For startups founded by foreign nationals that establish a company in Indonesia, appointing the founder as a Director of a PT PMA carries legal implications that should be considered from the outset. From a corporate law perspective, a foreign national may be appointed as a Director of an Indonesian limited liability company, including a PT PMA. However, when the founder also performs managerial and operational functions for the company in Indonesia, the matter becomes relevant not only from a corporate law perspective, but also under the foreign worker (Tenaga Kerja Asing or “TKA“) and immigration regimes.
Government Regulation No. 34 of 2021 (“PP 34/2021”) defines a TKA as a foreign national holding a visa for the purpose of working in the territory of Indonesia. The same regulation allows TKA to be employed in certain positions and for certain periods, including Director and managerial positions. Accordingly, being a founder or shareholder does not, by itself, exclude a foreign national from the TKA regime if the individual actually performs work in Indonesia. The key consideration is therefore not merely whether the founder’s name appears as a Director in the company’s deed, but how the position is actually performed in practice.
Foreign Directors in the Structure of a PT PMA
The Indonesian Company Law does not require members of the Board of Directors to be Indonesian citizens. In principle, the Company Law establishes requirements relating to an individual’s legal capacity and legal circumstances to be appointed as a Director without imposing an Indonesian nationality requirement. Accordingly, a foreign national may be appointed as a Director of a PT PMA, including a founder who resides outside Indonesia.
The appointment of a Director is a corporate law matter that should be distinguished from the employment of a foreign national as a TKA. A foreign founder may legally be named as a Director in the deed of a PT PMA even if the founder is not domiciled in Indonesia and does not perform work within Indonesia. In such circumstances, the founder’s position as a Director does not, by itself, mean that the PT PMA is employing a TKA in Indonesia.
The analysis may change, however, once the founder is physically present and actively performs the functions of a Director in Indonesia. Managerial decision-making, management of the company’s operations and personnel, execution of contracts, business development, and other activities that substantively constitute work for the PT PMA may bring the founder within the TKA regime if such activities are performed in Indonesia for the purpose of working.
Foreign Founder Status under the TKA Regime
PP 34/2021 places significant emphasis on work performed within the territory of Indonesia in determining the status of a TKA. Accordingly, the terms “founder,” “shareholder,” or “co-founder” cannot in themselves be relied upon to disregard TKA requirements where the individual is in fact performing work in Indonesia.
In startup practice, foreign founders often assume broader responsibilities than Directors of more established companies. During the pre-seed or seed stage, a founder may simultaneously make day-to-day business decisions, manage employees, negotiate with investors, execute contracts with vendors, develop customer relationships, and oversee the company’s operations. Where these activities are physically performed in Indonesia, the company should assess its TKA obligations before the activities commence.
Conversely, where a founder is merely listed as a Director in the company’s corporate documents, resides outside Indonesia, and does not perform work within Indonesia, this situation should be distinguished from one in which the founder actively operates the company in Indonesia. Accordingly, the formal appointment as a Director is not necessarily the sole determining factor. The founder’s actual activities and the purpose of the founder’s presence in Indonesia remain important elements of the analysis.
RPTKA Requirements for a PT PMA
Where a foreign founder works in Indonesia as a Director, the PT PMA is, in principle, required to comply with the applicable TKA requirements. PP 34/2021 requires an employer of TKA to obtain an RPTKA Approval issued by the Minister or an appointed official. This requirement is also reaffirmed under Minister of Manpower Regulation No. 8 of 2021 (“Permenaker 8/2021”).
A PT PMA falls within the category of TKA employers because it is a limited liability company established under Indonesian law and conducts business activities in Indonesia. Accordingly, where a foreign founder works as a Director in Indonesia, the PT PMA should obtain an RPTKA Approval for the employment of the TKA in accordance with the relevant position and period.
An RPTKA is essentially a plan for the employment of a TKA in a specific position and for a specific period. Accordingly, the RPTKA should be treated as part of the company’s compliance structure before the founder begins working in Indonesia, rather than as an administrative document to be completed after the company has commenced operations. The applicable TKA regulations also require TKA to be employed in accordance with the approved RPTKA.
This issue is particularly relevant for startups because founders typically begin performing operational functions immediately after the PT PMA is established. Activities such as executing contracts, managing employees, conducting business activities, and making operational decisions may begin before the company has established a complete compliance system. If the foreign founder has already begun performing such activities in Indonesia, the company should ensure that its TKA employment structure has been properly established in accordance with the applicable regulations.
DKPTKA as Part of TKA Compliance
In addition to the RPTKA requirement, employing a TKA may give rise to an obligation to pay the Foreign Worker Compensation Fund (Dana Kompensasi Penggunaan TKA or “DKPTKA“). Under Permenaker 8/2021, DKPTKA is generally imposed at a rate of USD 100 per position per person per month, subject to certain regulatory exemptions.
Being a founder or shareholder does not, by itself, provide an exemption from DKPTKA. Accordingly, where a foreign founder works in Indonesia as a Director and is treated as a TKA employed by the PT PMA, the applicable DKPTKA obligation should be taken into account as part of the company’s compliance requirements and operating costs.
For early-stage startups, this cost is often overlooked because the company’s primary focus is usually on establishing the PT PMA, determining the shareholding structure, obtaining business licences, and securing funding. However, once the foreign founder begins working in Indonesia, employment and immigration compliance should form part of the company’s legal structure from the outset.
RPTKA and Work Stay Permit
Compliance relating to a foreign founder must also be aligned with the immigration regime. The RPTKA forms part of the employment regulatory framework, while the visa and stay permit for work fall under the immigration framework. Both should be consistent with the activities actually performed by the founder in Indonesia.
Permenaker 8/2021 provides that information concerning prospective TKA submitted through the TKA Online system is used as a recommendation for obtaining a visa and stay permit for the purpose of working. Accordingly, employment and immigration processes should not be treated as two entirely separate matters.
A foreign founder who enters Indonesia using a business visa or another type of stay permit but in practice performs work as a Director of a PT PMA should ensure that the actual activities undertaken are consistent with the purpose of the visa and stay permit. Where the founder is intended to reside and work in Indonesia in performing the functions of a Director, the RPTKA and work-related stay permit should be structured consistently from the outset.
Exemption from Work Authorization for Shareholder Directors
The current employment and immigration regulations may provide certain exemptions from work authorization requirements for Directors who also hold shares in the relevant company, subject to specific qualifications and conditions. Accordingly, the assumption that every foreign founder who serves as a Director must automatically obtain the same work authorization should be avoided without first reviewing whether the individual satisfies the applicable shareholder-director exemption.
The availability of such exemption depends on the founder’s specific qualifications, including the nature and extent of the shareholding, the individual’s position within the company, and the requirements applicable to the relevant immigration and employment framework. Therefore, the founder’s corporate status, shareholding structure, actual activities in Indonesia, and immigration status should be reviewed together before determining whether the relevant work authorization requirements apply.
Key Considerations
A foreign national may serve as a Director of a PT PMA under Indonesian corporate law, but being a founder or shareholder does not, by itself, exclude the individual from the TKA regime. Where the founder is merely listed as a Director and does not work in Indonesia, the situation should be distinguished from one in which the founder actively performs managerial and operational functions within Indonesia.
Where a foreign founder begins working in Indonesia, the PT PMA should assess the applicability of TKA requirements, including RPTKA Approval, DKPTKA, and the appropriate visa and stay permit. At the same time, any available exemption for a shareholder who also serves as a Director should be assessed based on the founder’s specific qualifications and circumstances rather than assumed solely from the founder’s title.
How TAMA Global Mobility Can Assist
TAMA Global Mobility can assist foreign founders and companies with:
- Founder & Director Assessment , assessing the status of a foreign founder who also serves as a Director of a PT PMA and the resulting employment and immigration implications;
- TKA Compliance, advising on the employment of TKA, including RPTKA Approval and applicable DKPTKA obligations;
- Immigration & Work Authorization, determining and coordinating the appropriate visa and stay permit based on the foreign founder’s activities in Indonesia;
- Corporate & Employment Structuring, reviewing the allocation of Director functions and workforce structures to ensure alignment with applicable TKA requirements;
- Startup Compliance, assisting startups in identifying and addressing immigration and employment compliance issues from the pre-seed and seed stages through subsequent funding rounds; and
- Legal Due Diligence Support, reviewing founder and foreign Director compliance as part of preparations for fundraising, investment, or corporate transactions.
By integrating immigration, global mobility, and corporate licensing, TAMA Global Mobility helps ensure that a company’s legal structure remains aligned with the actual activities conducted by its founders and the company in Indonesia.
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TAMA Global Mobility
WhatsApp: +62 821-1015-402
Email: info@tamaglobalmobility.com
For additional insights on Indonesian immigration compliance and global mobility matters, explore our related publications:
Can a Foreign Company Operate in Indonesia Without Establishing a PT PMA?
Entering the Indonesian Market: PT PMA, Representative Office or Permanent Establishment?
Immigration Compliance for Foreign National Heads of KPPA in Indonesia
Permanent Establishment (BUT) in Indonesia: A Guide for Foreign Companies
Can a Foreign National Hold More Than One Stay Permit in Indonesia?
