Indonesia Financial Services Authority proposes new regulation on venture capital companies
On 16 May 2023, the Indonesia Financial Services Authority (Otoritas Jasa Keuangan or “OJK”) issued a draft regulation proposing that venture capital companies (Perusahaan Modal Ventura or “PMVs”) be separated into two categories: venture capital corporations (“VCCs”) and debt venture corporations (“DVCs”) (“Draft Regulation”).
The Draft Regulation seeks to revise Regulation POJK 35/2015 (“POJK 35”) concerning the Implementation of Venture Capital Companies.
Venture capital corporations
PMVs or PMV Syariah (PMVS) with a VCC business model will be a company that focuses on the business of equity participation, participation through the purchase of convertible bonds, and Joint Investment Contracts.
VCCs will be required to invest at least 90% of their total investment in investee companies not listed on the stock exchange. Participation in related investee companies is limited to 10% of the VCC’s equity while participation in non-related investee companies can be as high as 20% of the VCC’s equity, all subject to OJK approvals. Direct equity investment, investment through the purchase of convertible bonds, and/or purchase of sukuk should make up at least 40% of the VCC’s total business activities.
The maximum investment period in an investee company is 10 years.
VCCs will be required to have equity of at least IDR 50 billion. This value is the same as that set out under POJK 35, where a PMV is also required to have equity of at least IDR 50 billion.
Debt venture corporations
PMVs and PMVS which are included in the debt venture corporation (DVC) category are companies that focus on buying bonds, Shariah bonds, or bonds issued by start-up investees.
DVCs will also be allowed to channel financing to micro, small and medium enterprises.
DVSs will be required to have equity of at least IDR 25 billion.
Applicable to both clusters
Irrespective of which cluster they fall into, PMVs and PMVS will be allowed to carry out fee-based activities such as administration, accounting, management services (in the context of initial consultations or during business assistance), and/or marketing of financial services products such as insurance and/or mutual funds.
Companies with valid business licences prior to the promulgation of the Draft Regulation would need to comply with the capital limit provisions no later than 31 December 2025. The deadline to achieve this capital limit is also the same as that under POJK 35.
