Can the Head of a KPPA Coordinate Parent Company Activities and Also Serve as a Director in a PT PMA?

Corporate Secretary Service Indonesia – At PortCorp, we often receive questions from foreign investors about corporate structures in Indonesia. One of the most common involves whether the Head of a KPPA coordinate parent company activities can also hold the position of Director in a Foreign Investment Company (PT PMA). Combining the two roles may seem sensible at first, but the reality under Indonesian law is more nuanced.

It’s critical to first differentiate between the roles of a PT PMA and a KPPA (Foreign Company Representative Office) in order to comprehend why.  Both provide services to foreign businesses in Indonesia, but they have different goals, operate under different laws, and have different restrictions.

Duties of a KPPA Head

A KPPA exists to represent the interests of its parent company in Indonesia without conducting direct commercial activities. The head of the KPPA, who may be an Indonesian citizen, a foreign national, or a legal entity, is responsible for supervising, coordinating, and overseeing the company’s local representation.

Under the law, the role of a KPPA is primarily to coordinate parent company activities, such as market research, building relationships with potential partners, or preparing for the establishment of a PT PMA. Signing legally binding contracts, managing local operational entities, and conducting sales transactions are all expressly forbidden.

The Head of the KPPA must live in Indonesia and is not permitted to hold positions that entail overseeing the daily operations of an Indonesian company, according to Investment Coordinating Board Regulation No. 4 of 2021 (BKPM Regulation 4/2021).

How a PT PMA Director Differs

On the other hand, a PT PMA is a fully operational business entity. Being directly responsible for the company’s commercial operations, signing contracts, and making strategic decisions are all part of the Director’s much larger role within it. The Job Creation Law, which amends Indonesia’s Limited Liability Company Law (Law No. 40 of 2007), provides directors the power to act as the company’s representative in court and out of court.

Read Also: Understanding KP3A Indonesia: Easy Guide for Foreign Businesses

In short, the Director of a PT PMA has operational and legal powers that the Head of a KPPA coordinate parent company activities does not, and cannot, hold.

Why One Person Cannot Hold Both Roles

Article 16(3) of BKPM Regulation 4/2021 states that the head of a KPPA is not allowed to act as a director of the company or conduct business. By avoiding conflicts of interest and maintaining regulatory compliance, this division guarantees that the KPPA’s non-commercial character is upheld.

The regulation was intended to prevent the blending of non-commercial and commercial roles, which would occur if the same person served as both the Head of the KPPA and the Director of a PT PMA.

The Best Practice for Foreign Companies

The most compliant method for foreign companies that want to have a representative office and a fully functional commercial entity in Indonesia is to designate different people for each position.  While the PT PMA Director propels business expansion and oversees day-to-day operations, the Head of the KPPA can concentrate on strategic representation, networking, and market entry preparation.

In conclusion, the law is clear: the head of a KPPA that coordinates parent company activities cannot also be a director in a PT PMA, even though both roles are necessary for expanding into Indonesia.  Separating these responsibilities not only complies with legal requirements but also guarantees more efficient and successful business management.

So, don’t worry about developing your business by setting up a company in Indonesia, because Portcorp is here as a solution for your business, also when you need to understand does KPPA coordinate parent company activities. Portcorp is your comprehensive corporate secretary service in Indonesia. With our presence, you can get a dedicated company secretary to support you to what you need. Our company secretaries will track deadlines and file paperwork so your business keeps running smoothly. Contact us now on +6221-5020-8090 for your business succeed in the future!