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New Mining Regulation on Divestment of Foreign Investment Company in Indonesia

Government Regulation Number 23 of 2010 (“PP No. 23/2010”) on Implementation of Mining Business Operations is amended by Government Regulation Number 24 of 2012 (“PP No. 24/2012”). There are some matters covered in PP No. 24/2012.

Under Article 3 (a) PP No. 24/2012, a Mining Business Permit (“IUP”) is able to be issued by the Minister, governor or regent/mayor for Indonesian Limited Liability Companies established under the framework of domestic investment and foreign investment. However, IUP for foreign investment company can only be granted by the Minister.

Further, under Article 97 of PP No. 24/2012, foreign investment company which holds the IUP shall divest the share gradually so that Indonesian shareholder must have 51% of its share on the tenth year. In Article 97 paragraph (1) (a) it sets the minimum shareholding of Indonesian shareholder after the fifth year as follows:

  1. a minimum of 20% by the end of the 6th year;
  2. a minimum of 30% by the end of the 7th year;
  3. a minimum of 37% by the end of the 8th year;
  4. a minimum of 44% by the end of the  9th year;
  5. a minimum of 51% by the end of the 10th year.

Furthermore, in Article 98 of PP No. 24/2012, the shares of Indonesian shareholder shall not be diluted to less than the number of shares as set out above if there is an increase of capital’s amount in the foreign investment company. Under Article 7 (a) PP No. 24/2012, IUP assignment is now possible as long as the IUP assignor holds shares at least 51% or more of the total issued shares in the company. This provision also applies to the state-owned enterprise (BUMN) and the assignment must be approved by the Minister.

Regarding the provision of Mining Area Permit (“WIUP”), Article 9 paragraph (3) of PP No. 24/2012 regulates that the applicant may be granted for more than 1 WIUP if the applicant is public company and the mining area is not mineral and coal mining area.

Jennyke Setiono

New Mining Regulation on Divestment of Foreign Investment Company in Indonesia
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