Directors, Commissioners & Shareholders Meeting

Directors, Commissioners & Shareholders Meeting 

Indonesian corporate structure is different from the 

common law system, since it adopts a two-tier management 

structure instead of a single-tier management. The management 

structure comprises of Board of Directors  (“BOD- Direksi”) and 

Board of Commisioners  (“BOC-Dewan Komisaris”). Senior 

officers are responsible for the company’s actual management in the 

operational sense is the Direksi. Even though there is one director, 

there is usually more than one. The basic functions of the Direksi 

are to manage and represent the company, and not the shareholders. 

The second tier is Komisaris (“Commisioner”), which has the role 

of supervising and advising the  Direksi, and representing the 

interests of the company and not merely the interest of the 

shareholders. The requirement of  a company to have a BOC is a 

significant alteration from the old provision (the Code). To date, all 

public companies, companies in  the business of mobilizing funds 

from the public or companies that issue debt instruments must have 

at least two directors and two commissioners. The UUPT also 

distinguishes between the collegial nature of the BOD and the non-

collegial nature of the BOC. Where a company has more than one 

commissioner, the BOC constitutes a council pursuant to the 

Elucidation that no individual  commissioner can represent the 

company if there is more than one commissioner. In contrast, when 

a company has more than one director, each director has the 

individual authority to represent the company unless the company’s 

articles of association states  otherwise. Although the primary 

responsibility of managing the company rests on the directors, in 

some circumstances, commissioners can exert certain managerial 

powers -provided by the company’s articles of association or the 

GMS- for instance managing the company for a specific time 

period. Both director and commissioner bear personal liability for

any fault or negligence committed in discharging his/her task. 

Although the UUPT does not define “fault” or “negligence”, it does 

however acknowledge the concepts of fiduciary duties. In case of 

breaching any fiduciary duties, shareholders who control at least ten 

percent of the issued shares with valid voting rights may, in the 

name of the company, bring a cause of action against the director or 

commissioner for the loss suffered by the company. Since the 

shareholder initiates the legal action in the name of the company, it 

can be considered derivative action.   

Pursuant to the UUPT, the shareholders of an Indonesian 

company are acting via GMS. The GMS has various rights, some of 

which cannot be waived under any circumstances i.e. the right to 

approve amendments of the company’s Articles of Association and 

to approve a dissolution or winding up of the company, while the 

rest may be modified in the company’s Articles of Association. 

There are two types of GMS: annual and extraordinary meetings. 

An annual GMS is held within the last six months of the company’s 

fiscal year. The GMS convenes in order to approve the annual 

report, including its annual accounts that must comply with 

Indonesian Financial Accounting Standards and the signatures of 

the directors and commissioners required for the annual accounts. 

The extraordinary GMS can be  convened at any time that the 

company deems necessary for the purposes stipulated in the UUPT 

or Articles of Association. In other word, a company shall 

undertake an extraordinary GMS for the purposes other than 

approving the company’s annual account, such as: merges, 

acquisitions or appointment of a new Direksi. Commissioner, 

Director or a party that controls  at least 10% of the issued shares 

may request the meeting.

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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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The (New) Company Law Framework

The (New) Company Law Framework 

Ever since Indonesia’s independence, business sectors and 

mainly business enterprises have played an important role in 

fostering Indonesia’s economic  growth. There are various 

regulations that govern Indonesian business organizations. 

Presently, the laws of Indonesian business organizations are 

primarily governed by the Law on Limited Liability Company, Law 

No.1 of 1995 (Undang-Undang tentang Perseroan Terbatas or 

“UUPT”) which is considered modern Indonesian company law 

(referred also as the New Indonesian Company Law), the 

Indonesian Civil Code (Kitab Undang-Undang Hukum Perdata or 

Burgelijke Wetboek), and the Indonesian Commercial Code (Kitab 

Undang-Undang Hukum Dagang or Wetboek van Koophandel).  

The last two codes were first promulgated during the Dutch colonial 

rule.  

The UUPT, consist of 129 articles and was enacted on 

March 7, 1995 and came into effect  a year later. Prior to the 

enactment of UUPT the limited liability company was governed by 

only twenty-one articles in the Indonesian Commercial Code. The 

UUPT symbolizes the first major revision of the Indonesian 

company law since the commercial code. The promulgation of the 

law was a response to the rapid  economic progress that needed 

provisions to complement international practices and the modern 

commercial sector. This paper will focus on the UUPT since it 

serves as the basis of Indonesian corporate structures.

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business law:Types of Business Organizations:

Types of Business Organizations: 

business law:Types of Business Organizations:

Indonesia’s commercial sector recognizes three principal 

categories of business organizations: sole proprietorship, 

partnership (general or limited) and company. Sole proprietorship is 

generally used in the informal sector, since its nature and activities 

are of the informal sector. For example, it does not require formal 

registration to Indonesian authorities.   

There are three types of partnership:  persekutuan perdata 

(maatschap or private association), persekutuan firma (venootschap 

onder firma or firma, “FA”) and  persekutuan komanditer 

(commanditaire vennootschap, “CV”). The Indonesian Civil Code 

governs the first type of partnership whereas the rest are governed 

by both the Indonesian Civil Code and the Indonesian Commercial 

Code. It is not easy to determine absolute equivalents between these 

partnerships and partnerships under common law tradition; 

however, the maatschap and firma closely resemble the concept of 

a general partnership under the  common law system whereas the 

commanditaire venootschap resembles limited partnership under 

common law.  

The last type of business organization is under the 

Indonesian Company Law takes the form of Perseroan Terbatas 

(“PT”). It is similar to the incorporated limited liability company 

under the common law system. Historically, this was referred to as 

the Dutch corporate model known as the  naamloze venootschap 

(“NV”). However, since the enactment of the new Indonesian 

Company Law, which repealed the provisions governing the 

company, many companies started to use the abbreviation “PT”.  

There was also another form of an Indonesian incorporated 

company, which was intended to be used by indigenous 

Indonesians, so-called “the Maskapai Andil Indonesia” 

(Indonesische Maatschappij of Aandelen or IMA). It was 

governed by separate regulations,  i.e. Ordinances 886.  However, 

the promulgation of the new Indonesian company law in 1995 

abolished the dualism of the Indonesian company structure - PT 

under the Commercial Code and PT under IMA, and brought the 

Indonesian company structure into one common corporate regime: 

the (New) Indonesian Company Law.  

Until now, there are three types of companies in Indonesia. 

The most common is “PT Biasa” or local companies. Even though it 

only has Indonesian shareholders, directors and commissioners, it is 

still subject to regulation by the  UUPT. It is required to have a 

minimal capital, as stated in the UUPT. Although Government 

Regulation No.20 of 1994 (“PP20”) states that foreigners may 

acquire shares in this type of company, in practice,  it is closed to 

foreign investment and foreign  citizens are not allowed to hold 

positions of director or commissioner, unless the field of business is 

not listed on a negative list, in which a specific written approval 

from the relevant Minister is given. The second type is a domestic 

investment company referred to as “PT PMDN” (PMDN Company), 

which has certain regulatory advantages and tax concessions 

compared to a PT Biasa. Originally, a PT PMDN company was 

reserved to Indonesian shareholders, but following the enactment of 

PP20, the Decree of Chairman of BKPM (Investment Coordinating 

Board) 15/SK/1994 (“SK15”) and the current practice of BKPM, it 

became possible for foreign parties to acquire up to 95% of the 

shares in the company. Such a company with a foreign shareholder 

may have foreign directors and/or commissioners. To obtain status 

as a PMDN company, the company has to have BKPM approval for 

the line of business it is operating as and is required to have a 

minimum investment equivalent to the exchange rate as stated in 

BKPM’s letter of approval (specifically in rupiah) set by BKPM. 

Finally, there is the foreign investment company incorporated in the 

Foreign Investment Law of 1967 Law No. 1 of 1967 also known as 

the “PT PMA” (PMA Company). It may have foreigners as its 

shareholders so long as it has at least two shareholders, but it has an 

obligation to invest an unspecific percentage to Indonesia within 15 

years. It may have foreigners as director and commissioner, enjoy 

certain advantages and protections against expropriation of the

investment. However, it has an  obligation to report its activities 

regularly to BKPM. BKPM will approve the minimum investment 

plan of this company that is specified in both US dollars and rupiah.

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Chapter VI:BUSINESS LAW:A. COMPANY LAW

Chapter VI:BUSINESS LAW:A. COMPANY LAW

Introduction  

Since the implementation of the 25-year economic 

development-planning program, Indonesian economic growth can 

be attributed to an increase in participation of small and large 

business enterprises. Not only has there been an increase in assets 

and capital accumulation, enlistment of human resources, but also 

business resources (which from  time to time create a business 

cycle). One of the business entities that dominate, in the Indonesian 

business sector, is the Limited Liability Company. As a created 

legal entity, it is necessary for an Indonesian Limited Liability 

Company to be supported not only by its own organs, but also by 

clear and concise regulations in order to maximize and utilize its 

organizational and managerial ability effectively and efficiently. 

Hence, strong and stable business  entities are very important to 

enhance national development. It is therefore necessary to have a 

brief overview of business organizations within the framework of 

Indonesian Company Law. 

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