Responsibilities and Liabilities of Director - Sidharta Lawyers

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What are the responsibilities and possible liabilities of Director in Indonesian companies?

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ALBERT PELEALU
SIDHARTA LAWYERS

 

RESPONSIBILITIES
 AND
 LIABILITIES
 
 
OF
 INDONESIAN
 COMPANY
 DIRECTOR
 

 

Personal
 Liability
 
Conditions
 
 
There
  are
  several
  conditions
  under
  Indonesia’s
  Company
  Law
  where
  the
  Directors
  can
  be
 
deemed
 personally
 liable:
 
1. Director
 shall
 be
 personally
 liable
 in
 full
 of
 Company’s
 loss
 if
 it
 fail
 to
 perform
 its
 duty
 with
 
good
  intention
  and
  full
  responsibility.
  Director
  cannot
  be
  deemed
  personally
  liable
  for
 
Company’s
 loss
 if:
 
a. The
 respective
 loss
 is
 not
 resulted
 from
 its
 fault
 or
 negligence;
 
b. It
 has
 performed
 the
 management
 of
 the
 Company
 with
 good
 faith
 and
 prudent
 for
 the
 
interest
  of
  the
  Company
  and
  in
  accordance
  with
  the
  Company’s
  purposes
  and
 
objectives;
 
c. There
 is
 no
 conflict
 of
 interest,
 either
 directly
 or
 indirectly
 over
 the
 management
 of
 the
 
Company
 that
 resulted
 the
 loss;
 and
 
d. It
 has
 taken
 precaution
 measure
 to
 avoid
 the
 loss.
 

 

 
2. Director
  can
  be
  deemed
  personally
  liable
  if
  it
  acts
  without
  the
  consent
  of
  the
  entire
 
shareholders
  of
  the
  Company
  and
  Board
  of
  Commissioner
  should
  the
  Company
  have
  not
 
achieved
 its
 legal
 status;
 
 

 
3. Acquit
 et
 de
 charge
 from
 the
 Shareholders.
 Director
 must
 have
 a
 release
 and
 discharge
 from
 
the
  Shareholders
  for
  its
  actions
  for
  and
  on
  behalf
  of
  the
  Company.
  Failure
  to
  do
  so,
  will
 
expose
 the
 Director
 for
 the
 Company’s
 loss;
 
 
 

 
4. Any
  false
  or
  misleading
  information
  in
  the
  Financial
  Report
  will
  subject
  the
  Director
  to
  being
 
personally
 liable;
 

 
5. Failure
  to
  report
  Director’s
  share
  in
  the
  Company
  which
  result
  in
  a
  loss
  suffered
  by
  the
 
Company;
 

 
6. Should
  the
  Company
  declared
  bankrupt
  as
  a
  result
  of
  failure
  or
  negligence
  by
  Director,
 
Director
 shall
 be
 personally
 liable
 if
 the
 assets
 of
 the
 Company
 does
 not
 sufficient
 to
 cover
 
the
 Company’s
 debt
 and
 obligation;
 

 
7. Director
  can
  be
  deemed
  personally
  liable
  for
  any
  loss
  suffered
  by
  Shareholders
  in
  relation
  to
 
buyback
  of
  shares
  by
  the
  Company.
  Personal
  liability
  of
  Director
  shall
  occur
  when
  the
 
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S

 

 
buyback
  does
  not
  comply
  with
  the
  prevailing
  regulations
  and
  as
  such
  considered
  null
  and
 
void.
 
 

 
Consequence
 
Being
  personally
  liable,
  the
  entire
  asset
  of
  each
  Director,
  both
  the
  current
  and
  future
  asset,
  is
 
being
  accounted
  and
  subject
  to
  the
  liability
  of
  the
  Company.
  These
  assets
  shall
  include
  the
 
immovable
 assets
 such
 as
 land
 under
 the
 name
 of
 the
 Director
 as
 well
 as
 the
 immovable
 assets
 
such
 as
 cars,
 jewelry
 and
 other
 assets
 owned
 by
 the
 Director.
 
We
  have
  seen
  in
  practice
  that
  as
  a
  result
  of
  personal
  liability
  of
  Director,
  creditors
  of
  the
 
Company
 also
 sue
 the
 directors
 of
 the
 Indonesian
 Company,
 as
 debtor,
 when
 the
 assets
 of
 the
 
Indonesian
 Company
 are
 not
 adequate
 to
 repay
 its
 loan
 to
 the
 Creditors.
 
 

General
 Corporate
 Licenses
 
A. Responsibility
 in
 relation
 to
 general
 corporate
 licenses
 
1. SIUP
 –
 Business
 Trade
 License.
 
 
This
 license
 is
 valid
 for
 5
 years
 and
 must
 be
 renewed
 accordingly.
 
 
2. Domicile
 Letter
 of
 the
 Company
 
Company
 is
 required
 to
 renew
 the
 domicile
 letter
 annually.
 
3. Company
 Registration
 
This
 license
 is
 valid
 for
 5
 years
 and
 must
 be
 renewed
 accordingly.
 
B. Changes
 in
 Articles
 of
 Association
 
1. Director
 has
 the
 obligation
 to
 report
 any
 and
 all
 changes
 of
 the
 Company’s
 Articles
 of
 
Association
 which
 must
 be
 made
 with
 a
 General
 Meeting
 of
 Shareholders
 [GMS]
 
resolution.
 
2. Changes
 in
 Company’s
 Articles
 of
 Association
 must
 be
 made
 in
 a
 Notarial
 Deed
 within
 30
 
days
 after
 the
 GMS
 that
 change
 the
 Articles
 of
 Association.
 

 

Initial
 Offer
 
Should
 a
 company
 has
 fulfilled
 certain
 criteria
 as
 a
 public
 company,
 Director
 must
 perform
 initial
 
offer
 in
 accordance
 with
 the
 prevailing
 laws
 and
 regulations
 in
 Capital
 Market.
 
 

Capital
 Reduction
 
With
 regard
 to
 any
 capital
 reduction
 performed
 by
 the
 Company,
 it
 is
 the
 obligation
 of
 Director
 to
 
convey
 a
 public
 announcement.
 Terms
 of
 the
 respective
 announcement
 shall
 be
 in
 accordance
 with
 
the
 prevailing
 law.
 
 

Sidharta
 Lawyers
 –
 Responsibility
 and
 Liability
 of
 Indonesian
 Company
 Director
 
 
 

 


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 |
 2
 
 

S

 

 

Shareholders
 Register
 
 
It
 is
 the
 obligation
 of
 the
 Director
 to
 compose
 and
 maintain
 a
 shareholder
 register,
 which
 at
 least
 
consist
 of:
 
a. name
 and
 address
 of
 the
 shareholders;
 
b. amount,
 number,
 date
 of
 shares
 acquisition
 held
 by
 the
 shareholders;
 and
 the
 classification
 of
 
the
 shares,
 should
 there
 are
 more
 than
 one
 classification
 of
 shares
 has
 been
 issued;
 
c. paid-­‐up
 amount
 for
 each
 share;
 
d. name
 and
 address
 of
 individual
 or
 legal
 entity
 having
 a
 Right
 of
 Pledge
 over
 the
 shares
 or
 as
 the
 
recipient
 of
 fiduciary
 security
 over
 the
 shares,
 and
 the
 acquisition
 date
 of
 pledge
 on
 share
 or
 
registration
 date
 of
 the
 fiduciary
 security
 respectively;
 
e. description
 on
 the
 payment
 of
 shares
 in
 other
 form.
 
 

Specific
 Register
 
 
In
 addition
 to
 Shareholder
 Register,
 Director
 has
 the
 obligation
 to
 compose
 and
 maintain
 specific
 
register
 which
 describes
 shares
 of
 Director
 and
 Board
 of
 Commissioners
 and
 its
 family
 in
 the
 
respective
 Company
 and/or
 other
 company
 and
 the
 dates
 of
 the
 acquisition
 of
 the
 respective
 shares.
 
Failure
 to
 report
 Director’s
 shares
 and
 maintain
 the
 specific
 record
 as
 elaborated
 above
 will
 result
 in
 
personal
 liability
 of
 Director
 of
 any
 loss
 suffered
 by
 the
 Company.
 

Transfer
 of
 Shares
 
 
Director
 has
 the
 obligation
 to
 register
 any
 transfer
 of
 shares
 which
 shall
 include
 date
 and
 day
 of
 the
 
transfer,
 in
 the
 Shareholder
 Registers
 or
 the
 Specific
 Register.
 
 
It
 is
 also
 the
 obligation
 if
 the
 Director
 to
 notify
 the
 change
 of
 the
 composition
 of
 shareholders
 to
 the
 
Government,
 to
 be
 recorded
 in
 the
 Company
 Registry,
 not
 later
 than
 30
 (thirty)
 days
 as
 of
 the
 
registration
 date
 of
 the
 transfer
 of
 shares.
 

Business
 Plan
 
 
It
 is
 the
 obligation
 of
 Director
 to
 compose
 annual
 business
 plan
 for
 the
 coming
 financial
 year
 

Annual
 report
 
 
1. Director
 must
 submit
 an
 annual
 report
 to
 the
 GMS
 after
 it
 has
 been
 reviewed
 by
 the
 Board
 
of
 Commissioners,
 no
 later
 than
 6
 (six)
 months
 after
 the
 Company’s
 accounting
 year
 ends.
 
Annual
 Report
 consists
 of:
 
a. Balance
 Sheet;
 
b. Profit
 and
 Loss
 Report;
 
c. Equity
 Changes
 Report;
 
d. Cash
 Flow
 Report;
 

Sidharta
 Lawyers
 –
 Responsibility
 and
 Liability
 of
 Indonesian
 Company
 Director
 
 
 

 


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 |
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e. Record
 on
 Company’s
 debt
 including
 bank’s
 loan
 and
 list
 of
 Company’s
 shares
 in
 other
 
company
 

 
2. Annual
 Report
 must
 be
 audited
 by
 a
 Public
 Accountant,
 should:
 
a.
 Business
 activities
 of
 the
 Company
 are
 to
 acquire
 and/or
 to
 manage
 public
 fund;
 
b.
 Company
 issues
 a
 debt
 acknowledgement
 letter
 to
 the
 public;
 
c.
 Company
 is
 a
 Listed
 Company;
 
d.
 Company
 is
 a
 stated
 owned
 company;
 
e.
 The
 Company
 owns
 assets
 and/or
 turnover
 with
 the
 minimum
 value
 of
 Rp
 
50.000.000.000,00
 (fifty
 billion
 rupiah).
 
f.
 As
 required
 by
 specific
 regulation
 applicable
 to
 the
 company
 

 
3. Personal
 liability
 of
 Director
 if
 there
 is
 misleading
 information
 in
 Annual
 Report
 
 

 
4. To
 maintain
 all
 financial
 records
 of
 the
 Company
 

Interim
 Dividend
 
1. The
 decision
 to
 distribute
 Interim
 Dividend
 is
 the
 Director’s
 decision.
 However,
 should
 at
 the
 
end
 of
 the
 year,
 the
 Company
 post
 a
 loss,
 shareholders
 must
 return
 the
 respective
 dividend
 
2. Director
 will
 be
 personally
 liable
 if
 the
 shareholder
 cannot
 return
 the
 dividend
 

General
 Meeting
 of
 Shareholders
 [GMS]
 
1. Invitation
 
 
Invitation
 for
 the
 General
 Meeting
 of
 Shareholders
 must
 be
 conveyed
 by
 Director
 within
 15
 
days
 after
 a
 request
 to
 hold
 GMS
 and
 at
 the
 latest
 14
 days
 prior
 to
 the
 date
 of
 the
 GMS.
 

 
2. Chairman
 of
 the
 Meeting
 
It
 is
 common
 for
 the
 Director
 to
 be
 the
 chairman
 of
 the
 GMS.
 However,
 it
 is
 possible
 that
 the
 
Company’s
 Articles
 of
 Association
 determine
 other
 stipulation
 with
 regard
 to
 the
 chairman
 
of
 the
 GMS
 

 
3. Minutes
 of
 Meeting
 
It
 is
 the
 obligation
 of
 the
 Director
 to
 compose
 the
 minutes
 of
 meeting
 of
 the
 GMS
 

General
 Terms
 and
 Requirements
 of
 Director
 
 
1. Minimum
 1
 person,
 while
 Companies
 which
 engage
 in
 mobilizing
 public
 funds,
 issue
 debt
 
instruments
 to
 the
 public
 or
 Listed
 Companies
 must
 have
 a
 minimum
 of
 2
 (two)
 members
 of
 
Directors;
 

 
2. Job
 description
 of
 Directors
 shall
 be
 decided
 by
 the
 GMS
 

 
Sidharta
 Lawyers
 –
 Responsibility
 and
 Liability
 of
 Indonesian
 Company
 Director
 
 
 

 


 Page
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 4
 
 

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3. Directors
 of
 Indonesian
 company
 must
 be
 any
 individual
 who
 have
 not
 been
 deemed
 
incapable
 by
 the
 law
 and:
 

 
a. Have
 not
 been
 declared
 bankrupt
 
b. Have
 not
 serve
 as
 members
 of
 Directors
 or
 Board
 of
 Commissioners
 which
 had
 been
 
sentenced
 guilty
 in
 causing
 a
 bankruptcy
 of
 a
 Company
 
c. Have
 not
 been
 sentenced
 of
 criminal
 activity
 causing
 loss
 to
 the
 state
 and/or
 related
 to
 
financial
 sector
 

 
4. Directors
 are
 appointed
 by
 the
 GMS
 [except
 for
 the
 first
 time,
 when
 Directors
 will
 be
 directly
 
appointed
 by
 the
 founder
 during
 the
 establishment
 process].
 Within
 30
 days,
 Directors
 must
 
report
 the
 GMS
 with
 regard
 to
 the
 appointment
 of
 Director
 to
 the
 Government.
 Failing
 to
 
report
 the
 appointment
 within
 30
 days
 will
 deemed
 the
 appointment
 null
 and
 void
 as
 well
 as
 
the
 rejection
 of
 the
 Government
 to
 acknowledge
 the
 new
 Director;
 

 
5. To
 maintain
 all
 minutes
 of
 meeting
 of
 Director’s
 Meeting
 

Approval
 from
 GMS
 
Director
 must
 acquire
 approval
 from
 GMS
 to
 :
 
a.
 transfer
 the
 Company’s
 assets;
 or
 
b.
 put
 the
 Company’s
 assets
 as
 collateral.
 
which
 constitutes
 of
 more
 than
 50%
 (fifty
 percent)
 from
 the
 total
 net
 assets
 of
 the
 Company
 
in
 1
 (one)
 transaction
 or
 more,
 either
 separate
 or
 inter-­‐related
 

In
 relation
 to
 the
 Board
 of
 Commissioners
 
1. The
 Commissioners
 provide
 advices
 to
 Director
 
2. Director
  must
  report
  any
  changes
  in
  the
  structure
  of
  Board
  Of
  Commissioners
  to
  the
 
Government
 
3. It
  is
  important
  to
  review
  the
  Articles
  of
  Association
  for
  specific
  actions
  that
  require
  prior
 
approval
 from
 the
 Board
 of
 Commissioners
 


 The
 information
 contained
 herein
 is
 not
 intended
 to
 provide
 formal
 and
 specific
 advice
 and
 merely
 highlight
 
important
 issues
 in
 relation
 to
 the
 responsibility
 and
 liability
 of
 Director.
 You
 are
 advised
 to
 seek
 specific
 
advice
 prior
 to
 take
 any
 actions
 in
 relation
 to
 the
 fulfillment
 of
 your
 duty
 as
 director.
 Should
 you
 have
 
further
 questions
 with
 regard
 to
 matters
 as
 elaborated
 above
 or
 any
 other
 matters,
 please
 do
 not
 hesitate
 
to
 contact
 your
 usual
 Sidharta
 Lawyers’
 representative
 or
 you
 may
 contact
 our
 Albert
 Pelealu
 at
 
[email protected]
 

Sidharta
 Lawyers
 –
 Responsibility
 and
 Liability
 of
 Indonesian
 Company
 Director
 
 
 

 


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 5
 
 

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