INFO FOR EXPATS
What is the Corporate Structure in Indonesia?
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.