INDONESIA Law and Practice Contributed by: Agus Ahadi Deradjat (Agung), Gustaaf Reerink, Adri Dharma, Karina Widyaputri and Ilma Sulistyani, ABNR Counsellors at Law
side of court, formulate policies, and oversee daily operations. The company’s AOA may designate specific director(s) to represent the BOD in acting on behalf of the com - pany. The BOD’s authority to represent the company is gen - erally unlimited and unconditional, unless restricted by the Company Law, the AOA, or a resolution of the General Meeting of Shareholders (GMS). Any such resolution must not conflict with the law or the AOA. In practice, the AOA often stipulates reserved mat - ters that require prior approval from the BOC or the GMS. Additionally, the BOD must operate within the scope of the company’s stated business activities and comply with applicable licences and permits issued by relevant authorities. BOC The BOC’s primary role is to supervise the BOD’s management of the company and provide strategic advice. Unlike the BOD, BOC members do not have execu - tive authority and may not act individually. All super - visory and advisory actions must be taken collective - ly through formal BOC resolutions. However, in the absence of all members of the BOD, the BOC may temporarily assume management responsibilities for a limited period in accordance with the applicable laws and regulations. 3.5 Directors’, Officers’ and Shareholders’ Liability As a general principle under the Indonesian Company Law, directors of a PT are not personally liable to third parties for corporate actions undertaken in the course of their duties, provided such actions fall within the scope of their authority as defined by the company’s AOA, GMS resolutions, and applicable laws. However, the Company Law recognises the doctrine of piercing the corporate veil, under which directors may be held jointly and severally liable to third parties for tortious acts if they act beyond the limits of their authority. A member of the BOD may be exempt from
liability for company losses if they can demonstrate that: • the losses were not caused by their fault or negli - gence; • they managed the company in good faith and with prudence, in alignment with the company’s objec - tives and purposes; and • they took reasonable steps to prevent the occur - rence or continuation of losses, including efforts to obtain information about management actions that led to such losses – such as through participation in BOD meetings. As the name implies, a PT offers limited liability pro - tection to its shareholders. Shareholders are not per - sonally liable for the company’s legal actions or finan - cial losses beyond the value of their shares. However, this protection may be disregarded in certain circum - stances where the corporate veil is pierced, including the following. • The company has not obtained or fails to maintain its legal entity status. • A shareholder, directly or indirectly, acts in bad faith by using the company for personal gain. • A shareholder is involved in an unlawful act com - mitted by the company. • A shareholder unlawfully uses the company’s assets, resulting in insufficient assets to cover liabilities. Additionally, if a PT has only one shareholder for more than six months, that shareholder may be held personally liable for all obligations and losses of the company.
4. Employment Law 4.1 Nature of Applicable Regulations
Employment relationships in Indonesia are primar - ily governed by Law No 13 of 2003 on Labour, as amended (“Labour Law”), along with its implement - ing regulations, including Government Regulation No 35 of 2021 on Fixed-Term Employment, Outsourcing, Working Hours and Rest Times, and Employment Ter - mination (“GR 35/2021”).
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