M&A in Indonesia 2026: How the Omnibus Law Amendments, Law 1/2026 and New Compliance Rules Change Deals

A cluster of regulatory changes enacted between late 2025 and early 2026 has fundamentally reshaped M&A in Indonesia, creating new opportunities for foreign buyers while simultaneously raising the compliance stakes for every party at the negotiating table. The Omnibus Law amendments have recalibrated foreign ownership caps and sectoral restrictions, Law 1/2026 has clarified corporate criminal liability in ways that directly affect directors and officers, Permenkum No. 49/2025 now mandates company compliance assessments that feed straight into due diligence, and the new KUHP (Criminal Code) took effect on 2 January 2026 with expanded provisions for corporate offences.

Together, these instruments demand a new transactional playbook, one that integrates ownership structuring, D&O risk mitigation, pre-closing compliance remediation and updated deal drafting in a single, coordinated approach.

Executive Summary: M&A in Indonesia, 2026 at a Glance

For buyers, sellers and their advisers evaluating live or pipeline transactions, the following takeaways capture what has changed and what must be addressed immediately. Those seeking broader context on the Indonesian deal environment should consult our Indonesia M&A 2026 background guide.

• Ownership limits recalibrated. The Omnibus Law amendments have updated the negative investment list (previously known as the Daftar Negatif Investasi, now the Investment Priority List framework), widening several sectors to 100% foreign ownership through a PT PMA structure while tightening or adding conditionality in others. Every deal must recheck sectoral caps before structuring.
• Corporate criminal liability formalised. Law 1/2026 codifies when a corporation, not just an individual, can be held criminally liable, and aligns sentencing provisions with the new KUHP. This directly increases D&O exposure and demands enhanced indemnity language in transaction documents.
• Compliance assessment is now mandatory. Permenkum No. 49/2025 requires companies to undergo and document a structured compliance assessment. Sellers who cannot demonstrate compliance will face price adjustments, escrow demands or walk-away risk.
• New Criminal Code in force. The KUHP, effective 2 January 2026, introduces updated corporate offence provisions and penalty structures. Buyers must diligence historical and ongoing criminal exposure as part of every acquisition.
• Deal drafting priorities shift. Representations, warranties, indemnities and escrow mechanics all need updating. Industry observers expect that W&I insurance policies will need endorsement-level adjustments to address the expanded criminal liability landscape.
• Merger control coordination is critical. Indonesian merger control filing with the KPPU remains a post-closing obligation but must be coordinated with BKPM notifications and sector-specific approvals to avoid regulatory sequencing errors.

What Changed, Legislative Timeline and Top-Line Implications for M&A in Indonesia

The 2025–2026 regulatory cluster did not arrive as a single reform package. Instead, four overlapping instruments were enacted across different government ministries and legislative bodies. Understanding the sequencing is essential for determining which rules apply to transactions currently in progress versus those being structured now.

Key Dates and Instruments

The Omnibus Law amendments, building on the original Job Creation Law (Undang-Undang Cipta Kerja), were ratified to address Constitutional Court objections and to update implementing regulations including those governing foreign investment. Law 1/2026 was promulgated in early 2026 to harmonise corporate criminal liability provisions with the new KUHP. Permenkum No. 49/2025, issued by the Ministry of Law and Human Rights (Kemenkumham), introduced mandatory company compliance assessments during 2025. The KUHP itself, replacing the colonial-era Wetboek van Strafrecht, took full effect on 2 January 2026.

The practical consequence is that no M&A transaction signed or closed from early 2026 onward can ignore any of these instruments. Even deals that were papered in 2025 but have not yet closed should be reviewed against the new rules, particularly with respect to compliance representations and criminal exposure warranties.

Foreign Ownership and PT PMA Structuring After the Omnibus Law Amendments

Foreign ownership in Indonesia remains governed by the sectoral classification system, which the Indonesia foreign investment 2026 guide covers in greater detail. The Omnibus Law amendments replaced the old negative investment list with a risk-based licensing framework, but critical ownership caps remain for certain sectors.

Negative List and Sectoral Caps, Current Position

Under the updated framework, business activities are classified into priority, open and restricted categories. Priority sectors may receive fiscal incentives and are generally open to 100% foreign ownership through a PT PMA (Perseroan Terbatas Penanaman Modal Asing). However, a number of sectors remain subject to maximum foreign equity caps, commonly 49%, 67% or 95% depending on the industry. Key restricted areas include certain media, telecommunications, logistics and domestic trade activities. The implementing regulations issued under the Omnibus Law amendments set out these caps in detailed schedules that buyers must check line-by-line against their target’s business classification code (KBLI).

Routes to 100% Foreign Ownership

Where a sector permits full foreign ownership, the standard vehicle is a PT PMA incorporated with a minimum of two shareholders (which may both be foreign entities). The Omnibus Law amendments adjusted minimum investment capital requirements and streamlined certain BKPM notification procedures. Key structuring considerations include:

• PT PMA incorporation or conversion. A local company (PT) can be converted to a PT PMA following a share acquisition by a foreign buyer, subject to BKPM notification and sectoral clearance.
• Joint venture structures. Where sectoral caps apply, foreign buyers typically structure a JV with a local partner. The JV agreement must address governance, deadlock, put/call options and exit mechanics aligned with Indonesian corporate law.
• Nominee arrangements. These remain legally unenforceable and carry significant risk under Indonesian law. The Omnibus Law amendments did not change the prohibition on nominee shareholding structures.

Share Deal Versus Asset Deal Trade-offs

Share acquisitions dominate Indonesian M&A because asset transfers trigger separate tax and licensing issues, including the potential loss of operating permits tied to the selling entity. However, in certain situations, particularly where the target carries significant contingent liabilities or its compliance record under Permenkum No. 49/2025 is deficient, asset deals may offer cleaner separation of risk. Buyers should model both structures during preliminary due diligence and factor in the tax cost differential (notably income tax on share transfers versus VAT and land/building transfer tax on asset sales).

Law 1/2026: Corporate Criminal Liability and D&O Exposure

Law 1/2026 on corporate criminal liability represents the most consequential change for M&A deal structuring in the 2025–2026 reform cycle. It codifies the circumstances under which a corporation, as distinct from its individual directors, commissioners or employees, may be prosecuted for criminal offences, and aligns the available sanctions with the penalty framework of the new KUHP.

Scope of Corporate Offences and Individual Director Liability

Under Law 1/2026, a corporation may be held criminally liable where an offence is committed by, for, or on behalf of the corporation by a person exercising effective control, whether or not that person is a formal organ of the company. The law expressly recognises that individual directors and commissioners can be prosecuted alongside the corporate entity. This dual-track liability model means that personal exposure for officers is no longer limited to regulatory or administrative sanctions, it extends to criminal prosecution under the KUHP.

Sentencing Alignment and Corporate Fines

Law 1/2026 harmonises corporate sentencing with the KUHP’s penalty structure. Where the underlying offence carries imprisonment for a natural person, the corporate equivalent is a fine calculated at a prescribed multiple. Additional sanctions may include revocation of business licences, confiscation of proceeds and publication of the court’s judgment. Early indications suggest that prosecutors will use these provisions selectively but that the mere availability of criminal sanctions will change the negotiating dynamic in M&A transactions.

Practical Deal Implications, Representations, Warranties and Indemnities

For M&A teams, Law 1/2026 demands a recalibration of standard transaction document provisions:

• Enhanced criminal exposure representations. Buyers should require the seller to represent that neither the target company nor any of its directors, commissioners or key employees is the subject of any criminal investigation, prosecution or pending complaint, and to warrant that no acts have been committed that would constitute a corporate offence under Law 1/2026 or the KUHP.
• Criminal indemnity carveouts. Standard indemnities typically exclude criminal fines and penalties. In the post-Law 1/2026 environment, buyers should negotiate specific indemnification for losses arising from pre-closing corporate criminal conduct, potentially with a dedicated escrow tranche.
• D&O protection clauses. Incoming directors will want contractual assurance that D&O insurance is in place, that coverage has been confirmed to respond to Law 1/2026 exposures (to the extent insurable) and that run-off cover will be maintained for pre-closing acts.
• Material adverse change definitions. Definitions of MAC should expressly capture the commencement of criminal proceedings under the new framework as a potential closing condition or walk-away trigger.

Permenkum No. 49/2025 and Company Compliance Assessments

Permenkum No. 49/2025, issued by Kemenkumham, introduced a mandatory company compliance assessment framework that applies broadly to Indonesian limited liability companies. For M&A transactions, this regulation has immediate implications for both the due diligence process and the seller’s pre-closing preparation.

Who Must Undergo Compliance Assessment

The regulation applies to all limited liability companies (Perseroan Terbatas) established under Indonesian law, including PT PMA entities. Companies are expected to conduct and document a compliance self-assessment that covers their adherence to applicable laws, articles of association, internal policies and good corporate governance principles. The assessment is not a one-time exercise, it is expected to be maintained as an ongoing compliance programme.

Documents and Internal Controls Auditors Will Expect

A buyer’s due diligence team conducting a compliance review under the Permenkum No. 49/2025 framework should expect to request and review:

• Board and shareholder resolutions. Evidence that key corporate actions were authorised in accordance with articles of association and applicable law.
• Compliance officer appointment. Documentation confirming the designation of a compliance function or officer.
• Internal policies. Anti-bribery, anti-money laundering, data privacy, employment and environmental policies, together with evidence of training and implementation.
• Reporting and monitoring records. Whistleblower reports, internal audit findings, remediation logs and regulatory correspondence.
• Annual compliance assessment report. The self-assessment document itself, showing the company’s evaluation of its own compliance status.

Rapid Remediation Checklist for Sellers

Sellers preparing for a transaction should implement a remediation programme on an accelerated timeline:

Sellers who proactively complete this programme before a buyer’s due diligence commences are likely to achieve a smoother process, fewer price adjustments and reduced escrow demands. Conversely, a target that cannot produce a completed compliance assessment under Permenkum No. 49/2025 should expect significant scrutiny and potentially adverse deal terms.

Transactional Structuring and Deal Drafting in a Higher-Risk Environment

The cumulative effect of the 2025–2026 regulatory changes is that deal structuring for M&A in Indonesia now operates in a materially higher-risk environment. Buyers and sellers must adapt their approach to pricing, indemnification, insurance and escrow design.

Pricing Adjustments and Indemnity Design for Regulatory Exposure

Where due diligence reveals gaps in compliance with Permenkum No. 49/2025, unresolved regulatory exposures or potential criminal risk under Law 1/2026 and the KUHP, buyers have several options:

• Purchase price adjustment. A downward adjustment to reflect quantified or estimated regulatory exposure, typically applied at closing or via a post-closing adjustment mechanism linked to a compliance remediation schedule.
• Specific indemnities. Targeted indemnities for identified risks, with uncapped or high-cap coverage for criminal and regulatory exposures. In Indonesian practice, sellers typically resist uncapped indemnities, industry observers expect that specific criminal exposure indemnities will become a key negotiation point in 2026 deals.
• Deferred consideration. Structuring part of the purchase price as deferred or contingent payment, with release conditions tied to the absence of criminal proceedings or regulatory sanctions within a defined period post-closing.

W&I Insurance and D&O Cover Considerations

Warranty and indemnity (W&I) insurance is increasingly used in Indonesian M&A, particularly in competitive auction processes. However, the expanded criminal liability framework creates specific policy exclusion risks:

• Criminal fines and penalties. Most W&I policies exclude coverage for criminal fines, penalties and sanctions. Buyers should not rely on W&I insurance as the primary protection against Law 1/2026 exposure.
• Fraud and intentional misconduct. Standard exclusions for fraud will typically also capture conduct that constitutes a corporate offence under the KUHP. The practical effect is a coverage gap for the very risks that the 2026 reforms make more acute.
• D&O insurance. Incoming directors and commissioners should require confirmation that D&O insurance is in place with adequate limits, that the policy responds to investigations and proceedings under Law 1/2026 (at least for defence costs, if not fines) and that run-off or tail coverage will be maintained for at least six years following closing.

Escrow, Holdbacks and Criminal Risk Carveouts

Given the limitations of insurance coverage, well-designed escrow and holdback mechanisms are the most reliable contractual protection for criminal and regulatory risk. Sample structuring approaches include:

• Dedicated compliance escrow. A ring-fenced escrow amount (typically 5%–15% of enterprise value, depending on risk profile) held for an extended period (24–36 months) to cover claims arising from pre-closing criminal or regulatory exposure.
• Criminal risk carveout from general indemnity cap. Clause language that excludes losses arising from criminal proceedings, regulatory sanctions or non-compliance with Permenkum No. 49/2025 from the general indemnity cap, ensuring these claims are recoverable above the standard threshold.
• Release conditions. Escrow release should be conditioned on the absence of criminal proceedings, investigations or regulatory enforcement actions against the target or its former officers for pre-closing conduct, with clear dispute resolution mechanics for contested claims.

For further guidance on why disclosure letters are crucial in M&A deals and how they interact with these indemnity structures, see our dedicated guide.

Indonesian Merger Control and Regulatory Approvals

Indonesian merger control remains a post-closing notification system administered by the KPPU (Komisi Pengawas Persaingan Usaha, the Indonesia Competition Commission). However, practical coordination with BKPM and sector regulators is essential to avoid sequencing errors that can delay or jeopardise a transaction.

Current Filing Thresholds and Practical Timelines

A merger, consolidation or acquisition must be notified to the KPPU within 30 working days of the legal effective date of the transaction where prescribed asset or revenue thresholds are met. The KPPU reviews notifications and may initiate a substantive assessment if it identifies competition concerns. The assessment period can extend to 90 working days from the commencement of a full review.

Coordinating BKPM, Sector Regulators and KPPU Review

In addition to the KPPU notification, transactions involving foreign investment require BKPM (Ministry of Investment) notification and, depending on the sector, clearance from regulators such as OJK (financial services), the Ministry of Communication and Informatics (telecoms and digital businesses) or the Ministry of Energy and Mineral Resources (mining and energy). Failure to coordinate these approvals can result in a completed acquisition that lacks one or more necessary regulatory clearances.

Regulatory Approvals, Summary Table

Due Diligence Checklist and Top Red Flags in 2026

The 2025–2026 regulatory changes require a broader and deeper due diligence scope than was standard in earlier Indonesian M&A practice. The following modular checklist covers the key workstreams, with a particular focus on the new risk areas introduced by the regulatory cluster.

Beyond these specific red flags, the standard diligence workstreams, corporate records, material contracts, employment and labour compliance, intellectual property, insurance and litigation, continue to apply. The key shift in 2026 is that criminal and regulatory compliance diligence must now be treated as a core workstream rather than a supplementary check.

Post-Closing Integration, SOE Reform Implications and Special Considerations

Completing a transaction is only the beginning. Post-closing integration in Indonesia carries its own regulatory requirements, and the 2025–2026 reforms add new layers of complexity.

Government Procurement and SOE Contract Novation Risks

Where a target derives significant revenue from contracts with state-owned enterprises (SOEs) or government procurement arrangements, buyers must assess whether a change of control triggers consent or novation requirements under those contracts. The SOEs reform law and related implementing regulations have introduced additional governance requirements for SOE contracting, which may affect the transferability of existing agreements. Failure to obtain required consents can result in contract termination, a potentially deal-breaking outcome if the target’s revenue is concentrated in government business. For related guidance, see our article on planning exit strategies for joint ventures, which addresses similar change-of-control and exit mechanics.

Integration Compliance Plan

Within the first 90 days post-closing, acquirers should implement a compliance integration plan covering:

• Data privacy. Alignment with Indonesia’s Personal Data Protection Law (UU PDP), including data processing agreements, data subject notification and cross-border transfer assessments.
• Anti-bribery. Extension of the acquirer’s anti-bribery and anti-corruption policies to the target, with immediate training for management and key commercial personnel.
• Employment. Review of employment contracts, collective labour agreements and benefit programmes for compliance with current labour regulations, including any changes introduced by the Omnibus Law amendments to severance and termination provisions.
• BKPM and corporate filings. Update of BKPM registrations, beneficial ownership filings and any sector-specific regulatory notifications to reflect the new ownership structure.

Conclusion, Recommended Next Steps for Buyers and Sellers

The 2025–2026 regulatory cluster has permanently changed the landscape for M&A in Indonesia. Transactions structured without reference to Law 1/2026, Permenkum No. 49/2025 and the new KUHP carry material legal and commercial risk. The following six-point action list provides an immediate starting framework for any buyer or seller currently evaluating or executing an Indonesian deal:

1. Recheck sectoral ownership limits. Verify the target’s KBLI classification against the current negative list and confirm PT PMA eligibility with BKPM before committing to a deal structure.
2. Commission a Permenkum No. 49/2025 compliance review. Whether buying or selling, establish the target’s compliance assessment status early, gaps will affect pricing, indemnity and escrow design.
3. Enhance criminal risk diligence. Expand due diligence to cover potential corporate criminal exposure under Law 1/2026 and the KUHP, including investigations, regulatory correspondence and officer-level exposure.
4. Update transaction document templates. Revise representations, warranties, indemnity caps, MAC definitions and escrow mechanics to reflect the new regulatory environment, standard 2024 precedents are no longer fit for purpose.
5. Secure D&O and W&I insurance. Confirm coverage adequacy, particularly around criminal liability exclusions, and negotiate endorsements or bespoke coverage where standard policies leave gaps.
6. Coordinate regulatory filings. Map the full approval pathway, BKPM, KPPU, OJK and any sector regulators, before signing, and build realistic timelines into the transaction timetable.

Sources

1. Hukumonline, coverage of Omnibus Law amendments and local legal commentary
2. Assegaf Hamzah & Partners (AHP), Indonesia private M&A guide
3. PwC Indonesia, M&A update