Your Complete Guide to Local Nominee Services in Indonesia

Learn about local nominees in Indonesia.

Local nominee directors, shareholders, and commissioners are popular in countries with strict regulations for doing business, especially emerging markets like Indonesia.

However, using nominee services comes with a lot of essential things that you need to consider. Below, we’ll outline everything that you should know.

What are local nominee services?

Local nominees are people or legal entities that serve as directors, shareholders, or commissioner of a company on behalf of someone else. In other words, the nominees won’t have direct authority over the company and only represent the actual directors or shareholders.

A local nominee service offers you a list of one or more candidates that you can use as your local nominee. Moreover, these services usually provide legal arrangements to safely distribute control, ownership, and income between the nominees and actual owners.

What are the available types of local nominees?

Companies in Indonesia usually use three types of local nominees:

  • Local nominee directors,
  • Local nominee shareholders, or
  • Local nominee commissioners.

1. Local nominee director

A nominee director is a person who acts as director of a particular company in a passive role.

In other words, the nominee won’t be involved in managing the company. Also, they won’t be named as signatories for the company’s bank account in Indonesia.

Why do companies need nominee directors?

Both foreign or local companies need at least one local director to represent the company. This is because foreign directors need to get a KITAS or work permit before they’re eligible to work in Indonesia.

So, until they can arrange a KITAS for the foreign director, companies have the option to:

  • Name an Indonesian citizen as the director in the incorporation documents, or
  • Using a local nominee director service.

Either way, they’ll have the option to change the company director later on.

2. Local nominee shareholders

A nominee shareholder is a person or company that acts as the registered owner of another company’s shares on behalf of the actual owners.

In other words, the nominee shareholders will represent the actual owners with their names on the legal documents.

Why do companies need nominee shareholders?

Setting up a foreign company (PT PMA) in Indonesia can be quite challenging, especially if you want to do business in industries where foreign ownership is limited or even closed.

For some business purposes, incorporating as a local company (PT PMDN) would be a more efficient option. By using local nominee shareholders, businesses can register as a local company, effectively bypassing the requirements of setting up a foreign company.

Specifically, there are two main reasons why foreign companies use local nominee shareholders:

3. Local nominee commissioners

A nominee commissioner is a person that acts as the commissioner of a company on behalf of the actual owners.

The commissioner will act as a supervisor for the director and the company’s activities.

Why do companies need nominee commissioners?

Similar to nominee shareholders, local nominee commissioners can be an option for foreigners that want to incorporate as a local company (PT PMDN) instead of a foreign company (PT PMA).

This is because the commissioner of a local company needs to be an Indonesian citizen, and can’t be the same person as the director.

What are the risks of using local nominees?

Local nominee arrangements can be efficient solutions for a company to do business in Indonesia. However, it may come with some risks if you don’t choose a proper nominee service.

The nominee might leave with your assets.

An untrustworthy local nominee shareholder might use their legal ownership to seize control of your assets.

If this happens and you didn’t set up any legal agreements with them beforehand, you can’t pursue legal action against them. After all, the company documents specify the nominees as legal owners.

The ownership might transfer to someone else.

In the event of your nominee shareholder’s death, marriage, or divorce, their shares in your company might be counted as assets that someone else will inherit.

So, even if you trust the nominee shareholder, you should still arrange legal agreements to avoid unforeseen circumstances like this.

How can I safely use local nominees in Indonesia?

You need to be careful when choosing local nominees to represent you. However, local nominee arrangements are relatively common in Indonesia, so there are several safe practices that you can use.

Use nominee services from trustworthy service providers.

Look for companies or service providers with a proven track record in serving as local nominee shareholders. Trustworthy partners will ensure that you’ll always have full control over your assets.

Make legally-binding agreements.

Arrange a set of reliable, notarized arrangements with the nominee shareholders. Doing this will help protect your rights and ownership over your assets.

Are there any alternatives?

Yes. If you want to start a company in Indonesia without the minimum capital requirements, you can set up a representative office or KPPA.

This can be a simpler alternative to using local nominees. However, you should note that representative offices aren’t allowed to generate revenue.

Greenhouse offers an online platform for you to book business incorporation services and connect with market entry consultants in your target markets.

We’ll connect you with experienced consultants on the ground who can help answer your questions about doing business in Indonesia.