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Late in 2023, Indonesia’s Financial Services Authority (OJK) issued amendments to the regulation of venture capital (VC) companies in Indonesia, including sharia VC companies (OJK Regulation No. 25 of 2023 or Regulation 25). The new regulation came into effect on 22 December 2023 and is available in the Indonesian language here.
Set out below is a summary of the key changes introduced by Regulation 25 and how those changes may impact Indonesian VC companies’ current business models and investment strategies.
VC companies in Indonesia are now required to operate as either:
A VC company must choose to operate within only one of these two categories.
VC companies may, however, also engage in (i) fee-based activities, with prior notification to OJK, and (ii) other activities, with prior approval from OJK.
An Indonesian VC company can raise funds in various ways, including by issuing debt or equity. Regulation 25 requires a VC company to undertake full hedging for all funding elements, including the investment returns it plans to distribute to investors, where these funds are denominated in a foreign currency (eg, a US dollar fund).
Please reach out to your usual contact at Hiswara Bunjamin & Tandjung or Herbert Smith Freehills if you have any questions on how this new OJK regulation might affect your business.
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