Representative Office Limitations: Can RO Sign Contracts in Indonesia?

Corporate Secretary Service Indonesia – Foreign companies establishing a Representative Office in Indonesia must understand its legal limitations. A common question arises: can RO sign contracts in Indonesia? The answer determines how you structure your business operations.

What is a Representative Office?

A Representative Office serves as a liaison for foreign companies in Indonesia. It is not an independent legal entity but an extension of its parent company. Indonesia recognizes four types of Representative Offices:

• Foreign Trading Company Representative Offices (KP3A)
• Foreign Company Representative Offices (KPPA)
• Foreign Construction Services Representative Offices
• Foreign Electricity Support Services Representative Offices

Key Restrictions on Representative Offices

All Representative Offices face important operational restrictions:

• Cannot generate income in Indonesia
• Cannot conduct sales transactions
• Cannot participate in company management
• Must operate from provincial capital offices

These restrictions directly address the question can RO sign contracts in Indonesia?

Contract Signing Authority

Representative Offices cannot sign commercial contracts. This prohibition includes:

• Sales agreements
• Service contracts
• Distribution agreements
• Procurement contracts

The Indonesian government explicitly prohibits Representative Offices from engaging in any form of trading activity. This answers the central question can RO sign contracts in Indonesia with a clear negative.

Permitted Activities

While prohibited from commercial contracts, Representative Offices can:

• Conduct market research
• Act as supervisor and coordinator
• Manage parent company interests
• Prepare for future PMA establishment
• Build business relationships

Read Also: Choosing Between Self-Application and Professional Import License Help

Comparison with PT PMA

Understanding the difference with Foreign Investment Companies (PT PMA) clarifies contract limitations:

Representative Office

• No minimum capital requirement
• Cannot sign commercial contracts
• Not a separate legal entity
• Limited to liaison activities

PT PMA

• Minimum 10 billion IDR investment
• Full contract signing authority
• Independent legal entity
• Complete business operations

Practical Implications

If your business requires contract signing in Indonesia, you need a PT PMA, not a Representative Office. Many companies establish a Representative Office initially for market research, then transition to PT PMA when ready for commercial activities.

Documentation Requirements

Establishing a Representative Office requires:

• Articles of Association (English or Indonesian)
• Letter of Appointment (embassy legalized)
• Letter of Intent (embassy legalized)
• Statement Letter from Chief Representative
• Letter of Reference (for trading companies)

Compliance Requirements

Representative Offices must:

• File semi-annual activity reports
• Maintain non-commercial status
• Ensure chief representative resides in Indonesia
• Avoid any revenue-generating activities

Strategic Considerations

When planning your Indonesia entry, consider:

• Start with Representative Office for market research
• Transition to PT PMA for commercial activities
• Understand all activity restrictions
• Plan for eventual expansion

The question can RO sign contracts in Indonesia has significant business implications. Proper understanding prevents legal issues and ensures compliant market entry.

For companies needing contract capabilities, establish a PT PMA instead of a Representative Office. This provides full commercial rights while maintaining regulatory compliance. Professional guidance helps navigate these decisions effectively.

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 the question of can RO sign contracts in Indonesia. 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!