INDONESIA Law and Practice Contributed by: Ira A. Eddymurthy, A. Charlie R. Malessy, A. Ramadinan Saptara and Medita F. Siregar, SSEK Law Firm
4. Shareholders 4.1 Companies and Shareholders
4.2 Role of Shareholders As previously discussed, under the Company Law, a company’s BOD, not its shareholders, is responsible for the management of the company. Thus, sharehold - ers are not responsible for the day-to-day manage - ment of the company. However, shareholders, through the GMS, can 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. 4.3 Shareholder Meetings The Company Law requires companies to hold an annual GMS each year, typically to approve annual reports and the allocation of profits, including the dis - tribution of dividends. Other shareholder meetings, known as “extraordinary GMSs”, may also be held to adopt binding resolutions. To initiate a GMS, the BOC or a shareholder or group of shareholders representing at least 10% of the com - pany’s shares with voting rights may request the BOD to convene a GMS. The BOD must then issue GMS notices to shareholders. If the BOD fails to do so, the BOC is authorised to issue the notices. If both the BOD and the BOC fail to act, the requesting share - holder or group of shareholders may file a petition to the competent district court for permission to convene the GMS. A GMS is validly convened if it meets the quorum requirements and may pass binding resolutions if the voting thresholds are satisfied. Generally, a simple majority quorum is required to convene a GMS, and a simple majority of shareholders present or represent - ed at the GMS is sufficient to pass binding resolutions. Stricter requirements apply for certain agenda items: • super majority – for amendments to the articles of association, a GMS may be convened if sharehold - ers representing at least two-thirds of the total vot - ing shares attend or are represented at the meet - ing, and may pass binding resolutions if approved by at least two-thirds of the shareholders present or represented at the meeting; and • absolute majority – for mergers, consolidations, acquisitions, spin-offs, filing for bankruptcy, liquidation of the company, extension of the
In principle, Indonesian law recognises the separate legal personality of a company and its shareholders, meaning that shareholders cannot be held personally liable for the actions or obligations of the company. However, there are certain exemptions. Indonesia’s corporate criminal liability rules can hold shareholders liable if a crime committed by the company can be attributed to them. In the context of public companies, a controller may be held liable for losses suffered by the company in certain circumstances. While shareholders do not participate in the day-to- day management of a company, they have signifi - cant influence over the company’s affairs due to their ownership of shares and resolutions that they may take through a GMS. Also, as outlined previously, shareholders can determine the appointment and dismissal of BOD members, who are responsible for the company’s management. Shareholder approval is also 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 distri - bution of dividends as a form of return on sharehold- ers’ investment. Under the Company Law, sharehold - ers, through the GMS, have the authority to distribute the company’s net profits, including as annual divi - dends. However, the Company Law 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 indi - cates that dividends depend on the company’s profit - ability; if the company does not generate net profits, shareholders will not receive dividends. This under - scores the link between the company’s financial per - formance and the benefits shareholders can receive from the capital they have invested in the company. The Ministry of Law (MOL) maintains records of the shareholders of Indonesian companies, which are publicly accessible.
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