Company laws in most countries define what is considered to be acceptable conduct by businesses operating within their borders. Such company laws are enforced in order to protect businesses, consumers, and the government from corporate malpractices that may create or exacerbate unfavorable business conditions. Governments enact laws regarding taxation, health practices, and registration which are targeted at businesses; these laws are intended to create a favorable regulatory environment for the conducting of business activities. While most regulatory compliance laws are meant for the protection of local firms, such laws must also be flexible enough to protect foreign firms. In Indonesia, there are laws which specify details about a wide range of compliance issues. All companies need to adhere to these laws to ensure that their business operations may be performed in the proper manner.
Definition of Regulatory Compliance
Regulatory compliance refers to adherence to policies, rules, and procedures that create the regulations that businesses are to follow during the course of their operations. The effectiveness of regulatory compliance laws determine how easy or difficult it is to conduct business activities in a certain country. According to the ease of doing business rankings issued by the World Bank, Indonesia currently ranks 73rd in the world. The level of ease of doing business in Indonesia is similar to those of countries such as Mongolia, Ukraine, Greece, and Jamaica. Thus, one can conclude that the efficacy of regulatory compliance laws in Indonesia is approximately the same as those of the preceding four countries.
Compliance programs in Indonesia mainly affect the business entities that prospective business owners could start. Each entity has its distinct set of regulatory compliance matters which may sometimes overlap with those of another entity. These compliance programs mainly affect public companies, financial and non-financial banks, foreign investment companies, and other private companies. In Indonesia, the implementation of compliance programs is often carried out by independent bodies such as the Financial Services Authority (OJK), which oversees the financial aspects of companies’ operations in Indonesia. Each regulation has specific implications towards the Indonesian business environment.
Regulations Imposed on Indonesian Companies
Capital Market Law
The Capital Market Law is a regulation in Indonesia that controls the listing of companies on the Indonesia Stock Exchange (IDX). The law creates two main boards on the IDX which are controlled by the OJK. One of the two boards is the main board which lists prospective companies and issuers with extensive track records. The second is the development board which is meant for companies which have not fulfilled the full listing requirements for the main board.
In order to be listed on the main board, a company must have at least 1,000 shareholders with securities accounts; all shareholders are also required to be stock exchange members. Development board companies are required to have at least 500 shareholders who meet the same criteria.
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The Capital Market Law also requires public companies in Indonesia to develop dedicated internal structures such as the position of a corporate secretary, an audit committee, and an internal audit unit. People involved in such structures serve regulatory authorities, especially the OJK. However, documentation that represents the company’s status at any point when such documents are needed has to be provided by these people.
Trademark and Geographical Indication Laws
Trademark and geographical indication laws recognize well-known brands from both Indonesia and foreign countries alike. Such laws are intended to protect reputable businesses and their products from being copied or modified by the general business community. The law dictates the conditions for trademark registration and the terms of agreement for using a trademark within the Indonesian business environment. Recent adjustments to the trademark law have been directed towards punishing companies which have used established trademarks without prior permission from the owners of the trademarks in question.
This regulatory compliance law controls the registration of foreign investments in the country. It also dictates the terms of registration as well as the processes to be followed while registering a foreign company in Indonesia. Other rules and regulations related to this law assist in governing all foreign investments in Indonesia.
Indonesian Company Law