Separate Legal Entity,Incorporation,Share Capital and Voting Rights

Separate Legal Entity,Incorporation,Share Capital and Voting Rights

Separate Legal Entity  

PT, as an Indonesian company,  is a legal person who has a 

legal identity separate from its shareholders. Thus, shareholders are 

not personally liable for the obligations of the company. The 

shareholders have limited liability to the extent that their liability 

for the acts of the company can be limited to their capital 

contribution. Nevertheless, there are some limited possibilities to 

pierce this corporate veil, for instances in the event that the relevant 

shareholders either directly or indirectly with bad faith take 

advantage of the company solely for their personal interest or the 

relevant shareholders either directly or indirectly unlawfully use 

company’s asset causing the company’s assets to be inadequate to 

settle company’s debts.  

Incorporation 

There are four steps for incorporating a PT. First, execute 

the deed of establishment, which also includes the company’s 

article of association before a notary in the form of a notarial deed. 

Second, obtain a formal approval over the deed from the Ministry of 

Law and Regulation. Upon approval, the deed has to be registered 

in the Company Registry that is maintained by the Ministry of 

Industry and Trade.  Lastly, publish the deed of establishment in the 

State Gazette. It needs to be pointed out that prior to the registration 

and publication processes, the liability of a company can be put in 

the hands of its directors. In other words, in addition to the liability 

of the company, a personal liability of the director’s may arise if the 

new company fails to register and publish the approved deed.  

Another requirement in establishing a PT is to have at least 

two persons as the founders or shareholders. The eligible person can 

be an individual or a legal entity. With an exception for PT BUMN 

(State-Owned Company) can be established by a single entity, the 

government. The requirement to have at least two shareholders still 

continues. If a PT has only one  shareholder and it does not offer 

shares to other shareholders within six months, then the existing 

shareholder is personally liable for the agreements and losses of the 

company. The requirement to have at least two shareholders is 

based on contractual theory, a conception that a PT is a product of 

contract, thus it requires two or more shareholders at all times.  

Share Capital and Voting Rights 

The UUPT requires a company to have a minimum 

authorized capital of 20 million rupiah. Issued capital must be at 

least 25% of the authorized capital and by the time of approval of 

the Articles of Association of the new company by the Minister of 

Law and Regulation, all the issued  capital must be fully paid up. 

However, in the case of a PMA company and a PMDN company, 

usually BKPM requires a higher minimum capital level of 

investment.  

A company may issue registered and bearer shares and may 

also issue non-voting shares. Furthermore, it can issue redeemable 

and convertible shares, cumulative and non-cumulative shares, and 

preference shares. However, a company must have at least one class 

of ordinary shares (“saham biasa”) with voting rights. Payment for 

shares can be made in cash or in other forms (“in kind”), but 

payment in kind, such as of real  property in consideration for the 

issue of shares, requires an independent expert valuation. Under the 

UUPT, a company may not issue shares to itself or to its subsidiary. 

Subsidiary is defined as a company in which the parent company 

owns more than 50% of its shares or the parent company controls 

more than 50% of the voting rights in a General Meeting of 

Shareholder (“GMS”), and/or the parent company influences 

management control such as the appointment and dismissal of 

director and commissioner. However, under special circumstances, 

it can buy back the issued shares and hold them as ‘treasury shares’ 

that the company can sell at a later date. Such shares cannot be

counted to form a quorum nor can  the voting rights be attached to 

the shares being exercised.

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