INDONESIA LAW AND PRACTICE Contributed by: Agus Ahadi Deradjat (Agung), Gustaaf Reerink, Adri Dharma, Karina Widyaputri and Ilma Sulistyani, ABNR Counsellors at Law
are not personally liable for the company’s legal actions or financial losses beyond the value of their shares. However, this protection may be disregarded in certain circumstances 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 committed 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 primarily governed by Law No 13 of 2003 on Labour, as most recently amended by Law No 6 of 2023 on the Stipulation of Government Regulation No 2 of 2022 on Job Creation into Law (“Labour Law”), along with its implement - ing regulations, including Government Regula - tion No 35 of 2021 on Fixed-Term Employment, Outsourcing, Working Hours and Rest Times, and Employment Termination (”GR 35/2021”). Under the Labour Law, an employment relation - ship is established through the existence of an employment contract between the employer and the employee. This contract may be structured as either:
• an indefinite-term employment agreement (permanent); or • a definite-term employment agreement, which may only be used for: (a) completion of a specific task; or (b) a specific period not exceeding five years. 4.2 Characteristics of Employment Contracts Under the Indonesian Labour Law, employment contracts, whether for a definite-term and an indefinite-term, are subject to distinct legal char - acteristics and formal requirements. A definite-term employment contract must be made in writing, in the Indonesian language, and must include the following elements: • name, address, and type of business of the company; • name, gender, age, and address of the employee; • job title or type of work; • workplace location; • amount of wages and the method of pay - ment; • terms of employment outlining the rights and obligations of both the employer and the employee; • start date and duration of the employment contract; • place and date the contract was made; and • signatures of both parties involved in the contract. An indefinite-term (permanent) employment con - tract may be made verbally or in writing. If made verbally, the employer is required to issue a letter of appointment once the employee is confirmed as permanent – typically after completing a pro -
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