The corporate structure in Indonesia applies to all limited liability companies.
Indonesia allows foreign investment in most industries. Watch the video below to learn more about foreign-owned company (PT PMA) registration in Indonesia.
Corporate structure in Indonesia
As stated in Indonesia’s Company Law, the corporate structure of a limited liability company consists of the following:
Shareholders
Board of Commissioners
Board of Directors
Shareholders own the company. Meanwhile, commissioners and directors oversee different areas of the business. We will discuss these roles in further detail below.
Shareholders in a Company in Indonesia
Shareholders own the company. As such, they hold the highest position when it comes to decision making. A shareholder is an entity that holds an equity stake in the company.
Who can be a shareholder in Indonesia?
Any of the following can be a shareholder in a company in Indonesia:
An individual;
A company;
A foundation
Previous regulations required companies in Indonesia to have at least two shareholders. However, with the Omnibus Law, it is now possible to have one shareholder for a small company.
Liability of Shareholders in Indonesia
Shareholders are not personally liable for any of the company’s legal relationships. Shareholders are also not liable for the company’s losses that exceed the value of the shares they own.
Rights and Obligations of Shareholders in Indonesia
Different shares grant different rights to the company’s shareholders. The company’s articles of association must define the classification of shares. IT must also state the rights that correspond to each classification. Some examples of classifications of shares include:
Shares with or without voting rights;
Shares with rights to propose directors or commissioners;
Shares with rights to receive more dividends
Shareholders also have other rights as stated in the Indonesia Company Law (40/2007). Rights stated in this law are not transferable to the directors nor commissioners.
General Meeting of Shareholders
In most cases, any changes in the company must receive approval from its shareholders. Such changes include:
Increasing of decreasing the paid-up capital of the company;
Increasing or decreasing the authorized capital;
Changing business activities;
Changing the business location;
The incorporation period for the company;
Transferring shares;
Changing the company’s status from private to public, and vice versa;
Appointing and removing directors and commissioners
Shareholders decide on these changes during the general meeting of shareholders. The general meeting of shareholders must meet requirements for changes to be valid. The requirements are as follows:
At least half of the shareholders with voting rights must be present. A representative with a valid power of attorney can attend on behalf of a shareholder;
If not enough shareholders are able to attend, shareholders can hold another meeting. Only one-third of voting shareholders/representatives need to be present at this meeting. Note that the second meeting must happen between 10 to 21 days from the previous meeting.
Commissioners in a Company in Indonesia
PT PMAs in Indonesia must have at least one commissioner. The commissioner can own shares in the company. Shareholding, however, is not a requirement to be a commissioner.
Obligations of a Commissioner
The commissioner or board of commissioners’ task is to supervise the company. However, their actions must always be in accordance with the articles of association. The board of commissioners also supervises and gives advice to the board of directors. Commissioners are not part of the day-to-day management of the company.
If a company has more than one commissioner, one of them will have to be the president commissioner. The president commissioner is in charge of the board of commissioners.
Updated regulations on choosing your commissioners
Foreigners can be commissioners in a foreign-owned company in Indonesia. Note that foreign commissioners are subject to regulations on foreign workers. Foreigners must get work permits in Indonesia if they will be commissioners in a company.
On the other hand, Indonesian-owned companies cannot have foreign commissioners.
Company Directors in Indonesia
Like commissioners, all companies in Indonesia must have at least one director. Shareholders are in charge of appointing, replacing, and dismissing directors. If a company has two or more directors, one of them must take on the role of president director. The president director is in charge of the board of directors.
Rights of Company Directors
Directors are not considered as employees of the company. As such, employment laws do not apply to directors. The company’s shareholders decide on the director’s salary and benefits.
Obligations of a Company Director in Indonesia
Directors are in charge of managing the company. Specific tasks are in accordance with the Indonesian Company Law. The company’s articles of association may also specify directors’ tasks. The shareholders also decide how directors will share these responsibilities.
Directors also act as the company’s legal representative, per the articles of association. Their responsibilities as the legal representative include:
Signing contracts between the company and third parties like vendors, suppliers, and clients;
Submitting financial statements and yearly reports;
Maintaining the shareholders’ list and minutes of general shareholder meetings;
Preparing an annual work plan before the start of the upcoming fiscal year;
Maintaining compliance with tax regulations and employment laws
Directors are also responsible for any losses suffered by the shareholders and the company.
Note that a non-resident director cannot sign documents on behalf of the company. As such, a foreign director must process their work and stay permits immediately after their appointment.