Indonesian company laws stipulate the statutory requirements for forming and running a company within the country. These laws specify that the management of any company in Indonesia must include at least one director, one commissioner, and two shareholders. Both foreign and local companies alike must fill those positions before the company may be considered to be legitimate. Directors are tasked with overseeing the daily operations of the company. In an Indonesian company with some level of foreign involvement, the role of the director is unique because such a company is required to have at least one resident director. In this regard, foreign involvement may include any form of direct action which can be or has been influenced by foreigners. Such involvement may be in the form of foreign ownership or involvement in the company’s board of directors.
Resident Directors in Indonesia
According to the Indonesian company laws, all limited liability companies in the country must appoint at least one resident director on their board of directors. The term implies that the person who takes up the role of resident director must be a resident of Indonesia. Resident directors are not considered to be employees of the company because their appointment and removal from office is determined and controlled by the shareholders of the company. A resident director may be a signatory to the company’s bank account. Resident directors’ liabilities may either be limited or unlimited depending on the type of company in question.
Resident directors are important people in a company’s managerial hierarchy. Their role is below those of the members of the company’s board of commissioners as well as the company’s shareholders. They are responsible for reporting the company’s overall performance to the shareholders. They must also ensuring that all strategic objectives approved by shareholders are fulfilled. The board of commissioners also plays an important role with regard to resident directors in Indonesia. Although every company in Indonesia is not required to have a board of commissioners, the board of commissioners plays an important role in company management because the commissioners perform an advisory role in relation to the activities carried out by the resident directors.
Therefore, it is evident that an Indonesian company cannot overlook the importance of a resident director in its operations. This is especially true for foreign companies who plan to start business operations in Indonesia because although Indonesian company laws allow every member of a company’s board of directors to be of foreign origin, one of these members is required to be a resident director.
As an aside, should you be interested in starting a company of your own in Indonesia, we at Paul Hype Page & Co will be able to be of assistance. We have been known to have helped many a prospective company owner begin their own business venture in Indonesia. Our incorporation services are held in high esteem by all who have used them.