For foreign investors this law is a guide lays the procedures, terms and conditions regarding the establishment and the management of a company in Indonesia.

Indonesia’s Company Law

Before the emergence of the Indonesia Company Act 2007, there was the Indonesian Commercial Code (ICC), which is the basic rule for economic and commercial activities in Indonesia.

Starting with its codification on May, I 1848 in the Netherland (who colonised Indonesia for 126 years), the provisions of the ICC were, in principle, taken over from the Dutch Commercial Code (Nederland Wetboek van Koop handel).

It was codified on October I, 1838, and was very much influenced by the French Commercial Code of 1807.

Although the Wetbaek van Koaphandel had been revised to suit the Indonesian culture, its scope of applicability does not include the indigenous inhabitants.

The indigenous inhabitants were subject to the natives law, or more commonly known as ‘adat’. To provide legal security in business transactions to the indigenous inhabitants, the Dutch colonial government ratified a regulation to be applied specifically to this group of inhabitants.

The problem of legal diversity ceased to exist when Indonesia proclaimed its independence on August 17, 1945.

On August 18, 1945, the Republic did a declaration of its Constitution. At present, the validity of the Commercial Code is based on Article II of the Transitionary Regulation of the Constitution 1945.

In the framework of renewing corporate law in Indonesia, the Department of Justice had drafted of a company bill in 1974. Subsequently, the Department of Justice submitted a new company act bill to the Parliament which will in principle replace articles 36 up to 56 of the ICC’ and all their alterations, the last being made by Law No. 4 of 1971 concerning the Alteration and Increment of Article 54 of the Commercial Code.

According to the legislators, the enactment of a new company law is vital in the attempt to foster economic and commercial activities in the modern era.

Indonesia’s rapid economic growth and development in the past few years has resulted in its need to established special legal frameworks.

Businesses and entrepreneurs have created sources of income which are beneficial not only for themselves but also for the public at large. In this aspect, the Indonesian Company Law plays a larger than life role. The law regulates the activities of the company in the course of achieving its objective, which is to make profit.

The newly enacted Company Law provides guidance for anybody who is doing business and creates awareness of the rights and obligations, including the awareness of the obligation to conform to public order and good morals.

Although there were no amendment, one noteworthy regulatory development was the enactment of Law No. 2 of 2014 regarding Notaries (Law 2/2014), which amended Law No. 30 of 2004 regarding Notaries (Law 30/2004).

Law 2/2014 made several changes to Law 30/2004 that affected all corporations in Indonesia. It did not only change how they ran their businesses in the republic, but also how they organise and report changes in their corporate organs, the term used to describe the Shareholders, Board of Directors and Board of Commissioners.

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