indonesian limited liab com

8/8/2019 Indonesian Limited Liab Com

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Indonesian

Limited Liability Company

(Perseroan Terbatas)

Law No. 40/2007

Paripurna P Sugarda


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DefinitionDefinition

AA LimitedLimited LiabilityLiability companycompany shallshall bebe aa legallegal entityentityconstitutesconstitutes anan alliancealliance ofof capital,capital, establishedestablished bybyvirtuevirtue ofof aa contractcontract,, carriescarries onon businessbusiness operationsoperations

withwith anan authorizedauthorized capitalcapital divideddivided intointo sharesshares..Art. 1, Par. 1Art. 1, Par. 1

TheThe companycompany shallshall bebe establishedestablished byby 22 oror moremorepersonspersons byby aa notarialnotarial deeddeed drawndrawn upup inin thethe

IndonesianIndonesian languagelanguage..

Art. 7, Section (1)Art. 7, Section (1)


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The Company obtains the status of a legal entity ondate the Decree of the Minister concerning the

Companys ratification as a legal entity is issued

Art. 7, Section (4)

The companys shareholders shall not be personally liable for

any contract entered into on the behalf of the company andshall not be liable for the companys losses in excess of the of

the shares they own.

Art. 3, Section (1)

The Legal Entity Status and The Limitation of

Liability:


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Piercing The Corporate VeilPiercing The Corporate Veil

The shareholders liability become personal if:

a. The companys requirements as legal entity have not been

complied with;

b. The shareholders concerned, either directly or indirectly has in bad

faith misused the company, solely for their own personal interest;

c. The shareholders concerned is involved in unlawful acts committed

by the company; or,

d. The shareholders concerned, both directly and indirectly have

unlawfully used the companys assets to become insufficient forthe settlement of the companys liabilities.

Art. 3 Par. (2)


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Legal act on behalf of the company that are done after the

company is established but before it is authorized to become a

legal entity:

(1) Legal acts on behalf of a Company which has not yet obtained thestatus of a legal entity may only be performed by all of themembers of the BoD together with all of the founders and all of themembers of the Board of Commissioners of the Company and they

will all be jointly and severally liable for the legal acts.

(2) In the event that the legal acts contemplated in paragraph 1performed by the founders on behalf of a Company which has notyet obtained the status of a legal entity, the founders concernedshall be liable for such legal acts and the legal acts shall not be

binding on the Company.

(3) The Company shall by operation of law become liable for the legalacts contemplated in paragraph (1) after the Company becomes alegal entity.


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(4) The Company shall only be bound by and liable for the legalacts contemplated in paragraph (2) after the legal acts havebeen approved by all of the shareholders in a GMS attendedby all of the Companys shareholders.

(5) The GMS contemplated in paragraph (4) is the first GMS,which must be held no later than 60 (sixty) days after the

Company obtains the status of a legal entity.

Art. 14


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Minority Shareholders ProtectionMinority Shareholders Protection

Each shareholder shall have the right to lodge a

complaint against the company before a District Court, if

he is harmed by the actions of the company which he

considers unfair and with no reasonable grounds as a

result of the resolution of the General Meeting ofShareholders (GMS), BOD and Board of

Commissioners.

Art. 61 (1)

Claims are submitted on the basis of filling out a petition for the

company to cease the damaging acts mentioned and to takespecific steps not only to limit the results that have alreadyoccurred, but also to prevent singular acts in the days thatfollow.

Elucidation


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Every shareholder shall be entitled to request the

company to purchase his shares at a reasonable price,

if the person concerned does not approve of the

companys actions which are detrimental to the

shareholder or the company, in the form of:

a. amendment of the Articles of Association

b. the sale, the placing as security, exchange of the

majority or the entire assets of the company;

c. the consolidation, merger, or take over of the

company

Art. 62 (1)



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In the event that the shares that are requested

to be purchased exceeds the limit of the provisionon the re-purchase of shares, the company shall

make effort for the purchase of the balance of the shares by a third party

Art. 62 (2)Art. 62 (2)


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GMS may be convened at the request of:

a. one or more shareholders who jointly represent 1/10 (onetenth) or more of the total number of shares with votingrights, unless the articles of association determine a smallernumber; or

b. the Board of Commissioners.

Art.79 (2)



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On behalf of the company, a shareholderOn behalf of the company, a shareholder

representing at least 1/10 of the total number ofrepresenting at least 1/10 of the total number ofthe shares with valid voting right may lodge anthe shares with valid voting right may lodge anaction with the District Court against BOD andaction with the District Court against BOD andBOC member(s), who is proved to have causedBOC member(s), who is proved to have causedlosses to the company through his fault or failure.losses to the company through his fault or failure.

Art.Art. 9797 ((66) and) and 114114 ((66))



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Art. 1Art. 13838

(1)(1) An examination of the company may be carried out withAn examination of the company may be carried out withthe aim of obtaining data or information if there is reasonthe aim of obtaining data or information if there is reasonto suspect that:to suspect that:

a. the company has committed unlawful act that isa. the company has committed unlawful act that isdetrimental to the shareholders or third parties; or,detrimental to the shareholders or third parties; or,

b. the members of theb. the members of the DireksiDireksi oror KomisarisKomisaris havehavecommitted unlawful act that is detrimental to thecommitted unlawful act that is detrimental to theCompany or the shareholders or third partiesCompany or the shareholders or third parties


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District Courts may wind up Companies on:District Courts may wind up Companies on:

a.a. a petition from the public prosecutors office on thea petition from the public prosecutors office on thegrounds thatgrounds that the Company has breached the publicthe Company has breached the publicinterest or the Companyinterest or the Company has committed actions whichhas committed actions which

breach legislative regulations;breach legislative regulations;

b.b. a petition from interested parties on the grounds thata petition from interested parties on the grounds thatthere is athere is a legal defect in the deed of establishment;legal defect in the deed of establishment;

c.c. a petition from shareholders, the Board of Directors, ora petition from shareholders, the Board of Directors, orthethe Board of Commissioners on the grounds that it isBoard of Commissioners on the grounds that it isnot possiblenot possible for the Company to continue.for the Company to continue.

Art. 146 (1)Art. 146 (1)



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Capital SharesCapital Shares

(1)(1) The companys authorized capital shall consist of theThe companys authorized capital shall consist of thewhole nominal value of the shareswhole nominal value of the shares

(2)(2) The provision contemplated in paragraph (1) does notThe provision contemplated in paragraph (1) does notclose off theclose off the possibility of legislative provisions in the fieldpossibility of legislative provisions in the field

of capital marketsof capital markets providing for Companies capital toproviding for Companies capital toconsist of shares without nominalconsist of shares without nominal value.value.

ArticleArticle 3131::

(1)(1) The companys authorized capital shall at least amountsThe companys authorized capital shall at least amountstoto RpRp.. 550.000.000,00.0.000.000,00.

(2)(2) The law or implementing regulations that regulatesThe law or implementing regulations that regulatescertain field of business may determine the minimumcertain field of business may determine the minimumamount of the companys authorized capital which differsamount of the companys authorized capital which differsfrom the provision mentioned in section (1)from the provision mentioned in section (1)

ArticleArticle 3232::


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Capital SharesCapital Shares

(1) At least 25% (twenty five per cent) of the authorisedcapital contemplated in Article 32 must be subscribed andpaid up in full.

(2) The capital subscribed and paid up in full contemplated inparagraph shall be proven by lawful evidence of deposit.

(3) Any further issuance of shares at any time to increase thesubscribed capital must be paid up in full.

Article 33


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Protection of Companys Capital AssetsProtection of Companys Capital Assets

Article 36:(1) Companies are prohibited from issuing shares to be owned by theCompany itself or by some other Company whose shares aredirectly or indirectly owned by the Company.

(2) The prohibition on share ownership contemplated in paragraph (1)

does not apply to share ownership obtained by transfer byoperation of law, by grant, or by bequest.

(3) Shares obtained under the provisions contemplated by paragraph(2) must within 1 (one) year after the date of acquisition beassigned to some other person not prohibited from owning theshares in the Company.

(4) In the event that the other Company contemplated in paragraph(1) is a securities company, the provisions in legislative regulationsin the field of capital markets shall apply.


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Protection of Companys Capital AssetsProtection of Companys Capital Assets

(1)(1) Companies may reCompanies may re--purchase issued shares provided that:purchase issued shares provided that:

a. the rea. the re--purchase of shares does not cause the net assets ofpurchase of shares does not cause the net assets ofthethe Company to become less than the subscribed capitalCompany to become less than the subscribed capital

plus theplus the mandatory reserves set aside; andmandatory reserves set aside; and

b. the total nominal value of all the shares reb. the total nominal value of all the shares re--purchase by thepurchase by theCompany and any pledge of shares or fiduciary securityCompany and any pledge of shares or fiduciary securityoverover shares held by the Company itself or by some othershares held by the Company itself or by some other

CompanyCompany whose shares are directly orwhose shares are directly or indirectly owned byindirectly owned bythe Companythe Company does not exceed 10% (ten percent) of thedoes not exceed 10% (ten percent) of thetotal amount of capitaltotal amount of capital subscribed in the Company unlesssubscribed in the Company unlessotherwise provided inotherwise provided in legislative regulations in the field oflegislative regulations in the field ofcapital markets.capital markets.


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Protection of Companys CapitalAssets

(2) Direct or indirect re-purchases of shares which are contraryto paragraph (1) shall be void by operation of law.

(3) The Board of Directors shall be jointly and severally liablefor losses suffered by shareholders in good faith incurred asa result of repurchases which are void by operation of lawas contemplated in paragraph (2).

(4) Shares re-purchased by Companies as contemplated in

paragraph (1) may only be possessed by Companies for notmore than 3 (three) years.

Art. 37


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(1) Shares possessed by a Company because of re-purchase, transfer by operation of law, by grant, or by

bequest may not be used to cast votes in the GMSand shall not be counted in determining the quorumwhich must be achieved in accordance with theprovisions of this Act and/or the articles ofassociation.

(2) The shares contemplated in paragraph (1) are notentitled to any allocation of dividends.

Article 40:

Protection of Companys CapitalProtection of Companys CapitalAssetsAssets


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Boards of Directors Liability

(1) Boards of Directors shall undertake the management ofCompanies in the interest of the Companies and in

accordance with the Companies purpose and objectives.

(2) Boards of Directors are authorised to undertake themanagement contemplated in paragraph (1) in accordancewith any policy that seems appropriate within the limits

specified in this Act and/or the articles of association.

Art. 92


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Board of Directors Liability(5) Members of the Board of Directors cannot be held liable for

the losses contemplated in paragraph (3) if they can provethat:

a. the losses were not due to their fault or negligence;

b. they carried out the management in good faith and withprudence in the interests of and in accordance with thepurpose and objectives of the Company;

c. they do not have a direct or indirect conflict of interest inthe action of management that caused the losses; and

d. they took action to prevent the losses from arising orcontinuing.

Art. 97


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Directors Duties:

1. Fiduciary duties

Good faith and loyalty

2. Duty of care, skill and diligence


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The director as a fiduciary:Standard of loyalty is reflected in the positive andnegative obligations of co. directors.

Positive obligations include the duties:

(1) to act ingood faith in cos best interests(2) to act for proper corporate purposes(3) to give adequate consideration to mattersbeing decided, and not to fetter their discretion

Negative obligations require directors to avoidvarious kinds of conflicts of interest (e.g. improperuse of information, abuse of position, and insidertrading)


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It is a recognition that directors duties may divergefrom those of shareholders ( e.g. excessive salary packagesand perks)

Shareholders are vulnerable to:(a) fraud e.g. directors using cos assets, opportunitiesor info to advance their personal interests(b) mismanagement e.g. directors risking loss ordevaluation of cos assets through incompetence and poor

judgement

Mainly to ensure loyalty of directors to co

Director is in a fiduciary relationship with co (i.e. not atarms length)

A fine balancing act directors must be made accountableto cos interests while they must also have sufficient discretionto take decisions that carries some risks

Directors duties Why the need to recognise?


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Fiduciary relationship exists where a person holds a position oftrust in relation to another person, who due to the circumstances, isvulnerable to misuse of power by the fiduciary.

Owed to:

(1)company as a whole (i.e. to co as a whole, not toshareholders)

(2) in some instances can be to individual shareholders

(3) Creditors

Fiduciary duties of directors What and Why?


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Broadly there are 2 categories of duties:

1. Loyalty and Good Faith2. Care, Skill and Diligence

Where do the duties come from in law?

1. General law


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This second group of duties owed by directors are those ofcare, skill and diligence

Concerned with whether sufficient care extended inmanagement of the company

TWO SUB-DIVISIONS:1. Duty to exercise reasonable care, skill and diligence

when acting as director; and2. Duty to prevent insolvent trading by co.

2. Duties of care, skill and diligence (outline)

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