Indonesian Company Law

General Corporate

In Indonesia, there are three forms of corporation which has the status of “Legal Entity”. One of them is the Limited Liability Company, as stipulated by Law No. 40 of 2007 regarding Limited Liability Company (“Company Law”).

1.        Limited Liability Company

Ø  Key Legislations:

·      Company Law

·      Government Regulation No. 43 of 2011 regarding Usage of the Name of Limited Liabilty Company (“GR No. 43/2011”).

Ø  Minimum Authorized Capital: IDR 50 million, which minimum of 25% must be issued and paid-up (may vary depending on the business of the company) – Article 32 and 33 of Company Law.

Ø  The value of shares shall be stated in Rupiah, as mentioned in Article 49 (1) of Company Law.

Ø  Prohibited to use the name of existing listed company, unless you can provide a statement letter from such company – Article 5 of GR No. 43 of 2011.

Ø  Founded by two or more persons (or legal entity) by notarial deed based on a notarial deed drawn up ​​in Bahasa Indonesia (Deed of Establishment) – Article 7 (1) of Company Law.

Ø  Obtain legal entity status on the date of the issuance of Ministerial Decree regarding the ratification of the Company’s legal entity – Article 7 (4) of Company Law.

Ø  Required to have the following licenses: Domicile Letter which issued by related District Office, Tax Registered Number (NPWP and SKT) which issued by related Tax Office, Business License and Company’s Registration Certificate which issued by related Official Trade Office.

2.        Investment Company

Ø  Key Legislations:

·      Company Law

·      Law No. 25 of 2007 regarding Investment (“Investment Law”).

Ø  Domestic investment may be in form of corporation, non-corporation, or individual business, in accordance with the rules of law (Article 5 (1) of Investment Law).

Ø  Foreign Investment must be set up in a form of limited liability company (Article 5 (2) of Investment Law).

Ø  The establishment of Domestic and Foreign Investment shall be in accordance to Company Law.

Ø  Any investors shall have the right to make transfer or repatriation in foreign currency to capital, profit, dividend and any other revenue (Article 8 (3) of Investment Law).

Ø  Any investment companies shall be entitled to use experts of foreign citizen on certain position and expertise (Article 10 (2) of Investment Law).

Ø  According to Article 15 of Investment Law, every investor is required to make report on investment activity and submit it to the Investment Coordinating Board (Badan Koordinasi Penanaman Modal/BKPM).

Ø  Business fields closed to foreign investment are (Article 12 (2) of Investment Law):

a.         production of weapons, ammunition, explosive equipment, and warfare equipment; and

b.        any business sectors explicitly declared closed based on the law.

3.        Board of Directors (“BOD”)

Ø  According to Article 93 (1) of Company Law, the candidate of the BOD shall be individual who has the capability in performing legal action, except within the period of 5 (five) years prior to his appointment he/she:

a.         had been declared bankrupt;

b.        being the member of the Board of Directors or the member of Board of Commissioners who have been adjudicated to have caused the bankruptcy of a Company; or

c.         had been sentenced for a criminal offense which caused financial loss to the state and/or relating to financial sector.

Ø  The BOD shall undertake its duty to manage the Company for the interest of the Company in the pursuit of its purposes and objectives, as stipulated in its Articles of Association.

Ø  Members of the BOD are appointed by the General Meeting of Shareholders (“GMS”).

Ø  The BOD shall represent the Company, in or outside the courts (Article 98 (1) of Company Law).

Ø  The obligations of BOD are among others to establish and maintain a register of shareholders, special register, minutes of GMS and minutes of the BOD’s meeting.

4.        Board of Commissioners (“BOC”)

Ø  The BOC shall conduct supervision over the management policy, the implementation of the management in general, either regarding the Company or its business, and provides advice to the BOD (Article 108 (1) of Company Law).

Ø  The requirement for BOC’s appointment is similar to BOD.

Ø  Based on the articles of association or the resolution of GMS, the Board of Commissioners may perform the management over the Company in a certain condition for a certain period (Article 118 (1) of Company Law).

5.        General Meeting of Shareholders (“GMS”)

Ø  GMS has the authority which is not conferred to the Board of Directors and the Board of Commissioners.

Ø  During the GMS, the shareholders shall have the right to receive explanation relating to the Company from the BOD and/or the BOC, as long as it is related to the agenda of such GMS, and shall not in contrary with the interest of the Company (Article 75 (2) of Company Law).

Ø  The GMS may be convened by ways of teleconference, video conference, or other means of electronic which enables all of the GMS participant to see, hear, and participate directly in the meeting (Article 77 (1) of Company Law).

Ø  According to Article 86 of Company Law, GMS shall be lawful if more than ½ (one-half) from the total shares with voting right are present or represented, except the Law and/or articles of association stipulates a bigger number of quorum.