At Bali Law Connection, we offer comprehensive due diligence services for foreign individuals and companies looking to invest, acquire property, or enter into business partnerships in Bali. Our legal expertise ensures that all aspects of your transaction or partnership are thoroughly investigated to protect your interests and guarantee compliance with Indonesian law. Whether you are conducting a real estate purchase, a corporate acquisition, or forming a joint venture, we provide the legal insight needed to make informed decisions and minimize risk.
Overview of Due Diligence Law in Indonesia
Due diligence in Indonesia is governed by various laws, depending on the nature of the transaction. Key legislation includes Law No. 40 of 2007 on Limited Liability Companies (UU PT), Law No. 5 of 1960 on Agrarian Law (concerning property), and Law No. 25 of 2007 on Investment (for foreign investments). Due diligence is crucial to ensure that your transaction is legally sound and that all legal, financial, and operational risks are properly assessed.
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The process is often carried out with the assistance of Indonesia’s National Land Agency (Badan Pertanahan Nasional/BPN), Investment Coordinating Board (BKPM), and relevant local government bodies.
Types of Due Diligence Services for Foreigners in Bali
Real Estate Due Diligence
Bali’s vibrant property market attracts many foreign investors, but Indonesian land laws are complex and require careful scrutiny, particularly when foreign ownership is involved. Bali Law Connection's real estate due diligence services help investors ensure that their property transactions comply with Law No. 5 of 1960 on Agrarian Law (Basic Agrarian Law), which governs land ownership in Indonesia.
Our real estate due diligence process includes:
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Verifying land ownership and checking the Hak Milik (freehold) or Hak Pakai (right to use) certificates through the National Land Agency (BPN).
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Reviewing zoning regulations to ensure the property can be used for its intended purpose, as regulated by local government agencies.
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Checking for any existing encumbrances, mortgages, or disputes affecting the property.
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Ensuring compliance with foreign ownership restrictions and structuring ownership through leases or local entities if necessary.
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Corporate Due Diligence
Corporate due diligence is essential for foreigners looking to acquire or invest in an Indonesian company. This process ensures that the company’s financial health, legal standing, and operational history are in order. Bali Law Connection provides corporate due diligence services in line with Law No. 40 of 2007 on Limited Liability Companies (UU PT) and Law No. 25 of 2007 on Investment.
Our corporate due diligence includes:
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Reviewing the company’s legal documents, such as its Articles of Association and Deed of Establishment, to verify the legitimacy of the business.
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Assessing financial records, tax filings, and debt obligations to ensure the company is solvent and in good standing with the Directorate General of Taxation (Direktorat Jenderal Pajak/DJP).
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Checking for compliance with Indonesian labor laws, ensuring all employee contracts and obligations are met.
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Investigating potential liabilities, including pending lawsuits or regulatory issues.
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Investment Due Diligence
Before making a significant investment in Bali, whether in a business or a real estate project, thorough investment due diligence is vital. This process involves verifying the legitimacy of the investment opportunity, the financial stability of the target, and the potential returns on investment. At Bali Law Connection, we conduct investment due diligence according to Law No. 25 of 2007 on Investment and work closely with the Investment Coordinating Board (BKPM) to ensure compliance with all foreign investment regulations.
Investment due diligence covers:
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Examining the ownership structure of the target company or project.
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Reviewing legal and financial risks associated with the investment.
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Assessing the potential for returns in light of market conditions, industry regulations, and competition.
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Ensuring that foreign investors’ rights are protected under Indonesian law, including the ability to repatriate profits.
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Joint Venture and Partnership Due Diligence
Forming a joint venture or partnership with a local Indonesian entity is a common approach for foreigners who wish to invest or do business in Bali. However, these arrangements require careful vetting to avoid potential legal and financial pitfalls.
Bali Law Connection's due diligence process for joint ventures ensures compliance with Law No. 40 of 2007 on Limited Liability Companies (UU PT) and Law No. 25 of 2007 on Investment. We help foreign investors:
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Review partnership agreements to ensure clear terms of profit-sharing, management responsibilities, and dispute resolution.
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Assess the financial and operational history of the local partner to identify any red flags, including hidden liabilities.
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Ensure compliance with Indonesia’s Negative Investment List (Daftar Negatif Investasi), which limits or prohibits foreign investment in certain sectors.
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Draft and review legal documents to ensure the foreign investor’s interests are protected.
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Legal Compliance and Regulatory Due Diligence
Before engaging in any business or investment activity in Bali, ensuring compliance with local and national laws is critical. Our legal compliance due diligence focuses on:
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Verifying that the target entity or transaction complies with Indonesian corporate, labor, environmental, and tax laws.
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Ensuring compliance with sector-specific regulations, such as tourism, manufacturing, or agriculture.
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Reviewing the company’s licenses, permits, and approvals from relevant government agencies like the Ministry of Trade, Ministry of Tourism, and Ministry of Environment.
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Evaluating the entity’s adherence to labor laws, especially regarding expatriate workers, in line with Law No. 13 of 2003 on Manpower.
Legal Challenges in Due Diligence in Bali
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Ownership Restrictions: Foreign investors must be aware of restrictions on land ownership and foreign investment in certain business sectors. Thorough due diligence ensures compliance with these restrictions to avoid legal complications.
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Bureaucratic Delays: The Indonesian legal system can sometimes be slow, especially when dealing with government agencies such as the National Land Agency (BPN) or BKPM. Bali Law Connections expertise helps mitigate delays by ensuring that all documentation is prepared correctly and in line with legal requirements.
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Hidden Liabilities: Companies or properties may have undisclosed liabilities, such as unresolved tax issues or pending lawsuits. Through our in-depth investigative process, Bali Law Connection ensures that all liabilities are uncovered before any commitments are made.
How Bali Law Connection Can Assist You with Due Diligence in Bali
Bali Law Connection offers comprehensive due diligence services tailored to the needs of foreign investors and businesses in Bali. Whether you are purchasing property, acquiring a business, or entering a joint venture, our experienced legal team ensures that your interests are protected at every stage of the process.
We work closely with Indonesia’s relevant government bodies, such as the BKPM, National Land Agency (BPN), and Ministry of Law and Human Rights, to ensure full compliance with Indonesian laws and regulations.
Contact Bali Law Connection for Due Diligence Assistance
If you are considering an investment or business venture in Bali, contact Bali Law Connection today. Our legal experts are ready to provide you with the due diligence services you need to protect your investments and ensure your transaction is legally sound.
