Securing investors to support business growth is an important step for many companies. However, the process of finding investors is not an easy task. Investors tend to look for alignment in all aspects of a business before they are willing to inject funds into a company. One of the main concerns for investors is business legality. Yes, in a business negotiation, investors will often ask for a number of legal documents from a company before they are willing to work together. Because of course no investor wants to invest their capital in a company that is illegal (does not have business legality), right? So, what are the legality documents that are usually needed or a requirement for investors to invest in a company? Check out the full explanation in the following article.
What is an Investor?
Investor is a term for capital owners who invest their capital (investment) either directly or indirectly in a business. As the definition of an investor in the provisions of Article 1 of Law No. 25 of 2007 concerning Capital Investment, namely an individual or business entity that invests in the form of domestic investment or foreign investment. This certainly brings benefits to business actors. With investors, business actors can avoid a lack of operational funds which can result in less than optimal business management. So that it can be something that needs to be prioritized for a business actor.
Legalities that must be fulfilled to get investors
To be able to steal the hearts of investors, as a business actor you must be able to convince investors to invest in your company. One of the things that is considered before investors invest their capital is business legality. The legalities that need to be prepared are as follows:
Business Entity in the Form of PT
Before looking for investors, make sure your business is a Limited Liability Company (PT). PT is a business entity in the form of a legal entity with authorized capital entirely divided into shares. This makes it easier for investors to invest in your company. PT has the advantage of limited liability so that if PT suffers a loss, shareholders are only responsible for the amount of shares owned.
Company Articles of Association
The articles of association is the document that governs the internal structure and operational regulations of a PT. This document plays an important role in the context of legality, especially in preparation for securing investors. The articles of association typically include information that is highly relevant to investors, including shareholder rights and obligations, procedures for conducting shareholder meetings, the composition of the board of directors, as well as provisions regarding dividend distribution and capital management. In addition, the articles of association may contain rules that determine the distribution of profits, payments to shareholders, and changes to the corporate structure. In connection with investments, investors often review the articles of association to understand how the company is organized and how they will be afforded rights and protections within the company.
Business Identification Number (NIB) & Business Licensing
NIB is a legality document issued by the Ministry of Investment/BKPM that functions as a business identity and also functions as a business license (in the event that the business is classified as a low-risk business). This is regulated in Government Regulation No. 5 of 2021 concerning the Implementation of Risk-Based Business Licensing. NIB is mandatory for every business, starting from micro, small, medium, to large businesses. Apart from being a business identity, NIB is also currently valid as a substitute for the Company Registration Certificate (TDP), Import Identification Number (API), and in some conditions replaces the Trade Business License (SIUP). In addition to NIB, some business sectors also require additional business licenses. These can be in the form of Standard Certificates (SS) and/or licenses. To determine this, business actors can see it based on the business risk of each business which can be seen through the Online Single Submission (OSS) platform. In the event that a business that should have additional sectoral business licenses is found not to have such licenses, the business in question cannot be said to be legal to operate in its business activities.
Taxpayer Identification Number (NPWP)
NPWP is a tax identification number assigned by the Directorate General of Taxes and is mandatory for all business entities operating in Indonesia. When a business entity does not have one, it is not uncommon for investors to request that businesses obtain it first given the many conveniences that businesses can get when they have an NPWP. Concretely, in the event that a business entity does not have a business entity NPWP, then the objects that are taxed against it can be charged a higher tax fee than NPWP owners in general. NPWP is used for the purpose of reporting and paying corporate taxes, including Corporate Income Tax (PPh Badan). In addition, NPWP is also used to submit claims for withholding tax applied by business partners or suppliers.
Registered Trademark
Trademark is the identity of a product. Registering a trademark is a form of protection of product identity from piracy or unauthorized use. In addition, registering a trademark can also be an intangible asset of the company. By registering a trademark for a product, the trademark owner is given the exclusive right to use the trademark itself or give permission to other parties to use the trademark.
Why legality is important to get investors
Completeness of legal documents is a very important basis for investors because it provides confidence, protection, and clarity for the investments they make. This plays an important role in attracting potential investors to get involved in your company. Here are some reasons why legal documents are important for a company to get business investors:
Legal Certainty
Investors tend to seek legal certainty before they invest. With complete legality, a company demonstrates that its operations are in accordance with applicable laws and rules. This gives investors confidence that the company is operating legally and reliably.
Investment Protection
Proper legality helps protect investors’ investments. If there are legal issues in the future, a strong legal foundation can serve as protection for the investment that has been made.
Transparency and Trust
Complete legal documents and licenses indicate a high level of transparency from the company to investors. This helps build trust between the company and potential investors.
Possible Business Growth
By having a strong legal foundation, companies have easier access to greater funding opportunities and strategic partners, aiding business growth.
Avoiding Legal Risks
By having complete legality, companies reduce the risk of future legal disputes. This helps in maintaining the company’s reputation and preserving investment value.
KH Contact
Finding an investor is a difficult task. Therefore, before looking for investors, it is important to get advice from legal experts or related professionals to ensure that the company has fulfilled all the required legalities, one of which is to the Legal Contract.
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We have been trusted by more than 5000 companies and businesses in Indonesia to fulfill their needs, including in terms of cooperation and business relationships such as investment. Together with our professional experts, you can take care of all the legal documents needed to get investors, such as PT establishment, NIB, NPWP, and trademark registration. To view our services, visit our KH Services – Starting a Business page. If you have any other questions, feel free to consult for free at Ask KH and send a direct message (DM) to Instagram @kontrakhukum.
