Directors’ Duties in Indonesia

>> Powers and Duties in Indonesia

You must act within the powers imposed upon you by the Company Law, the Company’s Articles and any specific power of attorney.  You are also required to implement the decisions and policies approved by the shareholders and act in accordance with any specific powers that may have been delegated by the shareholders or by the Board of Directors itself, if any.

Duties – Skill and Care

When exercising directors’ powers, you are required to exhibit such a degree of skill as may reasonably be expected from a person with your knowledge and experience, as well as exercise independent judgment.

You must also exercise a degree of diligence and care in your actions as a company director. The statutory wording revolves around ‘negligence’ and ‘fault’, ‘good faith’ and ‘precaution’.  There is no specific reasonable person test but this would be a good basis on which to consider your actions.  A director should act in the best interests of the company and take actions to prevent losses from arising or continuing.

Duties – General

In general, the responsibility for the company lies with the directors. When carrying-out the administration of the business, they have to apply the diligence of a prudent businessman; i.e. they have to supervise all actions of all employees. As a director you must carry out duties in good faith and with full responsibility for the interests and business of the company.

The director also has a general duty of diligent management, which includes duties in particular to comply with and ensure the company’s compliance with all applicable statutory and legal obligations. The director should ensure that all corporate taxes and contributions are made in due course and in accordance with legal requirements. The director should comply with and ensure the company’s compliance with all applicable statutory and other legal obligations and requirements.

In particular, under Indonesian company law, there are specific duties and responsibility of the BOD as follow:

  • registration requirements
  • to register the company in the Companies Registry. To register all amendments to the company’s articles of association in the Companies Registry and/or report the amendments to the authorized party
  • secretarial responsibilities
  • to notify creditors if there is a reduction of capital. To ensure that the company keeps proper the register of shareholders, minutes of GMS, minutes of BOD, special register, books of accounts and records. To record transfers of registered shares in the appropriate registers
  • reporting and auditing responsibilities
  • to prepare an annual business plan of the company, including the annual budget of the company prior to the commencement of the next financial year. The annual business plan must be conveyed to the BOC or GMS (as determined by the Articles of the company)

Duties – Other

There are many other areas of law that impose duties on directors and senior managers.  Some of the more onerous duties are set out below.

You must call the Company’s annual general meeting within the legal deadlines. As a director you are also responsible for filing audited accounts with the relevant authorities, where applicable. Other reporting requirements include, for example, notifying Bank Indonesia of certain offshore loans.

You must comply with all competition law and regulations.  This includes Law No. 5 of 1999 on the Prohibition Against Monopolistic Practices and Unfair Business Competition and its implementing regulations.

You must comply will all areas of tax law and regulations.  Failure to do so could leave you personally liable for breaches of the tax laws and regulations if it is due to your own negligence  and fault.

Environmental Duties

A director should comply with environmental regulations for the produced or marketed products, the production process, waste treatment, the organisation of the work place and work facilities. This can include public law permits, and compliance with pollution limits and general reporting duties.

Under Law No. 32 of 2009 on environmental protection and management, administrative sanctions such as a written warning, government coercion, the suspension of an environmental permit or the revocation of an environmental permit can be imposed on directors in cases of serious violation of the Environmental Law. The imposition of administrative sanctions does not discharge directors from restoration obligations or penal responsibilities and sanctions under the criminal law (Article 78, of the Environmental Law).

Health and Safety Duties

Further, Law No. 36 of 2009 on Health, a company must ensure the health of employees through preventive efforts, improvement, treatment and recovery. The director plays an important part in ensuring that the company’s actions are in line with the Health Law.

A director must also apply an occupational safety and health management system, this should be integrated into the company’s management system. This obligation only applies if the company employs more than 100 workers or runs a business  with high level of potential danger.

Also as a director you should be ensuring statutory accident insurance remains in place, and that there is compliance with provisions for prevention of work place accidents. In the event that a director failed to comply with the regulations, the company may be imposed with criminal sanctions or a fine.

Anti-Bribery Duties

“Anti C” legislation means that it is prohibited to bribe;

  • any governmental official
  • any person representing another party with whom the company is doing business with in order to coerce the individual to act in a certain manner.

Under Indonesian anti-corruption laws, generally both the bribe givers and the officials who receive a bribe will be receive a criminal sanction and/or a fine.

Further, Foreign Corrupt Practice Act (FCPA) states that the FCPA’s anti-bribery provisions   can apply to conduct both inside and outside the United States (“US”). Issuers and domestic concerns—as well as their officers, directors, employees, agents, or  stockholders—may  be  prosecuted for using the U.S. mails or any means or instrumentality of interstate  commerce  in furtherance of a corrupt  payment to a foreign official.


Latest version updated 23rd March 2018

Country Breakdown

261

Million

Population

Rp

Indonesian Rupiah

Currency

$ 932.3

Billion

GDP

1.905

Million

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