Unlawful Blockade: Why the Ministry of Law and Human Rights Should Not Block Pre-2021 PT PMAs for Capital Shortfalls

Salam,

Last week, I focused on a single legal topic and examined the unlawful blockage of the Ministry of Justice and Human Rights (MoJ) of PT PMAs established before 2021.

I think it is a legal scandal, but in Indonesia, it may as well be a dropped sack of rice. I hope my legal "obsession" does not bore you.

The MoJ applies a BKPM regulation unlawfully, disregarding constitutionally guaranteed non-retroactivity guarantees and the Grandfather clause in the same regulation, thereby violating fundamental principles of the Rule of Law and legality.

The unlawful blockage puts legally established and capitalized PT PMAs and their owners at risk. Pre-2021 PT PMAs with a paid-up capital of 2.5 billion now face administrative coercion, requiring an additional investment of 7.5 billion or the loss of their legal entity status during online company register updates and OSS migration.

Due to the far-reaching consequences for the Rule of Law, legal certainty, and operational risks for investors, I published several posts last week, explaining what happened, detailing the issues, and expanding on my argument that the blockage is unlawful. I then outlined the risks, especially for "smaller" PT PMAs.

To understand the issue, read my posts, which I published a few months ago. In the posts, I discussed that the new investment laws increased capital requirements for PT PMAs from 2.5 billion to more than 10 billion rupiah.

• PT-PMA Minimum Paid In Capital Requirement 10 Billion IDR ( ca. USD 600,000)

• Capital Requirements for PT PMAs in Indonesia: Non-Compliance Risks

The key regulation for the increase is Article 12(7) of the BKPM Regulation 4/2021.

It should be noted that BKPM Regulation 4/2021 is a ministerial-level implementing rule, not a law, as it falls outside Indonesia's formal legal hierarchy under Article 7(1) of Law 12/2011. It has limited authority only within BKPM, restricting its binding effect to administrative implementation. As such, it functions as an internal BKPM guideline, enforceable primarily within its ecosystem but lacking the authority to bind external government agencies, such as the Ministry of Law and Human Rights.

POSTS THIS WEEK

EVENTS

• Ministry Forces Capital Increase via OSS Migration Trap - Administrative coercion threatens company survival for three reasons → Read how the trap works and the full post on X

ANALYSIS

• Constitutional Violation: Non-Retroactivity Principle Breached - Article 28I(1) provides the foundation for legal challenge against retroactive enforcement → Read the full post on X

• Article 97 Grandfather Clause Ignored - BKPM's own regulation explicitly protects pre-2021 entities from new requirements → Read the full post on X

• Jurisdictional Overreach: Ministry Lacks Enforcement Authority - Company Law versus Investment Law boundaries systematically violated → Read the full post on X

DEEP DIVE

• Existential Threat to Smaller PT PMAs - Forced recapitalization creates legal, commercial, and financial risks for foreign investors → Read the full post on X

WEEK'S KEY TAKEAWAYS

• Most critical constitutional development: The Ministry’s retroactive enforcement of BKPM Regulation 4/2021 contradicts the constitutional guarantee against retroactive laws and ignores Article 97's explicit grandfather clause protection

• Immediate business impact: Pre-2021 PT PMAs with 2.5 billion paid-up capital face administrative coercion requiring 7.5 billion additional investment or loss of legal entity status during mandatory OSS migration

• Recommended action: Companies should first seek legal counsel, consider compliance under protest, and an administrative court challenge to prevent the systematic elimination of smaller foreign investors

Have a great week! 

Kai