Types of Company Shares in Indonesia

What are the different share types in Indonesia?

Shares are units of ownership in a limited liability company, or private limited company (PT). Each share shows how much capital a person or company has paid in. It also sets what that owner can do: vote, take dividends, or claim leftover assets if the company closes.

Indonesian practice talks about two main types: common shares and preferred shares. That split is useful, but it is not the whole law. Article 53 of the Company Law lets the articles of association create several classifications. Those classifications can be mixed. For example, a preferred share can still vote, or it can be non-voting and redeemable.

A company that registers in Indonesia must name its share structure in the deed of establishment. Changing that structure later needs a shareholder meeting and an amendment to the articles.

Common shares

Common shares, also called ordinary shares (saham biasa), are the default class. Holders can attend the General Meeting of Shareholders (GMS), vote on company affairs, receive dividends, and take leftover assets after creditors are paid.

If the company has several classes, the articles must name one class as ordinary shares. That class is the baseline. Other classes are measured against it.

Common shareholders usually wait behind preferred shareholders for dividends and for leftover cash in a wind-up. They also take more of the upside if the company grows, because leftover profit after preferences often goes to ordinary shares.

Preferred shares

Preferred shares (saham preferen) give extra economic or control rights. The most common extras are:

• First claim on dividends, with a fixed rate or formula
• First claim on leftover assets in liquidation, up to a set amount
• A right to convert into ordinary shares
• A right for the company to redeem the shares later

Preferred shares do not always lose voting rights. Many investor shares vote. Non-voting preferred stock exists only if the articles say so. Copying a foreign “preferred = no vote” model into an Indonesian deed without writing it down is a common drafting error.

Companies use preferred shares to bring in capital without giving away day-to-day control, or to give a joint-venture partner a safer return.

Legal Framework and Hierarchy of Sources

Share rules sit in layers. Higher layers win if they conflict.

1. Company Law. Law No. 40 of 2007 on Limited Liability Companies, as amended by the Job Creation Law (now Law No. 6 of 2023), is the main statute. Articles 48 to 62 cover shares, registers, transfers, and buybacks. Article 53 covers classes.
2. Investment and sector rules. Foreign ownership follows the Positive Investment List and the company’s KBLI code. Banks, insurers, and other licensed businesses also follow OJK rules on who may hold shares.
3. Articles of association (AoA). Class names, voting, dividends, conversion, redemption, and transfer limits must appear here. The Ministry of Law reviews this text.
4. Shareholder agreements. Side contracts can add tag-along, drag-along, or vesting rules between the owners. They cannot cancel mandatory Company Law rights, and they do not bind the company unless the articles (or a company deed) pick them up.

Public companies add OJK and Indonesia Stock Exchange rules on top of this stack.

Core Taxonomy of Share Classes (with Typical Rights)

The statute lists features, not marketing labels. In practice, lawyers group those features into the six types below. Each type is valid only if the articles describe it in full.

1. Common (Ordinary) Shares

Ordinary shares vote on all management matters at the GMS. They receive dividends when the company declares them. They take residual assets after debts and any preference. This is the class Article 53(3) requires when more than one class exists.

2. Preferred Shares (Non-redeemable/Redeemable/Convertible)

Preferred shares change the money waterfall. They may be:

• Non-redeemable. They stay outstanding until a later sale, conversion, or liquidation.
• Redeemable. After a stated period or event, the company may buy them back on terms set in the articles. This is the “time-limited” class in Article 53(4).
• Convertible. After a stated period or event, they change into another class, usually ordinary shares.

Preferred dividends can be cumulative (missed years stack up) or non-cumulative (a missed year is gone). Write the formula in the articles. Do not leave it as “priority dividends” with no number.

3. Non-Voting Shares

Article 53(4) allows shares with or without voting rights. Non-voting shares still exist as ownership. Holders still have other statutory rights unless the law or the articles validly limit them. They may still get dividends, inspect certain records, and, in some cases, ask for a fair-price exit.

Use non-voting shares when an investor wants return, not control. Do not use them to hide the real controller from licensing or foreign-ownership checks.

4. Shares with Nomination/Appointment Rights

Some shares give a special right to nominate directors or commissioners. Joint ventures use this so each partner can place one board member even if the share split is not 50/50.

Nomination is not the same as a guaranteed GMS win. The articles should say whether the holder only proposes a name, or whether the GMS must appoint that name unless a stated test fails.

5. Series Shares (A/B/C…)

“Series A” and “Series B” are labels, not a separate legal type. Companies use letters to tell classes apart, often with different par values. One class may be ordinary founder shares. Another may be investor preferred shares with a higher par value and a dividend preference.

Each series must have equal rights inside the series. Mixing different rights in one series, then treating some holders better in a side letter, creates disputes.

6. Restricted/Founder Shares

Founder shares are usually ordinary shares with extra transfer limits. Typical limits include a lock-up, a right of first refusal, or a rule that shares cannot go to a competitor. Vesting is often in a shareholder agreement. If the limit is meant to bind later buyers and the company itself, put it in the articles as well.

Restricted shares still count toward the two-shareholder minimum. They still count for foreign-ownership percentages.

Share classifications under Indonesian law

Article 53 is the statutory map. The articles may set one or more classifications. Every share in a class gives the same rights. If there is more than one class, one must be ordinary shares.

The law’s own list, including combinations, is:

• Shares with or without voting rights
• Shares with a special right to nominate directors and/or commissioners
• Shares that, after a period, may be redeemed or swapped into another class
• Shares that take dividends first, on a cumulative or non-cumulative basis
• Shares that take leftover assets first in liquidation
• Shares that combine two or more of the features above

Shares are issued in the owner’s name. Indonesia does not use bearer shares. The Board of Directors must keep a shareholder register with names, addresses, numbers, class, amounts paid, and any pledge or fiduciary security.

Each share, in principle, gives the rights in Article 52: attend and vote at the GMS, take dividends and leftover assets, and use other rights in the law. A class may drop some of those rights only as far as the law allows. Non-voting shares are the clear example.

What rights are associated with shareholdings in Indonesia?

Class rights sit on top of statutory rights. Statutory rights protect owners even when the articles are silent.

Pre-emptive rights

Article 43 says new shares issued to raise capital must first be offered to existing shareholders, in proportion to what they already hold in that class. If the company issues a class that has never been issued before, all current shareholders get the first offer in proportion to their holdings.

This right is about new shares from the company. It is not the same as a right of first refusal when one owner sells existing shares to a buyer. That sale rule comes from the articles, under Article 57.

The articles may set how long the offer stays open and how a holder accepts it. Public companies follow extra OJK rules on pre-emptive rights (HMETD).

Right to file claims

Article 61 lets a shareholder sue the company in the district court if a company act is unfair and without reasonable grounds, and it harms that shareholder. This is a personal claim. It is different from a claim that directors or commissioners harmed the company itself.

Keep minutes, notices, and financials. A court will look at process as well as outcome.

Right to share buyback at reasonable prices

Article 62 gives a dissenting shareholder a path out after certain major acts that harm the shareholder or the company:

• An amendment to the articles of association
• A transfer or pledge of assets worth more than 50% of net assets
• A merger, consolidation, acquisition, or spin-off

The company must buy at a fair price. If the request would break the buyback caps in Article 37, the company and the remaining shareholders must try to find another buyer.

Right to convene the GMS

Directors call meetings. If they do not, commissioners or shareholders who hold at least 10% of voting shares (or a lower figure in the articles) may request one. If the boards still fail within the legal time, those shareholders may ask the district court for permission to call the meeting themselves.

This right belongs to voting shares. Non-voting holders should not assume they can force a GMS on the 10% test.

Right to attend the GMS

Shareholders may attend the GMS. Voting follows the class rules and, as a default, one shares one vote, unless the articles set a lawful variation. Holders may also review the shareholder register and get copies of the annual report and GMS minutes, which supports the duty of directors to keep those records.

Transfer of share ownership

Article 56 sets the form. A transfer needs a deed of transfer. The original and a copy go to the company. Directors record the date and the new owner in the shareholder register or special register. They then notify the Ministry of Law within 30 days so the company registry matches.

Missing the 30-day notice can block later filings. Banks and notaries also check that the register, the deed, and the ministry record tell the same story.

For a PT PMA, a transfer that changes the foreign or local mix can also affect OSS data and investment reports. Plan foreign company registration and later share sales as one compliance chain.

Transfer restrictions and requirements

Article 57 allows the articles to add three kinds of limits:

1. Offer first to other shareholders. If no one buys within 30 days, the seller may go to a third party.
2. Prior approval. The GMS, directors, or commissioners may need to approve the buyer.
3. Government approval. Some sectors need a licence-holder or regulator sign-off before a new owner is recorded.

A share pledge or fiduciary security should also be recorded. Buyers should check the register for encumbrances before paying.

Implementing New or Amended Share Classes: Procedure

New classes are not created by a term sheet alone. Follow this order:

1. Map the rights in a table: voting, dividends, liquidation, nomination, conversion, redemption, and transfer limits.
2. Check foreign-ownership caps and any sector regulator rules.
3. Hold a GMS (or a unanimous written circular) to amend the articles.
4. Sign a notarial deed of amendment.
5. File it with the Ministry of Law for approval or receipt, as the type of change requires. A change to capital or share rights is not a casual notice item.
6. Update the shareholder register, share certificates if used, OSS capital data, and any bank KYC files.
7. Align the shareholder agreement so it does not contradict the new articles.

If the change includes a capital increase, run the Article 43 pre-emptive offer first, unless a valid waiver applies.

Foreign Investment Interface (Positive Investment List)

Indonesia uses a Positive Investment List, based on Presidential Regulation No. 10 of 2021 as amended, including Presidential Regulation No. 49 of 2021. The list, read with the company’s KBLI, says whether a line is:

• Fully open to foreign owners
• Open only up to a percentage
• Reserved for Indonesian owners or special enterprises
• Subject to extra licences or local-partnership rules

Share classes cannot be used to pretend a foreign owner holds less than they do. Voting shares, nomination shares, and convertible preferred stock still count when the government measures control and ownership.

If a sector is capped at 49% foreign, a convertible preferred that would push the foreign holder above 49% needs a lawful path, or it should not convert. Closed sectors cannot be opened by labelling shares “non-voting.”

Drafting Architecture: What Must Be in the Articles of Association

To reduce ministry queries and later lawsuits, the articles should state, in plain numbers and steps:

• Class name and whether it is the ordinary class
• Number of shares and nominal value per class
• Voting rights, including any special quorum for that class
• Dividend formula, order, and whether unpaid amounts carry forward
• Liquidation order and cap
• Nomination or appointment rights, and how a vacancy is filled
• Conversion and redemption triggers, price, and timeline
• Transfer limits, offer periods, and who must approve a buyer
• How class rights themselves may be changed (often that class must vote too)

If a formula is in a spreadsheet but not in the deed, treat it as unfinished.

Governance Safeguards and Minority Protection

Strong classes can lock control. Balance that with clear minority tools:

• Keep ordinary shares as a real voting class, as the law requires
• Do not strip statutory rights that the law does not allow to be removed
• Give 10% holders a workable GMS-request path
• Record related-party deals and major asset sales with proper GMS majorities
• Use reserved matters in the articles for budget, new debt, new classes, and related-party contracts
• Remember the two-shareholder rule. If only one shareholder remains for more than six months, personal liability and dissolution risk follow

Minority holders should also keep the Article 61 and Article 62 paths in mind before they waive claims in a side letter.

Economics: Dividend, Preference, and Waterfalls

Write money rules as a sequence, not as adjectives.

Dividend waterfall (example):

1. The company may pay only from lawful profits after reserves.
2. Preferred shares take their stated dividend first.
3. If the preference is cumulative, unpaid years are paid before ordinary dividends.
4. Leftover distributable profit goes to ordinary shares, unless the articles give preferred shares a further participating share.

Liquidation waterfall (example):

1. Pay costs and creditors.
2. Pay preferred liquidation preference, up to the stated cap (often paid-in capital plus unpaid dividends).
3. Pay leftover value to ordinary shares, or as the articles split it.

Work a numeric example in a schedule to the articles. A one-line “priority on liquidation” line is how most payout fights start.

Risk, Compliance, and Pitfalls to Avoid

Watch for these recurring errors:

• Class rights live only in a term sheet or WhatsApp, not in the articles
• Preferred shares are assumed to be non-voting without saying so
• Pre-emptive rights on new issues are confused with a right of first refusal on sales
• Ministry notice of a transfer is filed late or not at all
• Convertible preferred stock would breach a foreign-ownership cap on conversion
• Buybacks would drop net assets below issued capital plus mandatory reserves, or would exceed the 10% treasury cap
• Series A and Series B have different secret deals for holders in the same series
• The shareholder register does not match OSS, the bank, and the notarial deed

Fix the register before you issue new shares. A dirty register makes every later class change fragile.

Public vs Private Company Considerations

Private PTs and PT PMA companies have more freedom to write custom classes, but transfers stay private and often need internal approval.

Public companies (Tbk) add capital-market rules:

• New shares often need a pre-emptive rights issue under OJK rules
• Disclosure and fair treatment of public holders are stricter
• Share buybacks and treasury shares follow OJK regulations, not only Articles 37 and 62
• Dual-class structures, if used, face extra listing and governance scrutiny

A private company that plans an IPO should not load the articles with private-company preferences that cannot survive listing without a painful cleanup.

Practical commentary

The most durable share structure is the one whose articles read like a completed term sheet. Definitions, formulas, and worked examples remove the grey areas that later become lawsuits or ministry questions.

Match economics to solvency. A high preferred dividend that the company cannot lawfully pay only creates arrears and conflict. Match classes to sector caps at the drafting stage, not at exit.

In a multi-class company, add two extras that prevent most fights: a class-by-class approval map, and a numeric waterfall schedule. Those two pages do more work than a long statement of “good faith.”

Company share buybacks

Article 37 lets a company buy its own issued shares, with guards:

• After the buyback, net assets must not fall below issued capital plus mandatory reserves
• Treasury shares, plus shares pledged to the company and shares held by companies it owns, must not exceed 10% of issued capital
• The company may hold the shares for a maximum of three years, then must transfer them or cancel them through a capital reduction

Article 62 buybacks (dissenters’ exit) still sit inside those caps. Public companies follow extra OJK treasury-share rules on top of this.

Buybacks are not a quiet way to freeze voting. While the company holds the shares, those votes should not be used to control the GMS.

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Conclusion

Indonesia gives companies a flexible share toolkit. The everyday split is common versus preferred. The legal split is the Article 53 list: voting or non-voting, nomination rights, redeemable or convertible features, dividend priority, liquidation priority, or a mix.

Those tools work only when the articles spell out numbers and steps, the register is clean, transfers are notified in 30 days, and foreign-ownership caps are respected. Statutory rights — pre-emptive offers, GMS access, unfair-treatment claims, and fair-price exits — still sit under every class.

If you are setting up a PT or PT PMA and need a share structure that matches your investors and your KBLI line, get a free quote from EZPZ Indonesia.

Sources: UU No. 40 Tahun 2007 tentang Perseroan Terbatas; Pasal 53; Pasal 43; Pasal 62. 

Frequently Asked Questions

What are the main types of company shares in Indonesia?

The two everyday types are common (ordinary) shares and preferred shares. Company Law also allows other classes, such as non-voting shares, shares with nomination rights, and redeemable or convertible shares, if the articles of association say so.

Do preferred shareholders lose their vote?

Not automatically. Preferred shares can vote unless the articles create a non-voting class. Always read the class clause, not the label.

Can a company have more than one class of shares?

Yes. Article 53 allows one or more classifications. If there is more than one, one class must be ordinary shares, and every share in a class must have the same rights.

What is the difference between pre-emptive rights and a right of first refusal?

Pre-emptive rights (Article 43) apply when the company issues new shares. A right of first refusal applies when an existing shareholder sells shares, and only if the articles include that limit.

How is a share transfer made legal?

Use a deed of transfer, record it in the company’s shareholder register, and notify the Ministry of Law within 30 days. Extra approvals apply if the articles or a sector regulator require them.