The Financial Services Authority (the FSA) has issued new regulations on obtaining a licence to run a conventional or Sharia financing company. (the Regulations).* All previous regulations on the topic are revoked.**

The Regulations state that all finance companies must be established as limited liability companies, abolishing the right for finance companies to establish as cooperatives.  The companies must have a paid-up capital of at least IDR 250 billion (approximately USD 17 million), more than doubling the paid-up capital required under the previous regime.

The Regulations set out rules as to who is allowed to own shares in the limited liability finance companies.  For example, under the new Regulations, foreign citizens are now allowed to own shares in finance companies but only through stock exchange purchase.  The new Regulations also focus on the funding sources for the purchase of shares – with money gained through illegal activities prohibited.

The new Regulations introduce new criteria for controlling shareholders – that is – prior to becoming a controlling shareholder in a finance company, with some exceptions, a legal entity must have been operating a business for at least two years.

The Regulations set out rules for finance companies which appointed foreign citizens as members of the executive institutions (i.e. the Board of Directors and/or the Board of Commissioners) to also appoint Indonesian nationals so that the composition of the executive institutions shall be at least 50% represented by Indonesian nationals. Finance companies which already operate before this Regulations were issued shall fulfil the requirements of having its Board of Commissioners to be filled at least 50% by Indonesian nationals before 26 November 2022.

* FSA Regulation No. 47/POJK.05/2020 on the Business Licensing of Financing Companies and Sharia Financing Companies.

** FSA Regulation No. 28/POJK.05/2014 on the Business Licensing of Financing Companies.