INDONESIA Law and Practice Contributed by: Jufrian Murzal and Enos Martryn Budiman, Murzal and Partners
mercially sound, legally compliant and aligned with the company’s interests. Directors’ duties are owed to the company as a legal entity rather than directly to shareholders or other stakeholders, although the broader interests of the company may involve consideration of various stake - holders. The board of commissioners oversees the board of directors and ensures that these duties are properly discharged. 8.2 Special or Ad Hoc Committees The Company Law does not require boards of direc - tors to establish special or ad hoc committees in busi - ness combinations. However, such committees are sometimes formed in public company transactions as a matter of good corporate governance, particu - larly where the transaction involves affiliated parties or potential conflicts of interest. Directors with a conflict of interest must disclose the conflict and abstain from participating in the relevant deliberations and decisions. In these circumstances, companies may establish committees composed of independent members to review the transaction and support regulatory compliance. 8.3 Business Judgement Rule Indonesian law does not expressly codify the “busi - ness judgement rule” as a standalone doctrine. How - ever, similar principles are reflected in the Company Law, which provides that directors must act in good faith, with due care and in the best interests of the company. In practice, courts generally defer to the board’s commercial judgement and do not second- guess business decisions solely because they later prove unsuccessful. Judicial review typically focuses on whether directors complied with their fiduciary duties, followed proper procedures and avoided con - flicts of interest or bad faith. Directors may nevertheless be held personally liable if they are found to have acted negligently, in bad faith or in violation of applicable laws. 8.4 Independent Outside Advice In business combination transactions in Indone - sia, directors commonly seek independent external
advice to support their decision-making. This typi - cally includes legal advice from external counsel and financial analysis from investment banks or financial advisers. In public company transactions, directors may also obtain a fairness opinion from an independ - ent appraiser registered with the OJK, particularly in transactions involving potential conflicts of interest or material corporate actions. Additional advice from tax or industry specialists may also be sought where relevant. 8.5 Conflicts of Interest Conflicts of interest involving directors, commission - ers, shareholders or advisers may be subject to judicial or regulatory scrutiny in Indonesia. Under the Com - pany Law, directors and commissioners must disclose any conflict of interest and may be held personally liable if the company suffers losses due to bad faith, negligence or undisclosed conflicts. The Company Law also requires the company to maintain a special register recording share ownership held by directors and commissioners and their immediate family mem - bers to promote transparency. For public companies, conflict-of-interest transac - tions are subject to stricter regulation under OJK rules, which may require enhanced disclosure, fair - ness opinions and, in certain cases, approval from independent shareholders. Hostile tender offers are not expressly prohibited under Indonesian law and may theoretically be pur - sued through a voluntary tender offer under OJKR 54/2015, which allows a bidder to make an offer directly to the shareholders of a public company. In practice, however, hostile takeovers are extremely rare. Most Indonesian public companies have concen - trated ownership structures, with founding families or large conglomerates holding controlling stakes. As a result, acquisitions without the support of the control - ling shareholder are generally difficult to execute. 9. Defensive Measures 9.1 Hostile Tender Offers
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