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Are Indonesia’s Business Laws stricter than those of other Countries?

Business Laws

On August 18, 1945, the Republic did a declaration of its Constitution. At present, the validity of the Commercial Code is based on Article II of the Transitionary Regulation of the Constitution 1945. 

In the framework of renewing corporate law in Indonesia, the Department of Justice had drafted of a company bill in 1974. Subsequently, the Department of Justice submitted a new company act bill to the Parliament which will in principle replace articles 36 up to 56 of the ICC and all their alterations, the last being made by Law No. 4 of 1971 concerning the Alteration and Increment of Article 54 of the Commercial Code.  

According to the legislators, the enactment of a new company law is vital in the attempt to foster economic and commercial activities in the modern era. 

Indonesia’s rapid economic growth and development in the past few years has resulted in its need to established special legal frameworks 

Businesses and entrepreneurs have created sources of income which are beneficial not only for themselves but also for the public at large. In this aspect, the Indonesian Company Law plays a larger than life role. The law regulates the activities of the company in the course of achieving its objective, which is to make profit.  

The newly enacted Company Law provides guidance for anybody who is doing business and creates awareness of the rights and obligations, including the awareness of the obligation to conform to public order and good morals.  

A good company law will regulate not only the internal relationship between a company and its shareholders, officers, employees but also matters outside of the company such as the protection of creditors and tax obligations in addition to matters that would enhance.  

The existing Indonesian company law as contained in the ICC is admittedly not sufficient in accommodating today’s business problems, issues and interest.  

The activities of a business may take various legal forms such as foreign joint venture-companies, public companies and State-owned enterprises, in addition to common companies.  

Although the ICC requires that a company has to be established by a minimum of 2 persons, after its reception as legal entity, the company belongs only to one shareholder. Different types and classes of investors also require different categories of shares.  

In addition, a clear definition and description of the responsibilities and liabilities of the shareholders as well as those of the management are also required. Finally, just to mention a few other aspect of the business is the legal framework for a merger. 

The Company Law of Indonesia also provides for other types of companies, such as the public and open ones. The Company Act covers the following aspects related to setting up a company in Indonesia: 

  • the company must have shareholders who will deposit a share capital which will allow them to conduct a commercial activity; 
  • the company must have a board of directors, a board of commissioners and a general meeting of the shareholders; 
  • the preparation and amendments brought to the company’s statutory documents;
    a company must commit to taking part in the development of a sustainable economy. 

Indonesia’s Company Law (Law No. 40 of 2007 on Limited Liability Companies) is a regulation that determines and binds how all companies operate their businesses in the Republic of Indonesia. Ever since it was enacted in 2007, the Indonesia Company Law has yet to be amended and it is a law that all corporate structures abide to. 

Therefore, to answer your questions, it depends on how an individual looks at it. The Indonesian law can be stringent to some, and lenient to some. As long as you abide by the law, there shouldn’t be any issue. 

 

 

Paul Hype Page & Co – OSS service provider and Asean Chartered Accountant.

Paul Hype Page & Co. have 3 physical offices in Singapore, Malaysia and Indonesia

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Posted on May 17, 2019 at 10:04 am
Categories: Business In Indonesia

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