Heaptalk, Jakarta — Indonesia’s Financial Service Authority (OJK) has issued PJOK Number 25 of 2023 concerning the Business Implementation of Venture Capital Companies and Sharia Venture Capital Companies to encourage the development of start-up businesses and MSMEs.
This POJK is a regulatory mandate of Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector (UU P2SK), which is needed to support industrial development and legal needs for the current business operations of venture capital companies.
“Venture capital companies and sharia venture capital have an important role in funding startups and debtor companies with MSME business scales that cannot be reached through funding by other financial service institutions,” OJK said in its official release.
Startup companies and debtors on the MSME scale are entities capable of expanding employment opportunities and providing broad economic services to the community, playing a role in equalizing and increasing people’s income, encouraging economic growth, and realizing national stability.
One of the main points of regulation is categorizing venture capital companies and Sharia venture capital companies in carrying out their business activities. According to the policy, Venture capital companies are required to carry out business activities based on categories, namely focusing on capital participation activities, participation through purchasing convertible bonds/convertible sukuk, or managing Venture Funds, hereafter referred to as a company in the form of a venture capital corporation.
Besides, venture capital companies must focus on financing through purchasing debt securities/sukuk issued by Business Partners at the initial start-up stage or business development, financing, and financing based on the profit sharing principle, hereinafter referred to as a Venture Debt Corporation.
OJK also determines the minimum equity amount for each type of business, including minimum equity for sharia business units (UUS) of Venture Capital Companies (PMV), with details:
- PMV, as a venture capital corporation, must have a minimum equity of Rp50 billion.
- PMV, as a venture debt corporation, must have a minimum equity of Rp25 billion.
- UUS PMV is required to possess a minimum equity of Rp10 billion.
With this categorization, OJK expected that venture capital companies and Sharia venture capital companies could be focused and optimal in carrying out business activities according to the preferred business line.
On the other hand, PJOK Number 25 2023 also strengthened multiple regulations, including:
- Prudential, venture capital companies, and Sharia venture capital companies are required to maintain and improve soundness by applying the principles of prudence and risk management in performing business activities.
- Venture Fund Management, PJOK regulates venture fund regulations, from applications for permits to manage venture funds to the dissolution of venture funds. Besides, this financial institution also regulates OJK also regulates the human resource requirements and organizational structure of venture capital companies and sharia venture capital companies that will manage venture funds, the use of venture fund names, agreements for establishing venture funds, placement of venture funds, and requirements for unit holders participating in venture funds.
