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What is the origin of 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 1974Subsequently, 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.  

 

The changes were stated as the following: 

Before a notary sign any notaries deed, such as one that changes the Board of Directors or Board of Commissioners, or the minutes of a General Meeting of Shareholders, the notary now requires the authorised signatory not only to sign the relevant notaries deed but also to provide a fingerprint in the notary’s presence. 

A notary’s deed must now be made in the Bahasa Indonesia, which is the native and official language of Indonesia. However, in given cases, the deed can also be made in a preferred foreign language if the relevant parties agree, but in that case the deed must also be translated into Indonesian. 

There also are changes in how a notary reports changes in a company’s organisation. Previously, any changes to a company had to be reported to the Ministry of Law and Human Rights (the “MOLHR”), which would then examine the reported changes and issue a letter. Now the notary has the responsibility to prepare a report on changes in the company. The MOLHR now only provides the system for reporting changes and prints the letter. It makes no independent examination of the changes. 

This change to the MOLHR process now requires companies to double-check not only the notarial deed that is signed but also the notary’s report and MOLHR letter itself, to ensure that all the information and changes made by the notary are correct and consistent with one another. 

 

Paul Hype Page & Co – OSS service provider and Asean Chartered Accountant.

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Posted on May 13, 2019 at 11:43 am
Categories: Business In Indonesia
2 comments

[…] newly enacted Company Law provides guidance for anybody who is doing business and creates awareness of the rights and […]

[…] 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. […]

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