Eligibility Criteria for a Director in Indonesia

Every private limited liability company in Indonesia requires one or more directors. Companies based in Indonesia are legally allowed to have as many directors as they desire. The company’s director is to be appointed by through a General Meeting of the Shareholders. To be the director of any company in Indonesia, a personal domicile letter should be received from the relevant authorities. This letter can be received from a local administration verifying that the person is the resident of Indonesia.

Article 93, Paragraph (i) and Article 110, Paragraph (i) of Indonesia’s Company Law state that only certain individuals may be appointed to a company’s board of directors. These individuals must be people who are capable of performing legal actions certain except for those who in the five years prior to their appointment have been:

  1. Acknowledged bankrupt
  2. Members of a board of directors or board of commissioners which have been declared to be answerable for a company’s bankruptcy
  3. Sentenced for an offense which caused losses to the state or were related to the finance sector

Foreigners are indeed allowed to be directors of companies based in Indonesia. In fact, the country’s government encourages foreigners to seek out such roles. However, before they may do so, they are required to fulfill the stated requirements to become the director of a company in Indonesia. They are also to submit the proper documentation to verify that they are a resident of Indonesia.

One of the easiest ways to become a company director in Indonesia is by becoming the director of your own company. In this regard, we at Paul Hype Page & Co can be of assistance. We will help you incorporate a company in Indonesia and guide you through the entire process.

Duties and Responsibilities of a Director in Indonesia

The board of directors is responsible for the management of the organization, for the accomplishment of the objectives of the organization, and for the representing of the corporation both within and outside the courts according to the company’s  Articles of Association. The director is responsible for the overall management of the company.

The following are the responsibilities of a director who is part of the board of directors:

  1. Distribute an annual report including the fiscal report of the corporation after it has been checked by the board of commissioners to the General Meeting of Shareholders within six months of the end of the company’s fiscal year.
  2. Help other board members make a business plan including the yearly budget plan for the incoming fiscal year, then put it forward to the board of commissioners or the General Meeting of Shareholders of the corporation as stated in the Articles of Association of the company.
  3. Organize and keep a register of shareholders of the corporation as well as a register comprising the information on the share rights of the corporation and other companies of the members of the board of directors, board of commissioners, and their immediate family members.
  4. Store the resolutions of the shareholders and board of directors of the corporation as well as all other commercial credentials.
  5. Arrange a General Meeting of Shareholders and then receive approval for the transferring of greater than 50% of the company’s overall property. This transferring may be conducted in one transaction or in multiple. The transferring may or may not be related to multiple fiscal years. The corporation’s Articles of Association will provide further information on this matter.
  6. Arrange a General Meeting of Shareholders approximately once a year. When doing so, invitations should be sent to shareholders if such is requested by shareholders, commissioners, or directors of the corporation.
  7. Notify the Minister of Law and Human Rights within 30 days of any change in the list of members of the board of directors or commissioners of the corporation. Such is to be done after the day of resolution of the General Meeting of Shareholders.
  8. Have a record of transferring of shares in the register of the company.
  9. Notify the Minister of Law and Human Rights with regard to changes of shareholders within 30 days after the day of transferring of shares between shareholders.
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Neglectful Directors and the Consequences Brought to a Company

The director is key to the success of a company because the director is the only person who connects all the members and relevant personnel with one another through the General Meetings of the Shareholders. The company will face the following consequences when the directors are neglectful:

  • Lack of proper management within and outside the company
  • No proper delivery of the annual report to the General Meeting of Shareholders
  • Lack of proper business plan for the development of the company
  • No proper records of the transferring of shares among the company’s shareholders
  • No General Meeting of Shareholders, so no resolutions will be passed; this situation leads to the development of an uncertain situation within the company
  • Shareholders begin to lose trust in one another, ultimately resulting in the collapse of the company

Legal Consequences Imposed on Neglectful Director

Legal actions taken on the behalf of a corporation which has not so far gained the rank of legal entity may only be performed by all members of the board of directors in conjunction with all founders and all members of the board of commissioners of the company. They will together be responsible to propose legal actions to be taken. Every company will have its own voting system; in these systems, at least one-tenth of all voters have the right to submit the claim against the member of the board to the District. In this way, the ultimate result of the director’s neglect is the director’s removal from the position.

 It should go without saying that if you happen to already be the director of a company in Indonesia, we do not want such unfortunate circumstances to befall you. Therefore, we at Paul Hype Page & Co are willing to assist you with all your compliance and legal requirements. In this way, we will ensure that you and your company can operate well without violating any laws or regulations.

Shareholders may also use their company voting rights for such purposes. They may remove a director if at least one-tenth of them agree to do so, then send the claim to the District Court.