Understanding Share Purchase Agreements in Indonesia

Indonesia is a growing economy and with that growth comes the need for more office spaces and physical meeting zones. Many growing businesses often approach XWORK to find space either as a base or in an attempt to drive costs down on available offices. Understanding the legal requirements of a shared workspace is important to preventing future costs.

When a business decides to enter the market in a new territory, the country’s workforce can be both alluring and confusing at the same time for many reasons, not least of which can be legal. This can be especially true when it comes to international agreements. For those with a presence in Indonesia, the laws surrounding agreements made in Indonesia with an overseas partner may seem unsurprising; for an Indonesian business seeking to expand, these international obligations may come as quite a shock. The kind of agreement we refer to here is a share purchase agreement (often abbreviated as SPA).

A share purchase agreement is a contract whereby shares of a company are bought or sold between parties. While these agreements are absolutely necessary, to provide proper protection, they can also produce problems if not properly documented. Our guidance given through the above article looks into this further.

International obligations for Indonesian businesses seeking investment are something that needs to be well understood by any business before they enter into such a deal. In addition, understanding other international obligations such as those for stamp duty on share purchase agreements in Mumbai is equally important.

In India, the stamp duty guidelines differ from those of a business based in Indonesia. Whereas some agreements are treated differently based on the state of the original agreement in India, Indonesia has its own guidelines. The fact a deal is being done with a company based in Mumbai provides other legal obligations that a business must keep in mind.

The Indian government lays out the stamp duty on a share purchase agreement in Mumbai, India as follows:

The above duty is applied to the actual consideration paid for the shares or the market value of the shares, whichever is higher. As set out in the above article, to omit this payment can lead to a 10% additional penalty on the deficient stamp duty, and the deal will be deemed to have been registered on the date of payment of the deficit and the penalty. For this reason, it is very important a business completes their due diligence when it comes to understanding their legal obligations with other companies in Asia, including why financial obligations should be completed.

Once the correct fee is paid, a stamp must then be affixed immediately on the instrument. In this case, the share purchase agreement. A share purchase agreement can involve more than one stamp, depending on the state of original. In this case, the buyer of the shares is responsible for paying the stamp duty. However, the parties may come to an agreement to share the stamp duty cost.

While it may be sensible for some businesses to undertake the management of legal agreements such as those concerned with a share purchase agreement, in an international context it can sometimes be easier to get help from an outside expert. This will save your business time and potential costs that could come from not taking action on stamp duties and other fees.