Shareholders' Rights & Shareholder Activism 2023 Comparisons

In Indonesia, the most common type of company is a limited liability company (Perseroan Terbatas or PT), which are governed under Law No 40 of 2007 on Limited Liability Companies, as most recently amended by Law No 6 of 2023 on Enactment of Regulation of the Government in Lieu of Law No 2 of 2022 on Job Creation (“Company Law”). A PT may be in the form of a private limited liability company or a public limited liability company.

PTs are commonly categorised into the following three types:

• fully locally owned PT (PT Penanaman Modal Dalam Negeri or PT PMDN);
• partially or fully foreign-owned (PT Penanaman Modal Asing or PT PMA); and
• majority or fully owned by the Republic of Indonesia as a state-owned company or enterprise (Badan Usaha Milik Negara Republik Indonesia or BUMN).

It should be noted that all companies listed on the Indonesian Stock Exchange are obliged to be public companies; however, public companies are not required to be listed on the Indonesian Stock Exchange.

In addition, micro and small-scale businesses may create a sole proprietorship. This form would only require a person to act as the sole shareholder, sole director and sole commissioner.

Foreign investment for companies has always been in the form of either full use of foreign capital or joint ventures with domestic investors.

Foreign investments are allowed to be sourced from:

• a foreign citizen;
• a foreign company; and/or
• a foreign government conducting investment in the territory of the Republic of Indonesia.

In this instance, any mixture of domestic and foreign capital will be deemed to be foreign investment and consequently make any Indonesian company a PT PMA.

There shall at least be one class of shares within the company’s Articles of Association (AoA), in which such shares are often referred to as common shares. These common shares enjoy the right to vote and determine the results of the General Meetings of Shareholders (GMS), and the right to receive dividends and any leftover assets from liquidation. Other rights attached to common shares may include the right to nominate members of the Board of Directors (BoD) and the Board of Commissioners (BoC), pre-emptive rights and rights of first refusal.

If there is more than one class of shares, they may be further divided to have a combination of rights, as listed in 1.4 Variation of Shareholders’ Rights.

In practice, these rights may be poured into preferred shares and common shares, wherein preferred shares cannot vote but may obtain dividends first before the common shares. Alternatively, the latter enjoys the right to vote but may have drawbacks in obtaining dividends.

As elaborated in the Company Law, the different types of share classification and rights may be segregated according to the following characteristics:

• shares with or without voting rights;
• shares with special rights to nominate a member of the BoD or the BoC;
• shares that are returned after a limited time or are traded with a different classification;
• shares providing a preference for dividends through a cumulative or non-cumulative method; and/or
• shares providing a preference for asset distribution upon liquidation.

In general, a PT PMDN enjoys freedom mostly to determine and settle any capital amount, with a bare requirement to make a payment of at least 25% of the authorised capital during its establishment. However, certain sectors (usually in finances) are required to have a minimum amount of capital, with the following examples:

• P2P lending companies are required to have paid-up capital of IDR25 billion (equivalent to roughly USD1,592,357) upon establishment;
• insurance companies must have IDR150 billion (USD9,554,140) in paid-up capital;
• reinsurance companies must have IDR300 billion (USD19,108,280) in paid-up capital;
• Sharia insurance companies must have IDR100 billion (USD6,369,426) in paid-up capital; and
• Sharia reinsurance companies must have IDR175 billion (USD11,146,497) in paid-up capital.

There is no leeway in the capital amount for a PT PMA, as there is a strict bare minimum of IDR10 billion (USD636,942) of paid-up capital or issued capital upon its establishment, excluding the land and building’s value for each business classifications proposed for the company. Certain exemptions for the capital of specific business classifications may apply.

Lastly, under Law No 8 of 1995 on Capital Market (the “Capital Market Law”), public companies are required to have at least IDR3 billion in paid-up capital.

Limited liability companies must have at least two individuals (natural persons or legal entities) partaking as shareholders. Failure to meet this criterion will push the shareholder to allow a transfer of a portion of their share to another individual, or the company will be mandated to release new shares to another individual within six months post-failure.

Furthermore, a sole proprietorship is capped at having only one Indonesian citizen as its shareholder. Upon any additions, the sole proprietorship will be legally required to change its status into a limited liability company.

Lastly, public companies (either listed or not) shall have a minimum of 300 shareholders.

In practice, whenever founders of companies intend to establish a private company, they usually enter into a joint venture agreement as the underlying agreement that regulates their rights, obligations and relationship prior to the company’s establishment. These agreements generally also govern matters such as the procedure of the company’s establishment, exit and entry for future shareholders, capital, dispute settlement, the company’s day-to-day operation, etc.

Shareholders' agreements are also commonly used once the company is established, and contain clauses covering general governance over the company, further share rights, share transfers, voting rights and obligations, dispute settlement, and other matters that are not covered by or are restated within the AoA. This method allows for more privacy as shareholders' agreements are not reported to the Ministry of Law and Human Rights (MoLHR) and are not accessible to the public, unlike some data and/or information in the AoA.

Listed companies and public companies do not usually have any shareholders’ agreement as they are required to report, provide transparency and disclose information to the public on any issues that are material to the company’s businesses. This would undermine the usage of any shareholders’ agreement if executed.

Typically, shareholders' agreements/joint venture agreements contain the following clauses:

• the purpose of the agreement;
• share capital;
• pre-emption rights;
• first right of refusal;
• the transfer of shares;
• the business and management of the company;
• the appointment of the BoD and BoC, including their authorities;
• the terms, rights and obligations of the GMS;
• reserved matters;
• financing, accounts and audits;
• shotgun clause;
• tag-along/drag-along rights;
• dilutions;
• termination; and/or
• dispute resolution.

These agreements are generally enforceable so long as the terms of those clauses are not disbarred by law. They remain private and are not reported to the MoLHR. However, under the Regulation of the Financial Services Authority (OJK) No 31/POJK.04/2015 on Transparency of Information or Material Facts of Issuers or Public Companies (POJK 31/2015), shareholders' agreements would remain less functional as public companies (either listed or not) must report material information possibly affecting the share prices thereof to the OJK and the public.

Even more so, it is mandatory to report these documents to the stock exchange and the Indonesia Central Securities Depository upon listing, as well as upon any subsequent amendments thereof.

BUMNs are obliged to give the public access to certain documents and data, such as data on the realisation of the procurement plan, corporate data (name, domicile, purpose, etc), minutes of the GMS, etc. However, BUMNs are not required to disclose any shareholders' agreement and/or joint venture agreement.

Generally, there are two types of GMS:

• the Annual GMS (AGMS); and
• the extraordinary GMS.

An AGMS is conducted annually, six months after the financial year ends, to discuss the annual business plan, the annual report and profit utilisation for the company. Alternatively, an extraordinary GMS is conducted on an ad hoc basis, to discuss other issues that are raised by shareholders, the BoD or the BoC. Such issues may include the sale of shares, acquisitions, mergers, spin-offs, AoA amendment, or other corporate actions that are necessary for the company’s business.

For the above types of GMS, a summons must be made at the latest 14 days before the GMS is held, without accounting for the date of the summons and the GMS date. The period itself cannot be shortened, but the AoA can allow for a longer period for this summons. In addition, the meeting can be held if 50% + 1 of the quorum is reached, with a baseline approval rate of 50% + 1. Certain matters would require a different threshold, as discussed in 2.6 Quorum, Voting Requirements and Proposal of Resolutions and 2.7 Types of Resolution and Thresholds.

Alternatively, shareholders can provide a resolution outside a normal meeting through a circular resolution of shareholders (CROS), as long as all shareholders provide written approval for the items within the CROS.

Without taking the date of the summons and the GMS date into account, a summons must be made at the latest 14 days before the GMS is held. The Company Law prohibits any shortening of this notice period.

In general, the BoD, BoC and shareholders may call for a GMS to be held. Firstly, the BoD is obliged to call the AGM and GMS. Secondly, shareholders can call for a GMS, either in accumulation or individually if they represent more than 10% of all voting rights, and request it with a written letter giving reasoning to the BoD and forwarded to the BoC. The required portion of shareholders may be lower if permitted by the AoA. The BoC may also request for the GMS to be held.

After the call for a GMS, the BoD will issue the summons within 15 days. The summons must be issued 14 days in advance of the GMS, without accounting for the date for the summons and the GMS, and is given through a written letter and/or advertisement in the national newspaper. If the BoD is unable to do so, the BoC or shareholder may be substituted to take charge of the summons after a decree is given from the district court.

Such procedures would be of the same nature for public companies, either listed or not, whereby the Regulation of OJK No 15/POJK.04/2020 of 2020 on the Planning and Organisation of General Meetings of Shareholders by Publicly Traded Companies (POJK 15/2014) provides the same quorum and notification requirements.

Shareholders are entitled to receive notice of a GMS and may obtain the information and material regarding the meeting’s agenda from the company’s office. They may also request any information in relation to the meeting agenda, so long as it does not contradict the interests of the company. Shareholders are also able to access the company’s register and special company’s register.

The GMS can be held in any type of form, either physically or virtually/remotely, while paying attention to the AoA. Public companies, however, are subjected to further restrictions.

To hold an electronic GMS (e-GMS), public companies are strictly required to have it through an e-GMS provider approved by OJK, with the provider allowing for a certain system in holding the e-GMS. The e-GMS shall thereafter be held in line with OJK’s approved agenda and the summons, with a physical attendance of at least the chair of the GMS, one member of the BoD and/or the BoC, and a capital market support professional (Profesi Penunjang Pasar Modal). The attendance of shareholders electronically through e-GMS will be considered to replace their physical presence and allow for the account of the quorum’s fulfilment.

To add further context to the above, capital market support professionals are parties that shall be registered within OJK, who give aid and support to the capital market industry. Examples include:

• public accountants;
• legal consultants;
• appraisers;
• notaries; and
• other professionals as determined by OJK.

The Company Law imposes thresholds for quorums, voting requirements and resolutions to follow certain corporate actions taken, as well as methods of making a decision. The classifications are as follows.

Ordinary GMS

An ordinary GMS is required to at least have a quorum of 50% + 1 share, with an approval rate of 50% + 1 share. If the presence quorum is not met, the second GMS can proceed with a presence quorum of at least one third of all voting shares. Failure to meet this quorum will then allow for a request to the district court to determine the minimum quorum for the third GMS. Keep in mind that the AoA may have a higher threshold for quorums and approval rates.

Under POJK 15/2020, the above rules also apply to public companies; however, instead of the district court, OJK will provide the quorum for the third GMS.

AoA Amendments

Amendments to the AoA require a minimum quorum of two thirds of all voting shares with an approval rate of two thirds of all voting shareholders. If the presence quorum is not met, the second GMS will have a minimum presence quorum of three fifths of all voting shares. Failure to meet this quorum will allow for a request to the district court to determine the threshold for quorums and approval rate. Keep in mind that the AoA may have a higher threshold for quorums and approval rates.

The preceding rules also apply for public companies as set in POJK 15/2020, with several differences, such as:

• the second GMS shall be valid if more than 50% approval is reached; and
• a quorum proposal for the third meeting shall be sent to OJK after failing to meet the required quorums in the second meeting.

It is also important to note that increasing the issued capital and paid-up capital would require a quorum and approval of 50% + 1, even if it amends the AoA.

Likewise, public companies are subjected to the same thresholds, but changes in share rights shall follow the quorum, procedure and approval rate, as mentioned below.

Mergers, Acquisitions, Spin-offs, Bankruptcy Petitions, Increase of Period of Establishment, Dissolution, Asset Acquisition or Encumbrance

For mergers, acquisitions, spin-offs, bankruptcy petitions, increases of the period of establishment, dissolutions, asset acquisitions or encumbrances (with a value exceeding 50% of the company’s assets), three quarters of all voting shares will have to be present and give approval in order to render the resolution valid. If the presence quorum on the first GMS is not met, the second GMS shall have a quorum of two thirds of all voting shares. If the second quorum is not met, the district court may then determine the applicable quorum for the third GMS, after a request is made. The AoA may also have a higher threshold than the above.

For public companies, instead of the district court, OJK will determine the applicable quorum for the third GMS after a request is filed.

CROS

All CROS are set to have a 100% approval rate from all voting shareholders in order to be considered valid, and there are no statutory limits on what types of actions may be decided through a CROS.

As mentioned in 2.6 Quorum, Voting Requirements and Proposal of Resolutions, Indonesian Law divides certain actions to have certain limitations on quorums and approvals, depending on the method chosen by the company.

Typically, matters regarding the appointment of a member of the BoD or BoC, share transfers, mergers, acquisitions, spin-offs, certain amendments to the AoA, and approval of the annual business plan, annual report and profit utilisation would require shareholders' approval. As discussed in 2.6 Quorum, Voting Requirements and Proposal of Resolutions, the approval requirement would depend on the methods and actions pursued by the company.

As discussed in 2.6 Quorum, Voting Requirements and Proposal of Resolutions, certain percentages of approval would be required depending on the method or action pursued by the company.

Generally, there are no specified voting mechanisms for passing a resolution. Such can be done by any method, either electronically or non-electronically, as long as the minutes of the GMS are signed by the chair of the GMS meeting and one appointed shareholder. It is also noteworthy that signatures are not required if the minutes of the GMS are made in a notarial deed.

Public companies are also subjected to the same rule, where they only need the minutes of the GMS to be signed by the meeting’s chairman and one shareholder appointed by the GMS, or would not require any signatures if the minutes of the GMS are made by a notary registered in OJK.

In addition, proxy voting is allowed through a power of attorney to vote during the GMS, so long as:

• the shareholder does not grant the power of attorney to more than one proxy over the portions of the number of shares that they own, to cast different votes from each other;
• the shareholder does not appoint a member of the BoD or BoC, or any company employee; and
• the shareholder does not appear in the meeting.

It is important to note that publicly listed companies and public companies are subjected to different standards for voting requirements through a proxy, with POJK 15/2020 requiring the following standards for the power of attorneys created:

• the shareholder does not divide their shares in voting among different individuals;
• the proxy shall be provided at most one day before the GMS is held;
• the proxy can be submitted electronically through a procedure determined by the e-GMS system provider; and
• the proxy can be provided to a party appointed by the shareholder, a participant that administers the securities sub-account or shareholders securities, and a party appointed by the company to be chosen by the shareholder. The party appointed by the company shall not be a member of the BoD or BoC, nor an employee of the company.

As discussed in 2.3 Procedure and Criteria for Calling a General Meeting, one or more shareholders with at least 10% of all voting shares may propose a specific issue for the GMS, or a lower number if the AoA determines a lower quorum for such proposals.

Furthermore, upon conducting the GMS, a proposal for another issue may occur, but these are subjected to unanimous approval from all voting shareholders.

For public companies, shareholders with at least 5% ownership of all voting shares may request an additional issue to be discussed in the GMS seven days before the GMS is held.

Every shareholder is entitled to file a suit against the company with the district court whose jurisdiction covers the company’s domicile if they suffer losses caused by the company's actions that are deemed unjustified and unfair as a consequence of a GMS/BoD resolution or a BoC resolution. Points that may be considered include:

• a resolution that has been taken in a wrongful manner (see 2.6 Quorum, Voting Requirements and Proposal of Resolutions);
• a resolution that goes against the company’s AoA; and
• a resolution that would harm the company’s business.

Similar to any shareholder or investors, institutional investors and other shareholder groups may obtain information and provide decisions based on the following.

• Shareholder(s) with at least 10% of the voting shares may request information on an issue if there are notions that a tort has been committed by the company, the BoD or the BoC. If no information is provided, the shareholder may request an inspection against the company, from the district court. The district court may then appoint up to three experts to inspect the issue proposed.
• Shareholders may request access to the following information, inter alia:
1. the shareholders registry and special shareholders registry; and
2. the meeting agenda and information in relation to the meeting.
• To influence and monitor a company's decision, several factors come into play, such as share percentage, the appointment of a BoD and BoC that suits the company's interests, amendment of the AoA, and approval of the company’s annual business plan, annual report and profit utilisation.       

Nominee agreements are considered void as the law bars any use of another individual’s name to conceal share ownership. In practice, to circumvent this, pledges of shares, encumbrances or power of attorneys have been used to take control over information and voting power, as these types of agreements still confer material ownership over the shares, while relaying the rights and obligations attached to another party. The pledge and power of attorney would settle the information of the matters being voted on and the vote’s execution during the GMS.

As mentioned in 2.6 Quorum, Voting Requirements and Proposal of Resolutions, the approval requirement for CROS is 100% from all voting shareholders. The utilisation of this instrument has been mainly found within Indonesia’s corporate sector, since it provides convenience to shareholders that are far from the company’s domicile.

In the case of newly issued shares, each shareholder is entitled to be offered first, in accordance with their share proportion within the company. If these new shares are not purchased and paid within 14 days, the company may sell them to a third party. Such pre-emption rights, however, would not come into effect if the newly issued shares are offered to the company’s employees, if they are converted to shares for obligation holders, or in the event of restructuring and/or reorganisation. They may also be subjected to additional requirements, depending on the AoA.

It should also be noted that the issuance of new shares in public companies shall be directed with pre-emptive rights under the following conditions.

• Under the Regulation of OJK No 32/POJK.04/2015 on Capital Increase of a Public Company by Providing Pre-Emptive Rights, as most recently amended by the Regulation of OJK No 14/POJK.04/2019 of 2019, the following types of shares shall not provide pre-emptive rights:
1. the reparation of financial position, with certain restrictions;
2. the increase of a maximum of 10% of all issued and paid-up capital, by adding capital for a shares ownership programme within either two years or five years of the GMS for capital increase; and
3. bonus shares earned through dividends capitalised and/or not through dividends obtained from share premiums or other equities that are capitalised.
• Shares shall be provided in a proportional manner.
• If the issuance is for more than one class of shares, the following will apply:
1. if the issuance is proportional across all types of shares, they shall have a certain ownership ratio over each share class; or
2. shareholders are given pre-emptive rights for the public company’s shares if:
1. the issuance is for one share class;
2. the issuance is across all share classes but is not proportional; or
3. a public offering is conducted over equity securities that can be converted to shares or rights to purchase shares.

In regards to the disposal of shares, the transfer of shares can happen by way of a notarial deed or a private deed (an imperfect notarial deed). Thereafter, the BoD will register the details of the share transfer (limited to the transfer, rights of shares, and the date and day of the transfer to the share registry) and provide a notification to the MoLHR.

Other than the above, what needs to be considered is mainly the positive investment list, the right of first refusal, the AoA and the shareholders' agreement.

To this extent, the positive investment list contains a limitation on foreign investors having a share percentage within an industry, and is mainly governed under the Regulation of the President No 10 of 2021 on Investment Business Fields, as most recently amended by the Regulation of the President No 49 of 2021 on the Amendment to the Regulation of the President No 10 of 2021, as well as the Regulation of the Government No 5 of 2021 on the Organisation of Risk-Based Business Licensing, as most recently amended by the Regulation of the Government No 11 of 2023 on Measured Fishing. Other sectors may set a specified share ownership percentage, as discussed in 1.5 Minimum Share Capital Requirements.

The AoA and shareholders' agreement may also govern the right of first refusal, where a 30-day period is provided to other shareholders to purchase such shares.

There are no restrictions on security interests by law, but, the AoA might have further terms regarding this issue. In practice, pledges of shares have often been utilised for security interests.

Generally, the law does not set a requirement for interest disclosure by shareholders. However, several points are to be highlighted and disclosed, such as:

• every change of shareholder shall be reported 30 days at most after the notarial deed on the AoA’s amendment is made;
• Indonesia maintains the Public Legal Entity Administration System (Sistem Administrasi Badan Hukum Umum or the SABH), where the public can provide payment to obtain information on the company’s profile, including the shareholding composition, board composition, capital and other company information; and
• other specific sectors, especially in finance, would require key persons (majority shareholders) to partake in and disclose information regarding their interests.

Another key point to note is that there is a requirement to disclose the beneficial owners of shares to the Directorate General of Legal Administrative Affairs (Direktorat Jenderal Adminsistrasi Hukum Umum) within the MoLHR. Failure to do so will bar the company from accessing its account in the SABH, leading to the company’s inability to amend its AoA and conduct corporate actions.

After issuance, a limited liability company can cancel (or lower the nominal of) its shares under a specified procedure, as follows:

• subject to a higher number within the AoA, a minimum quorum of two thirds and approval of all voting shares;
• the director shall announce the GMS resolution to all creditors in at least one national newspaper, seven days after the GMS resolution is passed;
• Within 60 days from the national newspaper announcement, the creditor is given the right to object to the share cancellation through a written letter, and its reasoning will be handed to the company, with a carbon copy given to the MoLHR;
• within 30 days of the creditor’s objection, the company shall provide an answer to the creditor, who may provide a claim to the district court if the company does not answer within 60 days; and
• if there are no further objections or if the creditor’s objection was denied through the court, the MoLHR would provide approval for the cancellation.

With regard to the above, certain restrictions are also given to allow a more balanced position for other shareholders. Firstly, a reduction in share price can only happen is the same percentage is reduced across all shares in all classifications, unless all shareholders approve of a reduction in a specific share class. Secondly, if there is more than one share class, all affected shareholders have to give approval of such.

Furthermore, under POJK 15/2020, a public company owning more than one class of shares may also cancel (or lower the nominal of) such shares with the following requisites.

• The GMS can occur if the presence quorum and approval reached three quarters of all share classes impacted by such a decision. Failure to meet the quorum will allow the second GMS to have at least two thirds of all impacted share classes present. If the quorum has still not been met, OJK will provide the quorum and approval rate upon the company’s request.
• If the impacted share class has no voting rights, they will be given a voting right on their share class.
• Abstaining shareholders present will be obliged to follow the majority decision within the GMS.

Companies can buy back their shares while abiding by the following terms:

• the buyback must not cause the company’s net worth to be lower than the issued capital of the company, counted with the required company reserves;
• shares purchased back counted with the encumbrances over the company’s shares cannot be more than 10% of the company’s issued capital, unless there are further discretions in the Indonesian capital market laws and regulations;
• a buyback shall occur only after a GMS with the appropriate quorum and approval of the AoA amendment, as discussed in 2.6 Quorum, Voting Requirements and Proposal of Resolutions;
• shares purchased back by the company can only be held for a maximum of three years; and
• a buyback is not to be accounted for the quorum requirements within the GMS, and shall not receive dividends.

A noteworthy point is that shareholders enjoy the right to request the company to buy back their shares if there is an amendment of the AoA or a transfer or encumbrance of the company’s assets exceeding 50% of the company’s net worth, or if there is a merger, acquisition or spin-off. Under these circumstances, if the company has exceeded 10% of self-ownership, the company will be obliged to aid the shareholder in finding a third party to purchase those shares.

Pursuant to the Regulation of OJK No 30/POJK.04/2017 on Buybacks of Shares Issued by Public Companies, public companies are also allowed to conduct buybacks under the same procedures as mentioned, albeit with additional terms of transparency, announcement and restrictions, such as:

• they shall not be used for insider trading and market manipulation;
• a plan and summons of the GMS to buy back shares shall be announced in a certain format to the shareholders, and shall be reported to OJK within two days of its execution;
• any additional changes to the plan and summons of the GMS shall be announced at most two days before the GMS is held;
• all buybacks shall be concluded at most 18 months after the GMS resolution is passed;
• all shares obtained through buybacks shall be transferred in three years, with the commencement of such procedure at most two years after the GMS resolution is passed; and
• additional mechanisms for price determination and share transfer may be in place.

Dividends are distributed to shareholders under certain thresholds of profits and reserves, as follows:

• net profits shall be put into reserves of at least 20% of all the issued and paid-up capital to cover the company’s losses;
• such distribution will follow if there are any further profits earned, through a method set in the AGMS resolution;
• interim dividends are allowed with the same thresholds, but shall be returned if the company suffers a loss at the end of the financial year, the interim dividends – if such dividends are unable to be returned, the BoD and BoC shall be jointly liable to provide indemnification; and
• dividends not taken for five years would be put in a special reserve – if they are not claimed within ten years, the dividends would be retained as the company’s rights.

In this instance, public companies are also subject to the same rules, but they are limited to distributing the dividends to the relevant shareholders within 30 days of the GMS resolution.

Shareholders have the right to appoint or remove a director from the board of a company by virtue of a GMS resolution, which can be passed by a normal GMS or a CROS.

The procedure for the appointment of the BoD is further governed by the company's AoA. However, by law, the BoD can be appointed through a GMS/CROS, which shall provide for the effectiveness of the appointment, substitution and resignation of the BoD. Upon the absence of a determined date, the date of the GMS/CROS shall be the effective date of the BoD’s appointment. Such a decision shall then be put into a notarial deed within 30 days of its inception.

Furthermore, once the appointment or discharge has been made, the BoD is obliged to notify these changes to the MoLHR to be recorded in the company registry within a maximum of 30 days from the date of the GMS resolution.

It is also noteworthy that any dismissed member of the BoD shall be allowed to defend themselves before the adoption of the removal resolution. This is enshrined through acquit et de charge, under which the BoD may be released from their responsibility for the company’s financial statements and performance after the GMS has provided approval of the BoD’s work. The release of such liability, however, shall also pay attention to the BoD’s obligations as follows:

• the BoD’s responsibility and good faith in operating the company;
• the BoD’s obligation to prepare a shareholders' registry, special shareholders' registry, minutes of the GMS, minutes of meetings of the BoD and financial statements; and
• the BoD's responsibility to report to the company on any shares in the company owned by the BoD and/or their family members.

Shareholders can file a lawsuit against the relevant members of the BoD in the relevant district court if the shareholders suffer losses caused by actions of BoD members that are unfair and unreasonable. Shareholders can also require the relevant directors to take certain action, as long as this has been approved by the GMS.

Shareholders can appoint or remove the company’s auditors through a GMS.

The BoD does not have explicit requirements to report to shareholders on the company’s governance arrangements. However, much information is still to be provided by the BoD for transparency’s sake, as there are several actions that would require GMS approval, as described in 2.6 Quorum, Voting Requirements and Proposal of Resolutions.

This is even more prevalent if such company is a public company. POJK 31/2015 requires a transaction and/or method of governance to be reported to OJK and the public whenever such information constitutes a material transaction that would affect the prices of shares within the capital market. Notable examples include the restructuring of loans, ceasing a part of their businesses, prohibition by authorities for business activities, etc.

Furthermore, in line with corporate governance, the company’s social and environmental responsibility programme is an important aspect. Such a programme is mandatory for companies that conduct business in the natural resources sector, but other companies may also provide for such programmes to be conducted. The plan and implementation results shall be provided and approved within the AGMS.

Controlling companies do not usually have liabilities and duties to other shareholders for the companies they control. This is embodied within the “limited liability” principle, under which they shall only be responsible for the shares they own within the company.

However, the principle of “limited liability” will be abolished and the parent company can be held accountable by other shareholders for the legal problems of its subsidiaries in the following circumstances:

• if the parent company also signs an agreement that was entered into by the subsidiaries with the third party;
• if the parent company acts as a corporate guarantee for subsidiary agreements with creditors; and
• if the parent company commits an unlawful act that results in losses for third parties from the subsidiary company.

According to the Company Law, shareholders have the right to receive payment of the assets remaining from the liquidation proceeds, after the proceeds have been distributed to other parties that receive prioritisation prior to receiving such dividends – ie, preferred, separated and concurrent creditors. If the assets are insufficient to cover these payments, the shareholders would receive nothing.

As discussed in 2.11 Challenging a Resolution, any aggrieved shareholders are given the right to file a lawsuit against the company for a company’s action in reference to a GMS resolution, BoD resolution or BoC resolution that is considered unfair and unreasonable. Such lawsuit shall be filed with the district court that has jurisdiction over the company’s domicile.

Shareholders are given the right to sue the company so long as they can prove the validity of such a claim, alongside the appeal and cassation upon disagreement to the court decision.

In essence, every shareholder can file a claim to the district court against the company’s directors/officers. The merits to such a claim would have to pay attention to the BoD’s obligations, as discussed in 6.1 Rights to Appoint and Remove Directors, as well as their requirement to act in good faith and responsibly.

Shareholders may file for a lawsuit for and on behalf of the company against the BoD and/or BoC with the relevant district court, so long as one or more shareholders representing more than 10% of all voting rights decides to do so.

The term “shareholder activism” is not recognised in Indonesia, and such practice is not governed by any specific regulation. However Indonesia’s Company Law gives shareholders and minority shareholders certain rights to influence the company, as follows.

• The right to cast votes, where each share provides for one vote within the GMS and other rights attached alongside such share. Collectively, they are used to affect the company’s movement and organisation through the amendment of the AoA, appointment of the BoD and BoC, approval of merger, consolidation, acquisition, insolvency, etc.
• The right to propose a GMS be held when requested by one or more shareholder representing 10% of all voting shares, or if a lower number is determined within the company’s AoA.

• One or more shareholders representing 10% of all voting shares may file a lawsuit against the BoD and/or the BoC, or request an investigation to be held to the district court.
• Minority shareholders may request a buyback from the company if there are losses arising from the amendment of the AoA or a transfer or pledge of assets exceeding 50% of the company’s net assets, or if there are mergers, acquisitions, consolidations or spin-offs.
• Public companies protect minority shareholders more, with the new controller in an acquisition process being required to execute a tender offer to public shareholders.
• Public companies are subjected to conflict of interest transactions that would require the approval of independent shareholders.

Activist shareholders are very uncommon in Indonesia. Many individuals are still unaware of what activist shareholders are or what their intentions are. However, the most important stake would be due to financial reasons, by trying to optimise their gains while minimising loss incurred.

Shareholder activism is not well known in Indonesia but, as discussed in 11.1 Legal and Regulatory Provisions, shareholders can generally still strategise to carry out their desired agenda. In terms of building their stake, the strategies may differ according to whether the company is public or private.

A publicly listed company is obliged to provide material facts or information related to relevant matters that may influence the price of securities on the stock exchange. Furthermore, potential investors can conduct securities transactions more conveniently because they can directly access various methods (ie, exchange transactions, off-exchange, and transactions by securities brokerage). These characteristics can affect the behaviour of capital holders, prospective investors and the public, and determine strategies based on their agenda.

Otherwise in a private company, the transfer of shares is based on the mechanism in the AoA and allows for less activism among shareholders. To this extent, the Company Law instructs that it is mandatory to make an offer in advance to certain shareholders or others, to obtain the approval of the company organs, and to obtain approval from the authorised institutions. On this basis, shareholders or potential shareholders of a private company are in a more rigid environment, and must consider more negotiation because there are denser mechanisms to be negotiated through.

To this end, certain additional strategies have been used by shareholders in Indonesia to affect company decisions, such as:

• issuing statements to the media to put pressure on the director's appointment;
• providing derivative actions within the company;
• filing complaints with OJK (in the context of public companies) regarding the BoC's improper management of the company's funds and lack of accountability for fraud; and
• holding public discussions between shareholder associations and the Head of the People's Consultative Assembly of the Republic of Indonesia on the Bank's areas for improvement.

In Indonesia, no particular industries or sectors are targeted because shareholder activism is not well recognised here.

In Indonesia, shareholder activism is not well known, but there is room for particular shareholders to be more active than other shareholders in making decisions at the GMS. These particular shareholders are those who have the voting rights, through which they can put their interest into the company's decision in the GMS. Furthermore, the amount of influence over the votes and activism conducted would often depend more on the capital they control and shares owned. Such would be under the premise that they have more stakes at hand, requiring them to be more active in partaking in company decisions as the capital they own might be affected more (ie, a hedge fund's shareholders would be more active in trying to control the company and reduce their investment risks, whereas retail stocks shareholders would have less power and fewer incentives to be more active).

The proportion of public activist demands that were met in the last year is not known, since activist shareholders are not recognised in Indonesia.

Considering that activist shareholders are not recognised in Indonesia and there are no regulations regarding activist shareholders, every shareholder is recognised as a regular shareholder, and their rights and limitations are regulated in the Indonesia Company Law and the company’s AoA.