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Company Law
The Company Law primarily governs the overall establishment
process, operation and dissolution procedure of a Limited Liability
Company (Perseroan Terbatas – “PT”) including on how the organs of
the PT namely the Board of Directors, Board of Commissioners and
the General Meeting of Shareholders operate
...


a
...
The conduct or management of the affairs of the PT;
b
...
The representation of the PT inside and outside the courts of
law
...
The BOD is
entitled to carry out the management of the PT in accordance
with the policy it deems best (Article 92 paragraph 2 of the
Company Law) provided that such policy does not contradict the
PT’s Articles of Association, especially in this regard is the
objectives of the PT
...


Note that the management duty of the BOD is in principle a duty
of all members of the BOD without exception and for which each
of them is personally responsible
...
For example, the Articles of
Association may regulate that all employment-related matters
(such as among others, recruitment, extension or termination of
an employment) can only be undertaken by the HR Director or
Human Resource Director, and all concerns on financial matters
such as the execution of loan agreement can only be conducted
by the Finance Director
...


b
...
The
primary function and duty of the BOC which has to act
collectively is to supervise the BOD in conducting its
management duties in the interest of the PT (Article 114
paragraph 1 and 2 of the Company Law)
...

In this regard, the BOC is allowed, or is even required to advise
and warn the BOD on any potential threats or detrimental effects
in regards to the BOD’s decision in the management of the PT
...
Failure to do
so might result in the BOC being held jointly and several
responsible, along with the BOD, to compensate the PT for its
financial loss due to a penalty imposed by the government
...


3) What is the defense of the BOC in case his decision caused
financial loss to the PT?
Under the business judgment rule doctrine, a member of the
BOD cannot be held responsible for the loss suffered by the PT if
he can prove that (Article 114 paragraph 5 of the Company Law):
a) he has performed the supervisory duty with good faith and
prudent principle for the interest of the PT and in accordance
with its purpose and objective set out in the PT’s Articles of
Association;
b) he has no, either directly or indirectly, personal interest to the
BOD’ management over the PT’s which results in the PT’s
financial loss; and
c) he has provided advice to the BOD in order to prevent the
occurrence or continuity of such financial loss
...


Entry into any agreements with respect to the incurrence of
borrowing with a value exceeding certain amount (for instance, ¼
of the PT’s authorized capital or paid up capital or its equivalent
in other currency)

2
...


Entry into an agreement between the PT and the shareholder(s) of
the PT

4
...
g
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Entry into an agreement with employee(s) of the PT which grants
a salary package of more than a certain amount

6
...
)

7
...


Disposal of significant movable assets of the PT (e
...
, assets

having an economic useful life of more than 2 years)

9
...
)

10
...

excess of a certain time period (e
...
, 2 years) or is outside the
PT's ordinary course of business or approved business plan

12
...
Issuance of collective shares certificate

Capital expenditure by the PT in respect of any item or project in
14
...

the PT is a party, in connection with which a potential liability, or
a claim, in excess of a specified amount

Any material acquisition or disposal or grant of any license by the
16
...
Approval on the transfer of shares in the PT

18
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Distribution of dividend

20
...
General Meeting Shareholders (“GMS”)
1) What is the power of the GMS?
The GMS is vested with powers that not reserved to the BOD or
the BOC within the limits provided in the Company Law and the
Articles of Association (Article 75 paragraph 1 of the Company
Law)
...


2) Could the shareholders of the PT be held responsible for the
financial loss of the PT?
Basically, the PT’s shareholders are not personally liable for
agreements made on behalf of the PT, and are not liable for the
PT’s losses in excess of their shareholding in the PT
...

3) What are matters which require shareholders’ approval in the
GMS?

Mandatory Reserved Matters under the Company Law

1
...


Amendment to PT’s Articles of Association

Increase of the PT’s authorized capital

3
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Buy-back of shares or transfer of treasury shares

5
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Approval of the PT’s annual business plan

7
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Utilization of the PT’s net profits (after setting aside reserve)

9
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Disbursement of special reserves

Merger, consolidation, acquisition, spin-off, voluntary
11
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13
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Determination of salaries of member(s) of the BOD

15
...
Determination of salaries of member(s) of the BOC

17
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Imposition of a security interest over 50% or more of the
PT’s assets

Other common reserved matters (shareholders can elect to
include provisions in the PT's Articles of Association requiring
shareholders’ approval)

21
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Entry into a material transaction or transaction with a value
that exceeds a certain amount

23
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Appointment of auditor

25
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Adopting or amending certain corporate policies or
standard operating procedures

***THANK YOU***



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