Corporate Structure for PT / PT PMA Companies in Indonesia
The corporate structure in Indonesia often caused confusion amongst foreign or even local entrepreneur.
Here is an introduction to the organizational structure of PT/PT PMA.
Shareholders are basically the owner of the company. A company must have at least 2 (two) shareholders. It consists of either individuals and/or legal entities.
However, a company cannot issue shares to itself and its subsidiaries. The shareholder won’t be held personally liable for the obligations of the PT.
This, of course, does not apply if the shareholders manipulate the PT with malicious intent for their own interests or participate in an unlawful act committed by the PT.
1. The legal consequences if you lost the other shareholder
If a PT/PT PMA has only one shareholder and doesn’t remedy the situation within the period of no more than 6 (six) months after the condition, the relevant shareholder is obliged to transfer their part of
shares to another person/legal entity.
If the time is exceeded, then the solo shareholder incurs personal liability for all the legal acts conducted on behalf of the company, thus losing the status of a legal entity.
2. General Meeting of Shareholders
General Meeting of Shareholders (GMS) needs to be held at least 60 days after the company obtains its legal entity. It needs to be attended by all of the shareholders, directors, and commissioners.
If not, then all of the prospective founders will be personally liable for the consequences arising from all the legal acts conducted before the GMS.
Annual General Meeting of Shareholders (AGMS) must be held at least six months after the end of the company’s financial year.
The AGMS must discuss and approve the annual report submitted by the Board of Directors.
The GMS and AGMS can be held via teleconference, video conference or any other electronic means.
3. Rights and Obligations of Shareholders
All the changes that take place in the company often need prior permission of the shareholders at the GMS, for example:
- Appoint and revoke directors and commissioners
- Change business activities
- Increase or decrease of authorized capital
- Shares transfers
- Change company status from private to public or vice versa
Each shareholder will carry one vote at GMS. If permitted by the Article of Associations (AoA), shareholder’s vote could be undertaken by proxy. Directors and commissioners,
However, could not act as proxies for shareholders. Furthermore, shareholders are obligated to make an AoA approved by a notary.
Directors and Commissioners
Indonesian company law adopts a two-tier management structure comprised of a board of directors and a board of commissioners.
Pursuant to the Company Law of Indonesia, all companies must now have at least 2 (two) commissioners and 2 (two) directors.
The Company Law of Indonesia specifically enumerates the qualifications of directors and commissioners which are individuals who
- Has a legal capacity
- Has never been bankrupt
- Was never a director or commissioner responsible for a bankrupted company
- Has not committed criminal offense causing financial loss to the state
1. Board of Commissioners
Commissioners usually appointed by the founders or subsequently appointed by shareholders during the GMS.
The main duty of commissioners is to supervise and monitor the work of the directors, making sure that every activities and decision made are in coherence with the company’s goal.
Provisions of Article 92 of Company Law in Indonesia clearly express the power of the commissioners to suspend a director, which is also enshrined in AoA.
It is not allowed to use any other kinds of letters like Greek or Cyrillic. The company name needs to be readable and understandable.
2. Board of Directors
Appointed by the GMS, directors’ main duty is to handle the company’s day-to-day management.
Pursuant to the Company Law of Indonesia, directors’ basic functions are to manage and represent the company.
One of the directors will be appointed as a President Director or Chief Director who leads the board of directors. It is recommended that a company should have at least one local director.
Furthermore, using a name that refers to the industry of the company may limit future opportunities of changing the nature of the business or restrict the company to add other business classification
3. Potential Liability for Directors and Commissioners
The Indonesian Company Law introduces what appears to be a greater scope of potential liability faced by directors and commissioners.
For example, if the company’s annual account is incorrect or misleading, the directors and commissioners are personally liable to all parties who suffer losses, unless proved otherwise.
Furthermore, each director and commissioner face personal liability for any error or negligent act committed in the discharge of his responsibility.