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What is the Cor­po­rate Struc­ture in In­done­sia?

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Cor­po­rate struc­ture in In­done­sia is the same for most for­eignowned com­pa­nies. How­ever, the or­gan­i­sa­tional lay­out in In­done­sia is of­ten con­fus­ing for for­eign en­trepreneurs. What roles are the share­hold­ers, com­mis­sion­ers, and di­rec­tors play­ing in your com­pany in In­done­sia? Who can ac­cess your cor­po­rate bank ac­count? How do you ter­mi­nate a di­rec­tor or a com­mis­sioner?

Share­hold­ers are the own­ers of the com­pany and thus at the high­est po­si­tion in the hi­er­ar­chy of de­ci­sion- mak­ing through the gen­eral meet­ing of share­hold­ers (GMS). The Board of Com­mis­sion­ers (BOC), how­ever, is there to su­per­vise man­age­ment poli­cies. They also ad­vise the Board of Di­rec­tors (BOD) who, fol­low­ing the Com­pany Law in In­done­sia, are mostly re­spon­si­ble for the com­pany’s man­age­ment and flu­ent op­er­a­tions.

Who can be share­hold­ers in In­done­sia?

Share­hold­ers are the peo­ple, a com­pany or a foun­da­tion that own an eq­uity stake in the com­pany. All com­pa­nies in In­done­sia, also lo­cally- owned PTs, must have at least two share­hold­ers. If you are plan­ning on us­ing nom­i­nee share­hold­ers in In­done­sia, make sure you do it the safe way. Share­hold­ers have any au­thor­ity not given to the BOD or BOC within lim­its spec­i­fied in the In­done­sia Com­pany Law (40/2007) on Lim­ited Li­a­bil­ity Com­pa­nies or the Ar­ti­cles of As­so­ci­a­tion (AoA). Share­hold­ers them­selves can­not be held per­son­ally li­able for le­gal re­la­tion­ships en­tered into on be­half of your com­pany. They are also not li­able for the com­pany’s losses that ex­ceed the shares they own. If dur­ing com­pany in­cor­po­ra­tion you de­cided to sign a cap­i­tal state­ment let­ter in­stead of in­ject­ing the re­quired paid- up cap­i­tal, the share­hold­ers must sign it to con­firm that you have enough funds to trans­fer the cap­i­tal af­ter the com­pany in­cor­po­ra­tion. Also, their li­a­bil­ity is up to the cap­i­tal state­ment let­ter (even if the funds have not been ac­tu­ally trans­ferred) – as per the is­sued amount of shares stated in the AoA.

Gen­eral Meet­ing of Share­hold­ers (GMS)

As the GMS has rights which can­not be trans­ferred to the BOD or BOC, changes that take place in the com­pany of­ten need the share­hold­ers’ per­mis­sion via the gen­eral meet­ing of share­hold­ers.

Th­ese changes can be, for ex­am­ple:

• To in­crease and or de­crease the paid up cap­i­tal of the com­pany

• Ap­point and re­voke di­rec­tors and com­mis­sion­ers

• Change busi­ness ac­tiv­i­ties

• In­crease or de­crease of au­tho­rised cap­i­tal

• Change of busi­ness lo­ca­tion

• Trans­fer shares

• In­cor­po­ra­tion pe­riod for the com­pany

• Change com­pany sta­tus from pri­vate to pub­lic (or vice versa)

To make a de­ci­sion, the GMS has to meet the fol­low­ing re­quire­ments:

• The first GMS can be held if 50 per­cent of share­hold­ers with vot­ing rights are present or rep­re­sented with a valid Power of At­tor­ney

• If the quo­rum of at­ten­dance is not ful­filled on the first GMS, the sec­ond GMS can be held and a de­ci­sion can be made if at least 1/3 of share­hold­ers with vot­ing rights are present or be­ing rep­re­sented

• The sec­ond GMS must be held be­tween ten to 21 days from the first GMS

Rights and obli­ga­tions of share­hold­ers

Share­hold­ers are those who sub­scribed to and paid the cap­i­tal of the com­pany. It is not pos­si­ble to is­sue shares with­out a nom­i­nal value. The AoA should clearly de­fine the clas­si­fi­ca­tion of shares, rights at­tach­ing to each share and the nom­i­nal value of each share.

Some of the clas­si­fi­ca­tions of shares are:

1. Shares with or with­out vot­ing rights

2. Shares with rights to pro­pose BOD and BOC mem­bers

3. Shares with rights to re­ceive more div­i­dend

Hav­ing shares in the com­pany, share­hold­ers have the fol­low­ing rights:

• At­tend and cast a vote at the GMS

• Re­ceive div­i­dend pay­ments

In ad­di­tion, share­hold­ers will ex­er­cise mul­ti­ple other rights un­der the In­done­sia Com­pany Law (40/2007) on Lim­ited Li­a­bil­ity Com­pa­nies. When choos­ing cor­po­rate share­hold­ers, con­sider the fact that In­done­sia has a dou­ble tax treaty agree­ment with over 60 coun­tries. Non-res­i­dent div­i­dend re­cip­i­ents’ fi­nal with­hold­ing tax is 20 per­cent; how­ever, it is lower for treaty coun­tries (be­tween 10 – 20 per­cent).

Ar­ti­cles of As­so­ci­a­tion

Cor­po­rate share­hold­ers also need to have the AoA ap­proved by a pub­lic no­tary in their re­spec­tive coun­try. The AoA is where you spec­ify the reg­u­la­tions for your com­pany’s op­er­a­tions, demon­strate how you han­dle fi­nan­cials and set­tle roles within the or­gan­i­sa­tion. It is wise for a for­eign in­vestor to con­sider the AoA in ad­vance be­cause in some coun­tries, for ex­am­ple, Thai­land and Aus­tralia, it is usu­ally not a must for com­pa­nies to have it by law. Keep in mind that in In­done­sia, for­eign com­pa­nies must make an AoA be­fore be­com­ing a share­holder here.

Com­mis­sion­ers in In­done­sia

The task of the Com­mis­sioner or the BOC is to su­per­vise the com­pany. How­ever, their ac­tions must al­ways be in ac­cor­dance with the AoA. Ac­cord­ing to the cor­po­rate struc­ture in In­done­sia, they also su­per­vise the BOD and give ad­vice to the di­rec­tors. Com­mis­sion­ers are not part of the daily com­pany man­age­ment. They can, but are not re­quired to, have shares. Note that your PT PMA in In­done­sia must have at least one com­mis­sioner. If you choose to have more than one com­mis­sioner, one of them must be­come the pres­i­dent com­mis­sioner. This puts him or her in charge of the board of com­mis­sion­ers.

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