreement of either scheme must be recorded with the DGIP, provided that the relevant IP rights have already been registered or recorded with the DGIP under the original owner. In the context of licensing, this recordation is to ensure the enforceability of the licensing towards third parties.

Financial Implications

Lastly, the implications of licensing versus assigning IP rights extend to various financial aspects. The choice influences the valuation of the JV entity, the allocation of profits derived from the IP, and potential tax consequences, particularly concerning the characterisation of payments as royalties (for licensing) or purchase prices (for assignment).

Indonesia has several key Environmental, Social and Governance (ESG)-related regulations that JV entities must be aware of. Among the most notable is Law No 32 of 2009 regarding Environmental Protection and Management, as amended by the Omnibus Law (the “Environmental Law”), which imposes strict environmental protection standards and mandates that companies assess their environmental impacts and obtain the necessary environmental permits. Under the Company Law and Minister of SOE Regulation No PER-1/MBU/03/2023 regarding Special Assignments and Social and Environmental Responsibility Programs of SOEs, PTs whose business activities involve managing and utilising natural resources and SOEs are required to perform CSR activities that benefit the community. This requirement underscores the importance of social responsibility in the corporate framework. Additionally, OJK Regulation No 51/POJK.03/2017 concerning the Implementation of Sustainable Finance for Financial Services Institutions, Issuers and Public Companies mandates the incorporation of sustainability principles into financial institutions and publicly listed companies. OJK Circular Letter No 16/SEOJK.04/2021 further provides guidelines for ESG disclosures in annual reports for public companies.

As discussed in 1.2. Industry Trends and Emerging Technologies, the Indonesian government remains committed to its environmental sustainability goals, particularly by encouraging a shift towards cleaner energy sources, including the use of EV. While no major regulatory developments have taken place over the past year, there has been notable growth in the renewable energy sector and industries related to EVs and their components. Discussions are also underway regarding the issuance of new ESG-related regulations, including the introduction of comprehensive ESG obligations in the industrial sector and the implementation of sanctions in carbon trading. However, no official drafts or detailed proposals are currently available for further review.

The termination of a JV can be either mutual, where all parties agree to end the collaboration, or unilateral, where one party seeks to terminate the collaboration based on specific conditions or events. Mutual termination of a JV usually occurs when the objectives of the JV have been achieved or if the parties agree that continuing the JV is no longer in their best interest. Under Indonesian law, contracts, including JVA/SHAs and co-operation agreements/joint operation agreements, can be terminated by mutual consent, pursuant to Article 1338 of the Indonesian Civil Code. The parties typically need to document the mutual termination through a written agreement.

A JV partner is also typically provided the right to unilaterally terminate the JV if another party defaults on their obligations. Pursuant to Article 1266 of the ICC, a unilateral termination based on the other party’s default can only be performed with prior court approval. Therefore, it is common for parties to an agreement governed under Indonesian law to include a waiver of this provision to ensure an efficient unilateral termination without requiring prior court approval. Common reasons for unilateral termination of a JV in Indonesia include:

• breach of contract by one of the JV partners;
• insolvency/bankruptcy of one of the JV partners; and
• force majeure.

Specifically in the context of a Corporate JV, one of the possible consequences of a termination of the JV is an agreement that the JV entity undergoes a winding-up process, which includes the processes of settling debts, collecting receivables and completing any outstanding obligations. Another critical aspect of JV termination is addressing any IP and confidential information issues. In the context of a Corporate JV, if the JV entity has developed IP during its operation, the JV partners need to determine who will retain ownership of the IP after termination. This may include assigning the IP to one of the partners or jointly owning the IP post-termination. Additionally, in either a Corporate JV or Contractual JV, the JV partners must ensure that any confidential information shared during the JV is protected, either by returning or destroying sensitive documents and data or by entering into confidentiality agreements that survive the termination.

In the event of the termination of a Corporate JV structured as a PT that leads to the winding up of the JV entity, the JV entity must undergo a formal liquidation process before its assets can be distributed to the JV partners (ie, the shareholders) in the form of liquidation dividends. From a legal standpoint, there is no distinction between assets originally contributed by a JV partner and those generated by the JV entity itself; both are regarded as assets of the JV entity. Consequently, these assets will be distributed to the shareholders as liquidation dividends in proportion to their respective shareholding percentages in the JV entity.

To safeguard against potential deadlocks and conflicts among JV parties, it is essential to establish a clear and orderly exit strategy under the JVA/SHA. The parties are free to determine the most appropriate exit mechanism based on their ownership structure and the specific circumstances of the JV company.

A common exit strategy is a share transfer, either to existing shareholders or to third parties. While the Company Law does not expressly require the inclusion of pre-emptive rights in the context of share transfers, it is common practice for JV parties to include a Rights of First Refusal (ROFR) and/or ROFO (Rights of First Offer) in the JVA/SHA and AOA for any share transfer in the company.

A ROFR prohibits a selling shareholder from accepting a third-party offer without first offering the terms of the third-party offer to the other shareholders holding the ROFR. A ROFO requires a selling shareholder to first invite the other shareholders holding the ROFO to submit an offer and negotiate that offer before engaging in negotiations with third parties.

JV parties also frequently negotiate the inclusion of drag-along and tag-along rights in the JVA/SHA to facilitate a smoother exit in the event of a share sale. A drag-along right allows its holder, typically the majority shareholder, to compel other shareholders to sell their shares alongside them, under the same terms and conditions. This mechanism is generally favoured by majority shareholders as it enables a full transfer of ownership to the buyer. Conversely, tag-along rights are usually sought by minority shareholders, as they provide the right to participate in a sale on the same terms offered to the majority, thereby protecting them from being left behind in a change of control.

Put and call options are also recognised as classic and widely used exit mechanisms. These rights are typically structured to become immediately exercisable upon the occurrence of certain pre-agreed conditions, as stipulated in the SHA/JVA. Upon exercise of a put option, the counterparty is required to purchase the holder’s existing shares in the company at a predetermined price or valuation formula. Conversely, upon exercise of a call option, the counterparty is required to sell their shares in the company at a predetermined price or valuation formula. Additionally, share buy-backs remain a viable strategy for minority shareholders, as discussed in 6.7 Minority Protection and Control Rights.