Once this ministerial decree is in force, new regulations will apply for direct selling, including the role of a foreign investment company owning a local Indonesian liability company conducting the business of single or multilevel marketing

The Ministry for Industry and Trade is presently drafting a decree governing the business activities of both direct or multi level marketing. The particular basis will be that such marketing is conducted by an Indonesian limited liability company, which may be owned by Indonesian individuals or companies or foreign investment companies. The foreign investment company however must comply to specific requirements, such as: it must have a permanent business license to distribute goods at distributor or wholesaler level; it may not sell directly to consumers; the minimum investment is IDR 15 billion; have an Indonesian shareholder owning at least 5% of the shares, as well has at least one Indonesian director on its board.

The Draft of the decree includes the requirements for the direct selling principal, members of the marketing network and their business arrangements. Such license, valid for 5 years, which the principal must obtain, is issued by the Directorate General for Domestic Trade, which then upon satisfactory, or unsatisfactory review, will determine whether an extension will be granted or not. In addition thereto, there will be a strict separation on whether a principal would like to conduct single level or multi level marketing, as a license will only be provided for one and not for both.

When this new ruling is in force, the previous licenses issued to the existing principals will be valid for another six months and a new application as set by this new decree must be made prior to termination of the old license.

If you need clarification or legal advice on this issue, please contact Lubis Ganie Surowidjojo at lgs@lgslaw.co.id