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Commissioners and Directors in an Indonesian Company

7 min read|Last Updated: September 6, 2022|
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Before you incorporate a company in Indonesia, understanding the various roles different individuals play in an organisation is crucial to ensure compliance as well as business success.

All limited liability corporations must have shareholders, a board of commissioners, and a board of directors, according to Indonesian company law. In the company, each of these roles has different obligations.

Shareholders in an Indonesian Company 

The corporation is owned by its shareholders. A foundation, a firm, or a person can all be shareholders in an Indonesian corporation. When it comes to decision-making, the shareholder has the final say and approval must be made for any changes to the company. These activities include, among others:

  • Transferring of shares

  • Increasing or decreasing company’s paid-up capital

  • Changing of business location and/or activities

  • Changing the business entity structure (from public to private, and vice versa)

  • Changing company’s incorporation period

Shareholders will be in control of appointing, replacing, and dismissing directors whenever the corporation needs to do so. Any of these changes must be decided at the annual meeting of shareholders. The shareholder’s general meeting must meet the following standards to ensure the legitimacy of the changes:

  • At least 50% of the shareholders with voting rights must attend the meeting. If the shareholder is absent, he/she can assign a representative with a legitimate power of attorney to sit in on behalf of him/her

  • If less than 50% of the shareholders can turn up at the meeting, shareholders have the right to hold another meeting between 10-21 days. Only 33% of the voting shareholders need to sit in for this meeting

Indonesia Incorporation Specialist Eric

Board of Commissioners in an Indonesian Company

Every PT PMA is required to have at least one commissioner. The company’s shareholders can serve as commissioners. However, shareholding is not required to be a member of the commissioner.

Responsibilities of commissioners

  • Supervise the company

    The board of commissioners in Indonesia is responsible for overseeing the firm and providing sound recommendations to the board of directors in accordance with the company’s articles of association.

    The board of directors will then employ the recommendations of the board of commissioners to administer the company as efficiently as possible. The commissioners are not counted in the day-to-day operations of a business.

  • Approved annual financial statements of a company

    Commissioners will also be required to approve the annual financial statements of a company.

  • Review next financial year budget

    Another duty of commissioners is to review next financial year budget.

What are the Requirements of Commissioners in Indonesia

As previously stated, all PT PMAs must have at least one commissioner. If a company has numerous commissioners, one of them will be chosen to serve as president commissioner. The president commissioner acts as the board of commissioners’ head, as implied by the title.

A commissioner does not need to be an Indonesian resident or citizen. If the prospective non-resident commissioner is not currently serving as a resident commissioner in another Indonesian corporation, a commissioner who is neither a resident nor a citizen may be chosen.

If the commissioner in question is a foreigner with a valid work permit in Indonesia who is sponsored by a different company, the commissioner will be required to get a new work permit.

Board of Commissioners’ Liability in Indonesia

Article 108, paragraph (1) of the Company Law specifies the liabilities of members of the board of commissioners. If the company suffers financial losses, the commissioners who were directly responsible for such losses will be held liable if it can be proven that they performed their duties in a way that was careless, reckless, unethical, or contradictory to the firm’s articles of organisation.

When more than one director is found to be at fault, this culpability is to be shared equally and jointly by all commissioners involved. However, if there is sufficient evidence that the commissioners performed their supervisory duties in the best interests of the company and in accordance with the company’s business objectives, had no vested interests in the board of directors’ actions, and they advised the board of directors to avoid losses, the commissioners will not be held liable for the losses.

Commissioners and Suspensions of Directors

Commissioners in an Indonesian corporation, acting through the board of commissioners, have the right to temporarily suspend any member of the board of directors if it is deemed appropriate. Indonesian Law Number 40 of 2007 governs such suspensions.

The director will be duly suspended and is therefore forbidden from carrying out any directorial duties during the duration of the suspension once the board of commissioners has presented the reasons for the director’s suspension and informed the director to be suspended in writing.

A general meeting of shareholders (GMS) must be held within 30 days of the suspension beginning. During this GMS, the director who has been suspended may make a personal defense. The commissioners will decide whether to keep or lift the suspension after GMS.

Indonesia Incorporation Specialist Eric

Directors in an Indonesian Company

Directors are members of the board of directors in an Indonesian corporation. The board of directors is in charge of overseeing all aspects of the company’s management. The company’s directors must make all decisions in accordance with the firm’s articles of association and all applicable Indonesian company regulations.

The articles of incorporation also specify how long a director will hold the office. During a GMS, members of the board of directors will be chosen, replaced, or even terminated.

What are the Requirements of Directors in Indonesia

Every company in Indonesia is required to have at least one director. When a corporation has more than one director, one of them must be chosen to act as the firm’s president director. The president of the board of directors, as mentioned, is the board’s leader.

Using the procedures of popular corporate structures in Indonesia, the obligations and responsibilities of an Indonesian company’s directors need to be determined. In many cases, these decisions are taken during a GMS.

Responsibilities of Directors

A company’s legal representatives are the directors. They must behave in accordance with the articles of incorporation. A director of an Indonesian company is also responsible for a number of crucial tasks, namely:

  • Filing of compliances

  • Submission of financial statements

  • Preparation of an annual work plan before the beginning of a company’s fiscal year

  • The signing of contracts between third parties and the company

  • Management of the company’s bank account

  • Submission of the company’s financial statement and yearly report

  • Maintenance of the list of shareholders as well as the minutes of any GMS.

Thinking of setting up a company in Indonesia? Reach out to us today for incorporation, visa, and any other corporate services today.

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FAQs

Who can terminate a commissioner or a director in the company?2021-01-29T14:59:07+08:00

The shareholders have the right to terminate a commissioner or a director in the company. To terminate a commissioner or a director in the company, the shareholders must issue a letter of termination, a statement letter, and host a hearing

The process of terminating a commissioner or a director in the company is a hassle. Is there any way I can avoid the termination process?2021-01-29T14:58:54+08:00

Yes, there is a way to avoid the termination hassle. In the company’s articles of association, the shareholders can limit the term of office (one to five years) of the commissioner or the director. Once the commissioner or the director hit the maximum term, the commissioner or the director must vacate the role. In this way, the company does not have to go through the termination process.

Who is responsible for reviewing and approving the annual financial statement of the company? Board of Directors or Board of Commissioners?2021-01-29T14:45:28+08:00

The Board of Commissioners is responsible to review and approve the annual financial statement of the company.

Can foreigners be the commissioners in Indonesia?2021-01-29T14:42:51+08:00

As long as the foreigner possesses a work permit in Indonesia, he/she can be a commissioner in a foreign-owned company. However, any company which is completely owned by Indonesians is not allowed to hire a foreigner as the company’s commissioner.

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