Can a foreign investor face criminal liability when a PT PMA is established using capital that exists only on paper?
Across Bali, foreign investors establish PT PMAs for hospitality, property management, wellness, consulting, and other commercial activities. The incorporation process is frequently handled by notaries, company-incorporation agents, and legal advisors.
Investors often receive a completed deed, corporate registration, NIB, and tax documents without fully understanding the legal declarations contained within them. This creates a significant question when a company’s registered capital does not correspond with the capital actually contributed.
This question has taken on heightened significance following the entry into force of Indonesia’s New Criminal Code (Law No. 1 of 2023) in January 2026. Among its provisions, Article 394 directly addresses false statements in authentic deeds—a standard that now applies to corporate incorporations and deserves closer examination by business owners and investors.
Understanding Capital: Where the Confusion Begins
Before examining criminal liability under Article 394, it is essential to distinguish several concepts that are frequently misunderstood in Bali’s foreign-investment market:
- Authorized Capital (Modal Dasar): Represents the company’s authorized share-capital structure as established in its articles of association.
- Issued Capital (Modal Ditempatkan): Represents the shares subscribed by shareholders.
- Paid-up Capital (Modal Disetor): Represents capital that has actually been contributed in satisfaction of the shareholders’ capital obligations.
- Investment Value (Nilai Investasi): Concerns the investment planned or realized for the company’s business activities, which is distinct from its paid-up share capital.
Under BKPM Regulation No. 5 of 2025, the general minimum issued and paid-up capital requirement for a PT PMA is set at IDR 2.5 billion.
However, a serious legal issue arises when an incorporation deed records capital as fully paid up when the contribution was never actually made.
Article 394: When a Capital Declaration Becomes a Criminal Question
With the new Criminal Code fully active since January 2026, Article 394 penalizes anyone who intentionally causes false information to be inserted into an authentic deed concerning a matter whose truth the deed is intended to establish. The maximum penalty is seven years’ imprisonment or a Category VI fine.
If capital was genuinely contributed, the company should have an appropriate legal and evidentiary basis for the transaction. Properly contributed capital does not need to remain idle in a bank account indefinitely; it may subsequently be used for legitimate operational expenditures.
However, if the capital was never contributed, and a person knowingly caused the deed to record that it had been fully paid, Article 394 becomes relevant under three critical legal tests:
1. Who Requested the False Statement?
An investor signing an incorporation deed prepared by an agent does not automatically establish that the investor knowingly requested false information. Investigators must examine written instructions, correspondence, and explanations provided to the investor, alongside the professional roles of both the incorporation agent and the notary.
2. What Is the Potential Loss?
Article 394 does not require actual financial loss to have occurred, but it requires that the use of the deed couldcause loss. A supportable theory of potential loss must be established—such as reliance by creditors, financial institutions, or commercial counterparties on a materially false capital declaration.
3. Who Is Actually Responsible?
Many foreign investors rely entirely on intermediaries and may misinterpret capital requirements as formal administrative targets rather than declarations of actual funding. While misunderstanding does not automatically eliminate legal responsibility, criminal intent (mens rea) must be evaluated based on who knowingly caused the false information to be recorded, rather than simply relying on whose signature appears on the deed.
The Crucial Role of Legal Counsel and Intermediaries
Foreign investors are frequently offered turnkey incorporation packages without adequate explanation of their legal obligations under Indonesian law. This highlights the indispensable role of independent legal counsel and advocates in assisting investors through corporate structuring:
- Duty of Disclosure and Explanation: Advocates and legal advisors have a legal duty to clearly explain the distinction between a future investment commitment and an immediate legal declaration of paid-up capital.
- Verification of Legal Compliance: Proper legal assistance ensures that shareholder declarations are supported by verifiable financial mechanisms before they are submitted to a notary for inclusion in an authentic deed.
- Risk Mitigation: Retaining qualified legal counsel prevents investors from unwittingly relying on non-lawyer intermediaries who may prioritize rapid corporate setup over statutory compliance.
Professional involvement does not automatically establish—nor shield participants from—criminal liability. Scrutiny must focus on what each participant knew, represented, verified, and intentionally executed.
Does the Reduction in Minimum Paid-Up Capital Resolve the Problem?
The reduction of the PT PMA minimum paid-up capital requirement to IDR 2.5 billion does not resolve historical non-compliance.
A regulatory change to minimum thresholds does not retroactively validate past false declarations. If a company previously declared that a higher amount of capital had been fully paid, the legal question remains whether that contribution genuinely occurred at the time of declaration.
What Should Existing PT PMA Investors Do?
Now that the new Criminal Code is in effect, foreign investors should proactively engage legal counsel to conduct a legal audit of their corporate records:
- Audit Capital Records: Reconcile declared authorized, issued, and paid-up capital against actual bank transfer records and financial statements under legal supervision.
- Review Funding Characterization: Work with advocates to verify whether incoming funds were properly categorized as share capital, shareholder loans, or capital advances.
- Legal Regularization Services: If discrepancies exist, advocates can assist in executing lawful corrective measures to align corporate records properly, rather than simply replacing or overwriting historical documents.
Conclusion: Corporate Documents Are Not Merely Administrative Formalities
A PT PMA incorporation deed is not a routine administrative document. Declarations concerning paid-up capital directly impact corporate governance, commercial credibility, and legal compliance.
With Article 394 enforced under the new Criminal Code framework as of January 2026, knowingly recording false capital declarations carries concrete legal risk. Navigating these legal requirements safely requires structured legal services, thorough legal assistance, and clear advice from competent advocates from the outset.
This Legal Update is provided for general informational purposes only and does not constitute legal advice. The application of criminal provisions depends on the specific facts, timing of conduct, evidence, and statutory interpretation applicable to each case.
