Structuring a Foreign Acquisition Around Ownership Limits

The moment a foreign buyer discovers the target’s licence caps foreign ownership at 67%, the deal does not die. It gets structured. Indonesia opens most sectors to full foreign ownership, but a meaningful set remains capped or conditional under the Positive Investment List, and an acquirer who wanted 100% of a business in one of them has to find a lawful way to own what the rules allow and control what it can. The wrong answer is the nominee, a local holding the extra shares on paper for the foreigner, which is void under Indonesian law and buys nothing. The right answers are real structures: a joint venture to the permitted level, a carve-out of the restricted activity, or control secured by agreement rather than by a majority the law will not permit.

The short answer

When a sector caps foreign ownership below what a buyer wants, the acquisition is structured around the limit in one of a few legitimate ways: acquire up to the permitted percentage in a joint venture with a local partner, secure control through the articles and a shareholders’ agreement rather than through the shareholding alone, carve the restricted activity out from the parts that are open, or restructure the target’s business scope so the acquired entity sits in an open classification. What a buyer cannot do is use a nominee to hold the balance, because nominee arrangements are void and confer no enforceable ownership.

The starting point is always the same: find the actual limit before designing anything. The foreign-ownership ceiling depends on the target’s business classification (KBLI) and what the Positive Investment List says about it. Until that number is known, every structuring conversation is premature, and a buyer who negotiates a deal without it risks agreeing to something the licence will not permit.

First, find the actual limit

Indonesia’s default is openness. Under the Positive Investment List introduced by Presidential Regulation No. 10 of 2021, as amended, most business lines are open to 100% foreign ownership unless the list specifies otherwise, and a shrinking set is capped, conditional or closed. The applicable rule attaches to the target’s KBLI classification, the code that describes what the business actually does, so the first task is to confirm the target’s real activities and the codes that govern them.

This matters because a company often does more than one thing, and the codes may not match the operation on the ground. A target described as a manufacturer may also distribute, and distribution can carry a different foreign-ownership rule from manufacturing. Establishing the true classification, and therefore the true ceiling, is the foundation of the whole structure, and it connects directly to our guide to the Positive Investment List and how sector limits are read.

If the sector is open: full acquisition

Where the target’s activities are open to full foreign ownership, the structure is the clean one: acquire 100% of the shares through a foreign-investment vehicle (a PT PMA), subject to diligence, approvals and the transfer mechanics. Most sectors now fall here, which is why the ownership-limit problem, though serious where it applies, is not the universal obstacle it once was. The buyer’s work in an open sector is the ordinary work of any acquisition, not a structuring puzzle.

Even in an open sector, the classification check still matters, because a single restricted activity buried in an otherwise open business can pull the whole entity into a cap. It is cheaper to find that one line at the diligence stage than to discover it when the licensing update is refused after signing.

If the sector is capped: the legitimate structures

Where the sector caps foreigners below 100%, the honest structure is a joint venture: the foreign buyer takes up to the permitted percentage and an Indonesian partner holds the balance as a genuine shareholder with real economic interest and real rights. This is not a workaround; it is the intended design, a foreign investor and a local partner co-owning a business within the ownership rule. The success of it depends entirely on the partner being real, chosen for what they contribute, and bound by terms that both protect the foreign investor and respect the partner’s genuine stake.

The key to making a minority or capped position work is that control is written down, not assumed from the shareholding. A foreign holder at 67%, or even below 50%, can secure meaningful control through the articles of association and a shareholders’ agreement: board nomination rights, reserved matters that require the foreign party’s consent, supermajority thresholds, and deadlock mechanics. These are the same instruments that make any board hold, described in board structuring for foreign-owned companies, and they are what separate a real partnership from a hopeful one.

The nominee temptation, and why it fails

The tempting shortcut is to have a local person hold the extra shares on paper while the foreigner controls them privately through a loan and a side agreement. It is void. Indonesian investment law prohibits nominee arrangements that put shares in one person’s name for the benefit of another, and a nominee agreement is unenforceable, so the foreigner has no legal claim to the shares the nominee holds. We set out the mechanics and the exposure in the risks of nominee shareholders.

In an acquisition, the nominee is doubly dangerous. If the target itself was built on a nominee structure, the buyer may be acquiring shares that do not carry clean title. And if the buyer resorts to a nominee to breach the cap on the way in, it has built its new ownership on a structure a court will not enforce and a beneficial-ownership filing cannot honestly describe. The cap is a real constraint, and the answer is a real structure, not a paper one that unravels the moment it is tested.

Carve-outs and multiple activities

Where a target mixes open and restricted activities, the structure can separate them. The open activities can be acquired fully, while the restricted line is either held in a joint-venture entity to its own cap or, in some cases, discontinued or divested if it is peripheral to the buyer’s thesis. This carve-out approach lets a buyer take full ownership of the part it actually wants without being dragged below control across the whole business by a minor restricted activity.

The carve-out has to be genuine, with the activities really separated in licence and operation, not merely relabelled. Done properly, it is one of the more elegant solutions to the ownership-limit problem, because it aligns the ownership structure with the commercial reality: full control of the core, a compliant arrangement for the restricted edge.

Control without a majority

Sometimes the cap leaves the foreign investor below 50%, and the question becomes how to hold real influence over a company it does not majority-own. The answer is contractual and constitutional. Reserved matters can require the foreign shareholder’s consent for the decisions that matter, budgets, senior appointments, new debt, changes to the business, so that day-to-day management runs with the majority but the strategic levers need the foreign party. Board composition, quorum rules and veto rights are set in the articles and the shareholders’ agreement to match.

This is legitimate and common, and it is very different from a nominee. A minority foreign holder with strong, enforceable governance rights genuinely shares control; a foreigner hiding behind a nominee has no enforceable rights at all. The line is whether the local shareholder is a real owner with a real stake or a front, and the law, the beneficial-ownership regime, and any future buyer’s diligence all test exactly that. The holding jurisdiction and the tax on returns are decided alongside this, as covered in Indonesia’s tax treaties.

Best practices

• Confirm the target’s real activities and KBLI codes, and the ownership ceiling, before negotiating structure.
• Where the sector is capped, choose a real local partner with a genuine stake, not a placeholder.
• Write control into the articles and shareholders’ agreement, not into the shareholding percentage alone.
• Carve out a minor restricted activity rather than let it cap the whole business.
• Reject the nominee outright. It is void, unenforceable, and now a beneficial-ownership problem too.

Common mistakes

• Negotiating before checking the cap. A structure designed without the real limit is built on sand.
• Using a nominee to breach the cap. The arrangement is void and confers no enforceable ownership.
• Assuming ownership equals control. Below a majority, control comes from the articles and the SHA.
• Ignoring a minor restricted activity. One line can cap the whole entity if not carved out.
• Picking a partner for convenience. A capped structure only works with a genuine, committed local shareholder.

Advisory note

Ownership limits are the point where foreign buyers most often reach for the wrong tool. The cap feels like an obstacle to be evaded, so the nominee, the quiet side agreement, the friend who will hold the shares, presents itself as a solution. It is not a solution; it is a deferred failure, void from the start and exposed the moment the structure is tested by a dispute, a tax authority, or a future buyer’s diligence. The genuine structures take more work and more honesty, and they are the only ones that survive contact with reality.

The better mindset treats the cap as a design constraint, not a barrier. A capped sector still allows a foreign investor to take a substantial, controlling-in-practice position through a real partnership and strong governance, and that position is defensible in a way a nominee never is. Where a structure cannot deliver the control the buyer needs within the law, the honest conclusion is that this target, in this sector, is not acquirable on those terms, which is a far cheaper thing to learn before signing than after.

What this means for foreign capital

An ownership limit narrows the options; it does not close the deal. A foreign acquirer who finds the real ceiling early, builds a genuine joint venture where the sector requires one, secures control through the articles rather than the share count, and refuses the nominee shortcut, can own and run a capped-sector business on a footing that holds. The buyers who come unstuck are the ones who treated the cap as something to get around rather than something to structure within.

Our team and partners have advised on cross-border transactions exceeding USD 50M in aggregate across Indonesia, spanning ownership structuring, joint ventures and acquisitions in restricted sectors. See our selected mandates, or read how the ownership question fits the wider cross-border M&A process. The cap is real, and so are the structures that respect it. The nominee is neither.

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