Generally, Indonesian law acknowledges two main types of business organisation: those structured as a business entity (badan usaha) and those operating as a legal entity (badan hukum). The distinction between these two types of business organisation lies in the legal subject and liability provisions.

A business entity can take the form of a:

• civil/general partnership (maatschap);
• partnership; or
• limited partnership (commanditaire vennootschap).

A legal entity business generally takes one of the following forms:

• limited liability company;
• foundation; or
• co-operative.

The most common form of business organisation in Indonesia is a legal entity structured as a limited liability company. It is important to note that within certain business sectors, entities are required to adopt specific organisational structures, primarily that of a limited liability company, in order to partake in the relevant business. Additionally, pursuant to Article 5, paragraph 2 of Law No 25 of 2007 regarding Investment, as last amended by Law No 6 of 2023 regarding the Stipulation of Government Regulation in Lieu of Law No 2 of 2022 regarding Job Creations as Law (the “Job Creation Law”) (hereinafter collectively referred to as the “Investment Law”), any foreign investment in Indonesia must be undertaken by means of establishing or acquiring shares in a limited liability company, unless otherwise stipulated by the relevant laws and regulations.

The primary legal framework for corporate governance in Indonesia is established in Law No 40 of 2007 regarding Limited Liability Companies, as last amended by the provisions of the Job Creations Law (the “Company Law”). Generally, the Company Law mandates adherence to all statutory provisions and articles of association by companies operating within Indonesia, whether they are classified as public companies or private companies.

However, specific corporate governance requirements are also stipulated for public companies, entities operating within certain sectors such as the oil and gas, banking or insurance sectors and entities designated as state-owned enterprises. For instance, the Financial Services Authority (Otoritas Jasa Keuangan or OJK), the regulatory body overseeing capital markets and financial sectors in Indonesia, has imposed specific corporate governance requirements on public companies and both bank and non-bank financial institutions.

In addition to the aforementioned regulations, there are various other laws and regulations pertinent to the practice of corporate governance in Indonesia that should be noted, as follows.

• Central government regulations:
1. Law No 8 of 1995 regarding Capital Markets, last amended by Law No 4 of 2023 regarding the Development and Strengthening of the Financial Sector (“Law 4/2023”) (hereinafter collectively referred to as the “Capital Markets Law”);
2. Law No 13 of 2003 regarding Manpower, last amended by the Job Creations Law (the “Manpower Law”);
3. the Investment Law; and
4. Law No 19 of 2003 regarding State-Owned Enterprises, last amended by Law No 1 of 2025 regarding the Third Amendment to Law No 19 of 2003 (the “SOEs Law”).
• OJK regulations:

1. OJK Regulation No 15/POJK.04/2020 of 2020 regarding the Planning and Holding of General Meetings of Shareholders of Public Companies (“OJK Reg 15/2020”);
2. OJK Regulation No 33/POJK.04/2014 of 2014 regarding Directors and Board of Commissioners of Issuing Companies or Public Companies (“OJK Reg 33/2014”);
3. OJK Regulation No 21/POJK.04/2015 of 2015 regarding the Implementation of Corporate Governance Guidelines for Publicly Traded Companies (“OJK Reg 21/2015”);
4. OJK Circular Letter No 32/SEOJK.04/2015 of 2015 regarding Corporate Governance Guidelines for Public Companies (“OJK CL 32/2015”);
5. OJK Regulation No 45 of 2024 regarding the Development and Strengthening of Issuer and Public Companies (“OJK Reg 45/2024”);
6. OJK Regulation No 34/POJK.04/2014 of 2014 regarding Nomination and Remuneration Committees of Issuing Companies or Public Companies;
7. OJK Regulation No 73/POJK.05/2016 of 2016 regarding Good Corporate Governance of Insurance Companies, as last amended by OJK Regulation No 43/POJK.05/2019 of 2019;
8. OJK Regulation No 48 of 2024 regarding Good Corporate Governance for Financing Institutions, Venture Capital Companies, Microfinance Institutions, and Other Finance Institutions; and
9. OJK Regulation No 16/POJK.04/2020 regarding the Implementation of Electronic General Meetings of Shareholders of Public Companies.

As discussed in 1.2 Sources of Corporate Governance Requirements, specific regulations governing corporate governance requirements apply to public companies listed on the Indonesia Stock Exchange (IDX). The primary legislation in this regard includes OJK Reg 21/2015 and OJK CL 32/2015.

Article 1 and Article 2, paragraph 1 of OJK Reg 21/2015 state that the OJK has the authority to issue guidelines concerning corporate governance for public companies through a circular letter, and every public company is required to implement these guidelines. To realise these provisions, the OJK has issued OJK CL 32/2015 containing corporate governance guidelines for public companies, as outlined in the annex to said letter (the “GCG Guidelines”).

OJK CL 32/2015 specifies that the GCG Guidelines therein cover five main aspects, namely:

• the relationship between public companies and their shareholders;
• the function and role of the board of commissioners (BOC);
• the function and role of the board of directors (BOD);
• the participation of stakeholders; and
• information transparency.

Although explicitly mandating that every public company adhere to the recommendations provided in the GCG Guidelines, both OJK Reg 21/2015 and OJK CL 32/2015 adopt a “comply or explain” approach concerning non-compliance with the GCG Guidelines. In this regard, should a public company fail to fulfil the recommendations outlined in the GCG Guidelines, the OJK will not immediately impose sanctions. Rather, the OJK will initially require the public company to explain the reason for its non-compliance and any alternative approaches taken (if any). This is evident in the obligations set forth in Articles 3 and 4 of OJK Regulation No 21/2015, where every public company is required to disclose information regarding the implementation of the recommendations set out in the GCG Guidelines in their annual reports, which must contain at least:

• a statement regarding the implementation of the recommendations set out in the GCG Guidelines; and/or
• an explanation for any non-compliance with the recommendations set out in the GCG Guidelines, which must include at least the reasons for such non-compliance and any alternative actions taken in lieu of implementing the GCG Guidelines (if applicable).

Should the public company fail to provide such explanations, the OJK may impose administrative sanctions in the form of a reprimand letter and/or fines or take other specific actions and publicly announce the imposition of such sanctions.

On 31 December 2024, the OJK issued OJK Reg 45/2024. This regulation was enacted to implement the mandate under Law 4/2023 and is intended to further develop and strengthen Indonesia’s capital markets sector. OJK Reg 45/2024 also revokes, in whole or in part, a number of existing regulations governing key aspects of the capital markets, including the registration and delisting of public companies and issuers, rights issues by public companies and the disclosure of material information or facts.

One of the key changes introduced by OJK Reg 45/2024 relates to corporate governance, particularly in connection with the disclosure of material information or facts and the responsibilities of controllers of public companies. Under the previous regulatory framework, public companies were required to disclose any material information or facts within two business days. Under OJK Reg 45/2024, public companies must now disclose and report material information as soon as possible, and no later than prior to the opening of the next business day’s first trading session. This accelerated disclosure timeline aims to enhance transparency and market integrity. OJK Reg 45/2024 also asserts an obligation for public companies to identify and report their controllers to the OJK, including any subsequent changes thereto. The term “controller” is defined as any party that directly or indirectly owns more than 50% of the paid-up voting shares or otherwise possesses the ability to determine – either directly or indirectly and by any means – the management and/or policies of the company. The party designated as the controller is also assigned specific responsibilities, including:

• organising and attending general meetings of shareholders (GMS);
• ensuring the continuity of the public company’s business; and
• appointing the members of the BOD and BOC of the public company.

Significantly, OJK Reg 45/2024 further provides that, pursuant to a resolution of the independent shareholders in a GMS or a decision by the OJK or a competent court, a controller may be held liable for losses suffered by the company if it is proven that the controller:

• in bad faith, utilised the company for their personal interests;
• was involved in unlawful acts involving the company; or
• directly or indirectly misused the company’s assets in a manner that caused the company’s assets to become insufficient to satisfy its obligations.

Aside from the foregoing developments, similar to 2024, the authors have observed several developments in the environmental, social and governance (ESG) sector. One such development occurred in late 2024, when the Institute of Indonesia Chartered Accountants launched the Sustainability Disclosure Standards Roadmap, which marks a significant step in the strengthening of corporate governance in Indonesia through enhanced sustainability reporting. The roadmap was developed through stakeholder consultations and is aligned with the standards issued by the International Sustainability Standards Board. It provides guidance to ensure the creation of high-quality sustainability reports to support business activities. According to the roadmap, the use of the standards set out within it as guidance for preparing sustainability reports will become effective starting 1 January 2027, with the possibility of earlier adoption. Among other objectives, the roadmap encourages broader voluntary disclosures and a robust sustainability reporting ecosystem.

Still within the ESG sphere, the Indonesian government has expanded the SIMBARA system, a digital platform to monitor non-tax state revenue and mineral and coal trade, with the aim of enhancing transparency, accountability and regulatory compliance. In mid-2024, SIMBARA’s functionality was broadened to enable the monitoring of additional key commodities, including nickel and tin. The launch and socialisation of the new features for nickel and tin monitoring were conducted in July 2024. This enhancement of the SIMBARA is expected to strengthen corporate governance practices by promoting greater oversight across the mineral and coal sector.

Finally, a notable improvement in the ESG performance of Indonesian companies occurred over the past year, as evidenced by several prestigious awards acknowledging these efforts. For example, at the Global ESG Awards in Dubai, PT Bukit Asam Tbk received multiple honours, including platinum awards for its education and awareness programme and renewable energy integration, as well as gold awards for supporting economically weaker sections and terrestrial biodiversity conservation. PT Kalimantan Prima Persada received several awards at the Global CSR & ESG Awards 2025, including the silver award for environmental excellence and the platinum award for the empowerment of women. Pertamina International Shipping was also recognised on several occasions for its dedication to women’s empowerment, winning the gold award at the Global CSR & ESG Awards 2025. Other prominent companies that received recognition in the ESG sector include PT Pertamina Hulu Mahakam, Pertamina EP Zona 7, and PT PLN Indonesia Power UBP Surabaya. These awards reflect the growing commitment of Indonesian companies to advancing sustainability and promoting social responsibility.

Private Companies

For private companies in Indonesia, ESG reporting generally aligns with the requirements outlined in the Company Law and Government Regulation No 47 of 2012 concerning the Social and Environmental Responsibilities of Limited Liability Companies (“GR 47/2012”). However, it is essential to note that these requirements are relatively basic and not comprehensive. In fact, Article 74 of the Company Law specifically mandates that companies engaged in natural resource-related business activities implement sustainable economic practices to enhance the quality of life for communities and the environment (corporate social and environmental responsibility). This suggests that only companies operating in this sector have an obligation to fulfil corporate social and environmental responsibility. There have been no significant developments in this regard.

The Company Law does not stipulate further requirements or considerations concerning the implementation of corporate social and environmental responsibility, except for requiring companies to allocate budgets for these obligations and to ensure that reports on the implementation of corporate social and environmental responsibility are included in every company’s annual reports, as stipulated in Article 74, paragraph 2 and Article 66, paragraph 2 of the Company Law, respectively.

Similarly, Article 3, paragraph 1 of GR 47/2012 only mandates that companies involved in natural resources implement corporate social and environmental responsibility. There are few differences regarding corporate social and environmental responsibility requirements under the Company Law and GR 47/2012. GR 47/2012 essentially reinforces provisions previously established in the Company Law, such as:

• requiring the BOD of relevant companies to allocate funds for the implementation of corporate social and environmental responsibility in the company’s annual work plan and execute corporate social and environmental responsibility as outlined in the annual work plan approved by the BOC or general meeting of shareholders (GMS), as determined in the company’s articles of association (as per Article 4 of GR 47/2012); and
• ensuring that reports on the implementation of corporate social and environmental responsibility are included in the company’s annual reports (as per Article 6 of GR 47/2012).

In addition to the aforementioned considerations, the OJK has mandated separate ESG reporting requirements for private companies operating as financial institutions, as regulated in OJK Regulation No 51/POJK.03/2017 concerning the Implementation of Sustainable Finance for Financial Service Institutions, Issuers, and Public Companies (“OJK Reg 51/2017”), which is discussed in the following.

Public Companies

OJK Reg 51/2017 mandates a specific ESG disclosure for public companies and financial institutions. This regulation primarily imposes the obligation for financial institutions and public companies to integrate sustainable economic practices and provide relevant disclosures to both the OJK and the public. The requirement for sustainable economic practices entails the submission of a sustainability report, either as an integral part of the annual report or as a separate document, on an annual basis.

The OJK also issued Circular Letter No 16/SEOJK.04/2021, which delineates guidelines for ESG disclosures within the annual reports of public companies. These guidelines necessitate, among other provisions, the inclusion of detailed information concerning the actions taken by companies to fulfil their social and environmental responsibilities.

The Company Law recognises three primary bodies within the corporate structure of Indonesian companies: the BOD, the BOC and the GMS. Each of these principal bodies holds distinct functions and authorities.

According to the Company Law, the BOD is entrusted with managing the company in alignment with its purposes and objectives, and in the best interests of the company. In exercising its management authority, the BOD has the capacity to oversee the company’s assets, enter into contracts on behalf of the company and generally represent the company both in and out of court. Despite the breadth of its management powers, the BOD operates under certain constraints, as delineated by law and/or the company’s articles of association.

The BOC is tasked with supervisory and advisory functions directed towards the BOD, ensuring that the company’s interests and objectives are pursued effectively. The GMS holds decision-making authority that surpasses that granted to the BOC and BOD, as stipulated by the Company Law or the company’s articles of association.

As briefly introduced in 3.1 Bodies or Functions Involved in Governance and Management, the BOD, BOC and GMS each possess distinct authorities and functions.

Given that the BOD is vested with the authority to conduct the management of the company, all decisions related to the company’s management fall under the purview of the BOD. However, as previously stated, these powers may be subject to limitations as specified in the law or the company’s articles of association. For example, if the BOD intends to sell or encumber company assets with a value exceeding 50% of the net assets of the company in one or more transactions, or to undertake a merger with another company, the BOD must seek approval from the GMS.

Generally, as the BOC only has the authority to supervise and provide advice to the BOD, it does not make decisions related to the management of the company. However, there are instances where decisions of the BOC are also required for the company to undertake certain actions. For example, if during a fiscal year the company intends to distribute interim dividends to shareholders (assuming the requirements under the Company Law for such action are fulfilled), the BOD cannot proceed with this action without the approval of the BOC. Additionally, the company’s articles of association may give the BOC the authority to approve specific management actions to be taken by the company.

Under the Company Law, the GMS holds authorities that the BOD and BOC are not allowed to exercise and therefore shall make various key decisions for the company. These decisions include:

• appointment of members of the BOD and BOC;
• amendments to the company’s articles of association;
• payment of annual dividends;
• liquidation of the company; and
• certain corporate actions such as acquisitions, consolidations, mergers and spin-off of the company.

Similar to the BOC, the company’s articles of association may grant additional authorities to the GMS to approve specific actions to be taken by the company.

Generally, every decision made by each body of the company is taken in accordance with the decision-making mechanism applicable to such body, as regulated in the Company Law and/or the articles of association.

However, it should be noted that the Company Law does not explicitly regulate how decisions in the BOD or the BOC for private companies are made. The Company Law does not prescribe any requirements regarding how the BOD or BOC conduct board meetings or make decisions therein. Therefore, in practice, the articles of association of each company may contain provisions regarding the conduct of board meetings and the decision-making procedures therein.

Despite the above, it should be noted that, based on Article 98, paragraph 2 of the Company Law, if the BOD consists of more than one member, then each member of the BOD has the right to act for and on behalf of the company unless otherwise specified in the articles of association. This means that specific directors may be authorised to take actions on behalf of the company without having to wait for a collective decision from the BOD, as long as they are appointed as authorised directors to represent the company. In contrast, when the BOC makes certain decisions, these decisions must be made collectively by the BOC, and no individual member of the BOC can act to represent the BOC in making decisions. This is based on the principle stated in Article 108, paragraph 4 of the Company Law, which states that if the BOC consists of more than one member, then each member of the BOC cannot act individually but must act based on decisions made by the BOC as a whole.

Unlike the provisions for the BOD and BOC, the Company Law extensively regulates how decisions can be validly made in the GMS. In short, the Company Law has established formal procedures regarding the conduct of GMS, such as how a formal GMS request is to be submitted and how the GMS invitations are to be delivered to shareholders, as well as the quorum requirements and decision-making process in the GMS. This is elaborated in 5. Shareholders.

As indicated in the preceding sections, Indonesia, similar to other civil law jurisdictions, adopts a two-tier board system comprising the BOD and the BOC. The implementation of the two-tier board system in Indonesia is mandatory under the Company Law, meaning that every Indonesian company is required to have an active BOD and BOC functioning in the operation of the company.

Furthermore, based on Article 92, paragraph 3 of the Company Law, the BOD may consist of at least one or more members. However, Article 92, paragraph 4 of the Company Law mandates that companies engaged in activities related to the collection and/or management of public funds, companies issuing debt instruments to the public and publicly listed companies must have at least two members on the BOD. This indicates that the Company Law only stipulates the minimum number of BOD members and does not impose a maximum limit on the number of BOD members.

Similarly, Article 108, paragraphs 2 and 5 of the Company Law states that the BOC must consist of at least one member, except for companies engaged in activities related to the collection and/or management of public funds, companies issuing debt instruments to the public, or publicly listed companies, which are required to have at least two members on the BOC.

It should be noted that the Company Law does not require that any member of the BOD or BOC be appointed as president director or president commissioner. However, the GMS may choose to make such appointments. Moreover, for the BOD, it is common for the GMS to determine the titles and authorities of each appointed member of the BOD, such as appointing one member of the BOD as the director of finance or director of operations.

In general, the Company Law stipulates that the role of the BOD is to carry out the management of the company in compliance with applicable laws and regulations, as well as the company’s articles of association.

As briefly discussed in the preceding sections, the Company Law does not differentiate the roles of different BOD members. However, in cases where there are two or more directors, the allocation of authorities and tasks among the BOD members may be determined by a resolution of the GMS. In the absence of such a resolution, the BOD may decide on this matter themselves.

As discussed in 3.3 Decision-Making Processes and 4.1 Board Structure, while the GMS may elect a specific member of the BOC to serve as president commissioner, it is crucial to recognise that no member of the BOC can independently carry out the duties of the BOC. According to the Company Law, this prevents variations in the roles of individual BOC members. Therefore, even if there is a president commissioner, no decision by the BOC can be unilaterally made by the president commissioner. Instead, decisions must be made collectively by the BOC in accordance with the provisions stipulated in the company’s articles of association.

As provided under the Company Law, limited liability companies in Indonesia are required to have at least one director and one commissioner. There are no stipulations regarding the maximum number of directors and commissioners. However, certain companies may be required to have more than one director and commissioner.

The requirement to have more than one director and commissioner is typically implemented by the OJK. For instance, public companies and companies carrying out financing activities are required to have at least two directors and two commissioners. Banks and insurance companies are required to have at least three directors and three commissioners.

As a general rule, the appointment of a member of the BOD is conducted through a GMS, in accordance with Article 94, paragraph 1 of the Company Law. Directors may be appointed for a specific term and may be reappointed. Each appointment is effective on the date specified by the GMS or, in the absence of such specification, on the date the GMS is deemed closed.

Any individual may be appointed as a member of the BOD provided they have legal capacity and have not, within the previous five years:

• been declared bankrupt;
• served as a member of a BOD or BOC deemed responsible for a company’s bankruptcy; or
• been criminally convicted of an offence detrimental to state finances or related to the financial sector.

Further provisions regarding the appointment, replacement and dismissal of BOD members may be outlined in the company’s articles of association, subject to the minimum quorum requirements.

The procedures for the dismissal of BOD members are governed by Article 105 of the Company Law, which stipulates that BOD members may be dismissed at any time through a GMS provided there is a valid reason for such dismissal and the director concerned is given an opportunity to defend themselves, unless the director does not object to the dismissal. The dismissal becomes effective on the date the GMS is deemed closed or on a specific date determined by the GMS.

A member of the BOD may be suspended by the BOC for a specified reason as outlined in Article 106, paragraph 1 of the Company Law. During suspension, the BOD member is not authorised to perform their directorial duties. Within 30 days of the suspension, a GMS must be convened to decide whether the suspension will be lifted or if the director will be permanently dismissed.

Unless otherwise stipulated in the relevant articles of association, the GMS attendance and voting quorum for the appointment and dismissal of BOD members shall be a simple majority.

The Company Law does not recognise the concept of independent directors, and, therefore, there is no requirement for the appointment of independent directors in Indonesian companies. This also applies to public companies, as stipulated by OJK Reg 33/2014, which does not mandate the presence of independent directors for public companies.

However, the Company Law does acknowledge the concept of independent commissioners. Article 120 of the Company Law states that the articles of association of a company may provide for the appointment of one or more independent commissioners. Although the Company Law permits the inclusion of independent commissioners, it does not make it obligatory. In contrast, for public companies, Article 20 of OJK Reg 33/2014 specifies that if a BOC of a public company consists of two members, one must be appointed as an independent commissioner. If the BOC has more than two members, 30% of the total members must be independent commissioners.

On the issue of conflicts of interest, Article 99 of the Company Law addresses potential conflicts by prohibiting members of the BOD from acting as legal representatives of the company if they are conflicted in such matters. This is to ensure that representation is always in the company’s best interest, aligning with their fiduciary duties.

In addition to the above, Law No 5 of 1999 concerning the Prohibition of Monopolistic Practices and Unfair Business Competition, as amended by the Job Creation Law, addresses potential conflicts of interest for BOD members. It explicitly prohibits individuals from concurrently serving as directors in other companies operating in the same market or closely related business industries.

As outlined in the preceding sections, Article 92, paragraph 1 of the Company Law mandates that company directors have the primary legal responsibility to manage the company in the company’s best interests, ensuring that their actions are in alignment with their fiduciary duties as well as the company’s purposes and objectives. Additionally, Article 98, paragraph 1 of the Company Law assigns the BOD the responsibility of representing the company in both legal and non-legal matters.

The members of the BOD are entrusted to act in the best interest of the company, ensuring their actions align with the company’s objectives and purposes. In fulfilling their duties, BOD members may also consider the advice provided by the BOC, provided such advice similarly aligns with the company’s best interests and objectives. Ultimately, BOD members are obligated to serve solely in the best interest of the company, without consideration of the interests of other parties or bodies.

Under Article 97 of the Company Law, members of the BOD are required to perform their duties in good faith and with full responsibility. Generally, BOD members are not personally liable for company losses, provided their actions are conducted in the company’s interest and in accordance with the provisions of the company’s articles of association. However, BOD members may be personally liable for company losses if they are found guilty of misconduct or negligence in performing their duties. In such instances, claims can be filed against the breaching BOD members by other company organs.

If the BOD comprises two or more members, the liability is joint and several, meaning each member responsible for the misconduct or negligence is collectively liable.

On behalf of the company, shareholders representing at least one-tenth of the total shares with voting rights may file a lawsuit against BOD members in a specific district court to seek compensation for the company’s losses. Additionally, members of the BOC or other BOD members also have the right to file claims on behalf of the company against any BOD member whose misconduct or negligence has caused losses to the company.

Notwithstanding the above, in the context of public companies, and as elaborated in section 2.1 Hot Topics in Corporate Governance, Article 50 of OJK Reg 45/2024 further stipulates that a resolution of the GMS or a decision by the OJK or a competent court may determine that a member of the BOD or BOC is personally liable for losses suffered by the public company if such losses arise due to:

• the member’s bad-faith use of the company for personal gain;
• the member’s involvement in unlawful acts involving the company; or
• the member’s direct or indirect misuse of company assets, resulting in the company’s assets becoming insufficient to meet its liabilities.

As a principle, there is a clear separation between the personal assets and liabilities of the members of the BOD and those of the company. It is essential to determine whether a director is acting in a personal capacity or on behalf of the company. As discussed in 4.8 Consequences and Enforcement of Breach of Directors’ Duties, personal liability of a director can be invoked if they are found guilty of misconduct or negligence in performing their duties or in other circumstances applicable to public companies.

However, a director cannot be held personally liable for company losses if:

• the loss was not caused by their fault or negligence;
• they have managed the company in good faith and with due care, in the interests of and in accordance with the company’s purposes and objectives;
• they do not have a direct or indirect conflict of interest in the management actions that caused the loss; and
• they have taken actions to prevent the loss or its continuation.

In return for their service, members of the BOD may be granted remuneration and/or other entitlements. The authority to determine the amount of such remuneration and entitlements resides with the GMS, as outlined in Article 96, paragraph 1 of the Company Law. This authority can be delegated to the BOC, in which case the BOC will make the decision through a BOC meeting.

It is important to note that the Company Law does not explicitly mandate the provision of remuneration and/or other entitlements. Consequently, the remuneration and/or other entitlements of BOD members are contingent solely upon the decision of the GMS or the BOC meeting, as applicable.

The Company Law provides that the remuneration payable to BOD and BOC members be included in the company’s annual report, wherein the annual report shall be submitted by the BOD to the GMS after it has been reviewed by the BOC. The Company Law does not require the separate disclosure of information regarding the remuneration, fees or benefits payable to the BOD or other officers of the company to the public.

However, certain companies regulated by the OJK are obligated to make available their annual report to the public. Thus, acknowledging that the remuneration payable to BOD and BOC members must be included in the company’s annual report, certain companies will inevitably be required to disclose the remuneration of BOD and BOC members to the public.

The Company Law adopts the principle of piercing the corporate veil, meaning that, similar to the BOD and BOC, there is a separation between the assets and liabilities of the company and those of its shareholders. This means shareholders cannot be held personally liable for the actions or obligations of the company. However, in the context of public companies, there are specific circumstances under which a controller may be held liable for losses suffered by the company, as outlined in section 2.1 Hot Topics in Corporate Governance.

As a result, shareholders do not participate in the daily management of the company. However, due to their ownership of shares, shareholders, generally through the GMS, have significant influence over the company’s affairs. This is because shareholders holding shares with voting rights can determine the appointment and dismissal of BOD members, who are responsible for the daily management of the company. Furthermore, shareholder approval is required for significant corporate actions, such as amending the company’s articles of association, approving mergers and acquisitions and deciding on liquidation.

Another key variable in discussing the relationship between shareholders and the company is the distribution of dividends as a form of return on shareholders’ investment. According to Article 71 of the Company Law, shareholders, through the GMS, have the authority to distribute the company’s net profits, including as annual dividends. However, this article stipulates that dividends can only be distributed if the company has a positive profit balance and the mandatory reserve requirements are met for a given fiscal year. This indicates that dividends depend on the company’s profitability; if the company does not generate net profits, shareholders will not receive dividends. This underscores the link between the company’s financial performance and the benefits shareholders can receive from the capital they have invested in the company.

As previously discussed in 5.1 Relationship Between Companies and Shareholders, according to the Company Law, the company’s BOD, not shareholders, is responsible for the management of the company. Thus, shareholders are not responsible for the day-to-day management of the company. However, shareholders, through the GMS, may influence the company’s management as they will be able to decide corporate actions taken by the company, including mergers and acquisitions, capital injection and the dissolution of the company.

In general, the GMS of Indonesian private companies is extensively regulated under the Company Law.

The GMS consists of an annual GMS and any other GMS that may be held at any time depending on the needs of the company. The latter is also known as an extraordinary GMS. The annual GMS must be held by no later than six months after the closing of each fiscal year. At the annual GMS, the BOD is required to submit the annual report of the company for approval, and shareholders may also ask for other items to be placed on the agenda for discussion at the annual GMS, such as the appointment or dismissal of members of the BOD or BOC, and the distribution of annual dividends.

Note that the Company Law regulates the relevant procedures and guidance for an annual and extraordinary GMS to ensure they are the same.

Procedure for GMS

Company Law provides that the BOD shall hold the GMS after a notice for such has been distributed to shareholders. The BOD can issue a notice for a GMS on its own authority or because one or more shareholders who collectively represent one-tenth or more of total shares with voting rights or the BOC has/have requested the BOD to convene a GMS.

Such request shall be submitted to the BOD by registered mail, accompanied by the reason for the request. If the BOD does not give the notice of GMS within 15 days after the date of the request to convene the GMS is received, the following applies.

• In the case of shareholders, such shareholders may re-submit the request for the GMS to the BOC. The BOC is required to give notice of the GMS within 15 days as of the date the request to convene the GMS is received. The shareholders that request the GMS can issue the notice for GMS based on a stipulation of the chairperson of the district court with jurisdiction over the company if the BOD or BOC does not issue the notice of the GMS.
• In the case of the BOC, they may themselves give notice of the GMS to shareholders.

For a notice for a GMS to be valid, it must include the date, time, venue and agenda of the meeting, and must be accompanied by a note that the materials to be discussed in the GMS are available at the company’s office as of the date of the notice of the GMS until the date the GMS is convened. Further, a notice of a GMS must be sent no later than 14 days prior to the convening thereof, excluding the date of the notice and the date of the GMS, in the form of a registered letter or through an advertisement in a newspaper.

If all shareholders attend the GMS, then the notice requirement may be waived by a shareholders’ resolution passed at the GMS, in which case the GMS may be held at any time without notice.

Representation of Shareholders

The Company Law allows for shareholders to be represented in the GMS by a representative appointed by a valid power of attorney. The power of attorney must be in Indonesian, although it can be made in bilingual format if the parties deem it necessary. If executed outside Indonesia, Indonesian practice requires that the power of attorney be executed before a notary and apostilled or legalised, as applicable, in the jurisdiction of execution.

It is important to note that a shareholder is only allowed to appoint one representative to represent them in voting for all the shares with valid voting rights owned. In other words, the appointed representative shall represent the shareholder in full. If a shareholder is represented by a member of the BOD or BOC, or by an employee of the company, the Company Law prohibits such representative to cast a vote in the GMS. Further, the Company Law stipulates that all powers of attorney must be presented to the chairperson of the GMS and that the chairperson has the right to determine the parties eligible to attend the GMS.

Chairperson of the GMS

The position of chairperson of the GMS is generally regulated in the company’s articles of association. The articles of association typically provide that the president director is to act as chairperson of the GMS. In their absence, another director selected by the president director may serve as chairperson or, if none of the directors are present, a member of the BOC may be selected. If none of the directors or commissioners are present at a GMS, the shareholders may vote to select a chairperson therefor.

However, since the choice of chairperson of a GMS is not regulated in the Company Law, shareholders are free to make different arrangements for the position of chairperson in the company’s articles of association.

Venue of GMS

The Company Law stipulates that the GMS must be convened in Indonesia at the domicile or place where the business activities of the company take place, as stipulated in the company’s articles of association. Alternatively, the GMS may be held anywhere in Indonesia so long as all the shareholders agree and can attend.

The Company Law also allows for the GMS to be held by teleconference, videoconference or any other electronic media that enable all GMS participants to see, hear and directly participate in the meeting with each other.

Quorum of GMS

The Company Law sets out the quorum and margins of approval applicable in a GMS for various types of resolution to be adopted. Therefore, the quorum for each GMS will depend on the resolutions to be approved at that GMS. Notwithstanding the following elaboration on quorum requirements, the articles of association of a company may determine a higher (not lower) quorum and/or approval margins for the various types of meetings.

Initial GMS

For an initial GMS to discuss any matter, the Company Law provides for the following minimum quorums and margins of approval.

• Simple majority quorum – a GMS may be held to approve one of the following resolutions if it is attended or represented by shareholders who own more than one-half of the total shares with valid voting rights, and the resolution shall be valid if approved by more than one-half of the total votes cast by the shareholders in the meeting:
1. annual business plan (including annual budget) (if required in the articles of association);
2. appointment, replacement and termination of BOD and BOC members;
3. allocation of the authorities and duties of the BOD;
4. annual report;
5. utilisation of net profits;
6. remuneration for members of the BOD and BOC;
7. delegation of management actions for the BOC under certain conditions for a certain period of time;
8. matters normally approved in an annual GMS, such as:
1. a change in any method, practice or principle of accounting, except as required by changes in Indonesian generally accepted accounting principles (GAAP) determined by the company’s independent certified public accountant;
2. a change to any underlying assumption, method of calculation of or depreciation of any type of asset or establishment of any material reserve;
3. the distribution or payment of any dividend or distribution in cash or in-kind of shares of capital stock of the company; or
4. the appointment of an independent certified public accountant; or
9. increasing or decreasing the issued and paid-up capital of the company.
• Super majority quorum – a GMS may be held to approve the following resolution if it is attended or represented by shareholders who own at least two-thirds of the total shares with valid voting rights, and the resolution shall be valid if approved by at least two-thirds of the total votes cast by the shareholders in the meeting:
1. amendment to the company’s articles of association.
• Absolute majority quorum – a GMS may be held to approve the following resolutions if it is attended or represented by shareholders who own at least three-fourths of the total shares with valid voting rights, and the resolution shall be valid if approved by at least three-fourths of the total votes cast by the shareholders in the meeting:
1. merger, consolidation, acquisition or spin-off;
2. submission of court petition to have the company placed in suspension of payment obligations or declared bankrupt;
3. liquidation or winding up of the company;
4. extension of the company’s term (if limited to a specific number of years); and
5. the sale, transfer, disposal, pledge or encumbrance of any material assets of the company that constitute more than 50% of the company’s total net assets (regardless of whether in a separate or interrelated transaction).

Second and Third Meetings

Where a quorum for attendance is not reached, the Company Law permits a second GMS to be held within a maximum period of ten days and no later than 21 days after the initial GMS that preceded it took place. The notice for the second GMS must be made at the latest seven days before the second GMS is held. These requirements are also applicable for the third GMS.

The quorums and approval margins provided in the Company Law for a second and third GMS are summarised in the following.

Simple majority quorum

With respect to simple majority quorum, for the second meeting, the quorums and approval margins are as follows:

• quorum – at least one-third of outstanding voting shares; and
• approval – more than one-half of shares voted in meeting.

If the second meeting fails for lack of quorum, a third GMS may be held upon application to the district court with jurisdiction over the company, which will set the required quorum.

Super majority quorum

With respect to super majority quorum, for the second meeting, the quorums and approval margins are as follows:

• quorum – at least three-fifths of outstanding shares; and
• approval – at least two-thirds of shares voted in meeting.

If the second meeting fails for lack of quorum, a third meeting may be held upon application to the relevant district court, which will set the required quorum.

Absolute majority quorum

With respect to absolute majority quorum, for the second meeting, the quorums and approval margins are as follows:

• quorum – at least two-thirds of outstanding voting shares; and
• approval – at least three-fourths of shares voted in a meeting.

If the second meeting fails for lack of quorum, a third meeting may be held upon application to the relevant district court, which will set the required quorum.

Minutes of the GMS

The Company Law requires that minutes be made for each GMS convened. The minutes will need to be signed by the chairperson of the GMS and one shareholder in attendance appointed by the GMS. The elucidation of the relevant article in the Company Law explains that this requirement is to ensure the accuracy of the minutes. On a separate but important note, the company may draw the minutes in the form of a deed made by a notary. In such case, the requirement for the chairperson of the GMS and a representative shareholder to sign the minutes will be waived.

Circular Resolution

The Company Law also allows the shareholders of the company to make a binding resolution outside of the GMS, provided that all of the shareholders with voting rights provide written approval by signing the relevant proposal. A resolution made outside of the GMS is commonly known as a circular resolution.

As discussed in 4.8 Consequences and Enforcement of Breach of Directors’ Duties, shareholders representing at least one-tenth of the total shares with voting rights may file a lawsuit against a director if the director is found guilty of misconduct or negligence in performing their duties.

Additionally, in cases where the company undertakes the following actions, and if a shareholder does not agree with such actions and incurs a loss as a result, such shareholder has the right to request the company to buy back their shares at a fair price:

• amendments to the articles of association;
• transfer or pledge of company assets valued at more than 50% of the company’s net assets; or
• mergers, consolidations, acquisitions or demergers,

However, this buyback is subject to the following conditions:

• it must not result in the company’s net assets becoming less than the company’s total paid-up capital plus the mandatory reserves that have been set aside; and
• the total value of all shares repurchased by the company must not exceed 10% of the total paid-up capital in the company.

If this threshold is exceeded, the company must seek to have the remaining shares purchased by other parties.

Under OJK Regulation No 4 of 2024 regarding Reports on Ownership of or Any Ownership Changes in Public Company Shares and Reports on Activities of Guaranteeing Public Company Shares (“OJK Reg 4/2024”), BOD and BOC members directly or indirectly owning shares with voting rights must submit a report of their ownership and any changes thereof to the OJK. Additionally, the following parties are bound by the same obligation:

• shareholders owning at least 5% of the voting shares; and
• parties who are considered controllers of public companies.

If parties subject to the aforementioned disclosure obligation see their ownership of voting shares decrease to less than 5%, they are also required to report such change to the OJK.

OJK Regulation No 4/2024 stipulates that this report must be submitted to the OJK promptly, no later than five working days from the date when such person acquires the voting shares or from the date of any change in the ownership of such voting shares.

Pursuant to Article 66 of the Company Law, the BOD is required to submit an annual report, which has been reviewed by the BOC, to the GMS no later than six months after the end of the company’s fiscal year. Among other elements, the annual report must include the company’s financial statements, which should at least consist of the final balance sheet for the fiscal year in comparison with the previous fiscal year, the profit and loss statement for the relevant fiscal year, the cash flow statement and the statement of changes in equity. These financial statements must be prepared in accordance with the accounting standards set by the professional accountancy organisation recognised by the government of Indonesia.

The BOD is also required to submit the company’s financial statements for audit by a public accountant if:

• the company’s business activities involve collecting and/or managing public funds;
• the company issues debt securities to the public;
• the company is a public company;
• the company is a state-owned enterprise;
• the company has assets and/or annual business turnover with a minimum value of IDR50 billion; or
• the company is mandated by other regulations.

Pursuant to OJK Regulation No 14/POJK.04/2022 regarding the Submission of Periodic Financial Reports for Issuers or Public Companies, public companies are obligated to submit periodic financial statements, consisting of annual and mid-year financial statements, to the OJK and disclose the same to the public.

The Company Law does not mandate companies to publicly disclose their corporate governance arrangements. However, pursuant to Article 66 of the Company Law, the BOD must ensure that the company’s annual report includes, among other elements, a report on the company’s activities, the names of the BOD and BOC members and a report on the supervisory duties performed by the BOC.

For further details, refer to 6.1 Financial Reporting regarding the obligation to deliver the company’s annual report.

In Indonesia, the Company Registry is maintained by the Directorate General of General Legal Administration (Administrasi Hukum Umum, or AHU) under the Ministry of Law. Essentially, the Company Registry is an official record consisting of information regarding companies in Indonesia. Among other things, it consists of information regarding a company’s name, domicile, address, purpose and objectives, time period of establishment and shareholding structure. Additionally, the Company Registry contains information regarding the company’s corporate documents, including the deed of establishment, articles of association and its amendments, as well as the notary in charge of creating the deed of establishment and articles of association.

Upon a company’s submission of its information to the AHU, that information will be available through the AHU’s website. Members of the public must pay from IDR50,000 to IDR500,000 to obtain a company profile from the Company Registry.

As previously discussed in 6.1 Financial Reporting, the financial statements of private companies in Indonesia generally do not require an audit by a public accountant unless the company:

• engages in business activities that involve collecting and/or managing public funds;
• issues debt securities to the public;
• is a public company;
• is a state-owned enterprise;
• has assets and/or annual business turnover with a minimum value of IDR50 billion; or
• is required to do so under other regulations.

The annual financial statements of public companies must be audited by an independent and accredited public accountant registered with the OJK.

The decision to appoint a public accountant or public accounting firm to provide audit services for the company is typically made at the GMS with a simple majority quorum.

A company’s annual report, which encapsulates its activities and performance throughout the financial year, serves as a crucial tool for the BOD to showcase how they manage risks and implement internal controls. While the mandatory components of the annual report as regulated under Article 66 of the Company Law may not explicitly address risk management, they indirectly highlight the BOD’s approach to risk management and internal controls.