One of crucial things when setting up a Foreign Investment Company is deciding the shareholders, director and commissioners of the PMA Company. This can prove to be frustrating for foreign investors; even more if one is not familiar with the Indonesian laws and regulations.

Foreigners often occupy the position of foreign director in multiple companies in Indonesia.

There are however several restrictions to director positions in Indonesia, such as the restriction to occupy multiple director positions under certain conditions. This article will clarify the related laws and regulations and explains the general restrictions of foreign directors in Indonesia.

One of crucial things when setting up a Foreign Investment Company, also known as PT PMA Company in Indonesia is deciding the shareholders, director and commissioners of the PMA Company.

This can prove to be frustrating for foreign investors; even more if one is not familiar with the Indonesian laws and regulations.

Principally, arrangement regarding shareholders, commissioners and directors in an Indonesian Company  is regulated under the Law No 40 of 2007 on Limited Liability Companies in Indonesian Company  Law.  The shareholders – through General Meeting of Shareholders – Commissioners and Directors are referred to as “Company Organs” which have specific role and responsibilities.

Under the Company Law, every company at least must have 2 (two) shareholders, 1 (one) director and 1 (one) commissioner.  This writing we will gives a brief explanation about Company Organs in PMA Company.

Foreign Director in ID Infographic

The Role of a Company Director

Director through the Board of Directors has an obligation to run daily activities of the company. The Board of Directors has full authority and responsibility for the management of the Company in the interests of the Indonesian Company in accordance with the company’s purposes and objectives and to represent the company in and out of court in accordance with the provisions of the Articles of Associations of the Indonesian Company.

The Director in the PMA Company can be foreigner or Indonesian individual and they must be appointed by the GMS.  Further, if the GMS resolves to appoint more than 1 (one) directors, then one of directors should be appointed as the President of Director who will lead the BoD.

In addition, if the PMA Company appoints foreign individual as a director, the foreign director does not need to apply for the IMTA as well as the KITAS, however the PMA Company still should apply for the Foreign Worker Utilization Plan (“RPTKA”-Rancangan Penggunaan Tenaga Kerja Asing).

General Restrictions for Foreign Director

As mentioned above, company Law article No.  40 of 2007 on Limited Liability Companies provides general regulations regarding members of the Board of Directors. Article 93(1) of the Company Law regulates the restrictions of members of the Board of Directors.

According to this article prospective members of the Board of Directors cannot become members of the Board of Directors in the event, 5 years prior to their appointment, they:

  1. were declared bankrupt;
  2. have been declared at fault in a previous position as member of the Board of Directors or Board of Commissioners, which resulted in the bankruptcy of such Indonesian Company ;
  3. Committed a financial crime or financial sector related crime for which they have been charged as guilty.

Apart from these general restrictions, both for a local director and a foreign director have specific restrictions stipulated in other regulations. This is in line with article 93(2) Company Law, which state that specific regulations may stipulate additional requirements.