INDONESIA Law and Practice Contributed by: Alvin Suryohadiprojo and Dimas Nandaraditya, KARNA
event that the remaining assets of the company are not sufficient to settle its liabilities, unless there is a contradicting regulation and the com - pany’s creditors agree to settle outside the bank - ruptcy process. 3.6 Corporate Governance Indonesian company law adopts a two-tier man - agement structure comprising a board of direc - tors (BOD) and a board of commissioners (BOC). The BOD serves the executive function and is responsible for the day-to-day management and operations of the company. The BOC supervises the BOD’s duties and the articles of association of the company may require the BOD to obtain prior approval from the BOC before taking cer - tain legal actions on behalf of the company. Both the BOD and the BOC are accountable to the shareholders of the company for their respec - tive roles. Given the applicable above-mentioned corpo - rate structure, there are several types of influ - ence over management/the affairs of the port - folio company in Indonesia. First, the investor is directly involved in the day-to-day operation of the company through the right to appoint a member of the BOD. Second, the investor has the right to appoint a member of the BOC to supervise the management of the company con - sisting of the founders sitting as the BOD. Alter - natively, the investors may negotiate certain veto for a list of corporate actions that can be taken
there should be two types of representations and warranties, covenants and undertakings: • general terms, such as “the company has obtained and will continue to maintain all licences, permits and consents from any authority to conduct its operations” or “there is no encumbrance over the company’s assets” ; and • specific terms that should be included based on due diligence findings, such as “the com- pany undertakes to transfer the ownership of the relevant IP from the founder’s personal name to the company itself” . If the funding is made in the form of loan or con - vertible notes, investors usually have the right but not the obligation to make all outstanding investment amount and unpaid accrued interest become due and payable. There is also a default interest rate enforceable upon default. The most commonly seen example of indem - nification made by an investee to its investor is the contingent tax liability, whereby the company will pay damages to the new investor when a tax obligation that has been accrued prior to the incoming of the new investor becomes due and payable after the incoming of the new investor.
4. Government Inducements 4.1 Subsidy Programmes
by the BOD ( “reserved matters” ). 3.7 Contractual Protection
The Indonesian government has been very pro - active in incentivising financing in growth com - panies, ranging from tax incentives, streamlined regulations for start-ups, creating start-up accel - erators and even enabling less stringent require - ments for growth companies that wish to seek financing through IPO.
For equity investments, legal recourse for con - tractual breach is available by law and con - tractually there are full or partial indemnities for breaches of specifically negotiated representa - tions and warranties or undertakings. Ideally,
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