Indonesia`s New Company Law

Transcription

Indonesia’s New Company Law
It should be noted that the material in this publication is designed to provide general information
only. It is not offered as advice on any particular matter, whether it be legal, procedural or other,
and should not be taken as such. The authors expressly disclaim all liability to any person in respect
of the consequences of anything done or omitted to be done wholly or partly in reliance upon the
whole or any part of the contents of this publication. No reader should act or refrain from acting on
the basis of any matter contained in it without seeking specific professional advice on the particular
facts and circumstances at issue.
Table of Contents
A.
Introduction....................................................................................................................................1
B.
Material Considerations.................................................................................................................1
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
Name and Domicile.............................................................................................................1
Establishment of a New Company and Legal Entity Status................................................1
Amendments to Articles of Association..............................................................................2
Company Registry...............................................................................................................3
Announcement in State Gazette ..........................................................................................4
Increases in Capital .............................................................................................................4
Reduction of Capital............................................................................................................4
Transfer of Shares ...............................................................................................................5
Business Plan/Work Plan ....................................................................................................5
Annual Report .....................................................................................................................5
Appropriation of Profit and Dividends................................................................................6
Corporate Social Responsibility ..........................................................................................6
General Meetings of Shareholders ......................................................................................6
Board of Directors ...............................................................................................................7
Board of Commissioners .....................................................................................................9
Cross Shareholdings ..........................................................................................................10
Merger, Consolidation, Acquisition, and Spin-Off ...........................................................10
Dissolution, Liquidation, and Termination of Status as Legal Entity ...............................14
Other and Transitional Provisions .....................................................................................15
A.
Introduction
Indonesia enacted a new Company Law, effective as of 16 August 2007 (Law No. 40/2007) (“New
Company law”). The New Company Law has been long in concept and is an improvement on the
previous Company Law. However issues that are familiar to clients in common law countries (such
as redeemable cumulative convertible preference shares) are still not regulated as in more detailed
legislation in other jurisdictions.
In addition, as is usual with Indonesian laws, there is still much that needs to be supplemented by
additional implementing regulations. There is no news as yet as to when these regulations might be
issued.
B.
Material Considerations
The following is a summary of some, but not all, of the key material areas of which clients should be
aware.
1.
Name and Domicile
The name of a company must reflect the business activities of the company and may not reflect only
the identity of the company. The name may not resemble (i) the name of another company or (ii) the
name of a State organization or institution, or an international organization except with the approval
of the relevant organization or institution.
The company must also have a complete address in accordance with its domicile in Indonesia. These
requirements are similar to those of the previous Company Law. However, at a socialization seminar
held by the Indonesian Notaries’ Association in August 2007, the Director General of General Law
Administration stated that the Articles of Association of a company (i.e. Article 1.1) must clearly state
the regency (kabupaten) or municipality (kotamadya) where the company is domiciled. Therefore,
any change in the regency or municipality of a company will be considered an amendment to the
Articles of Association and must be approved by the Ministry of Law and Human Rights
(“MOLHR”). In our view, this is an unnecessary approval for a mere change in location.
2.
Establishment of a New Company and Legal Entity Status
Under the New Company Law, the procedures for establishing new companies (including obtaining
legal entity status) have been changed in many respects and are as follows:
(a)
(b)
A company must have a minimum of two shareholders, except for:
(i)
companies that are wholly-owned by the State;
(ii)
companies that manage a stock exchange;
(iii)
clearing and guarantee institutions;
(iv)
central securities depositories; and
(v)
other institutions, as stipulated under the Indonesian Capital Markets Law.
The minimum capital for a company is now Rp. 50,000,000. However, a higher minimum
capital requirement may be applied by law for companies engaging in certain business
activities.
Hadiputranto, Hadinoto & Partners
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From the authorized capital, 25 percent must be issued and fully paid-up by the founders.
Payment of capital can be made in cash or in-kind (subject to a fair value, determined on the
basis of the market value or by an independent expert, to ensure shares are fully paid up).
(c)
The application for MOLHR approval can be submitted electronically by the founders or their
proxy (the proxy should be a Notary) through the Sisminbakum system (i.e. the administrative
system for legal entities maintained by the MOLHR).
(d)
The application for the MOLHR’s approval (attaching the required supporting documents,
e.g. certificate of incorporation/articles of association of the founder) must be submitted no
later than 60 days after the date of the Deed of Establishment. Otherwise, the Deed of
Establishment will be deemed null and void, the company will be dissolved by law, and the
founders will need to arrange for the liquidation of the company. If there is no objection to
the data submitted to the Sisminbakum system, the company must file the physical documents
to the MOLHR within 30 days. The MOLHR will, in theory, issue its approval within 14
days as of the filing of the physical documents.
(e)
A company obtains its legal entity status as of the date that the MOLHR approval is issued.
(f)
Actions taken by the founders in connection with their share ownership and subscription of
shares must be stated and attached in the Deed of Establishment either in the form of a
notarial deed or a privately drawn deed, otherwise, such actions will not bind the company.
(g)
Legal actions taken by the founders in the interests of the company prior to the establishment
of the company will bind the company after it obtains its legal entity status if the first General
Meeting of Shareholders (“GMS”) acknowledges and accepts the assignment of all rights and
obligations arising from such legal actions. Otherwise, the founders will be personally liable
for any legal consequences arising from such actions.
(h)
The first GMS must be conducted no later than 60 days after the company obtains its legal
entity status. The first GMS must be attended by all shareholders and resolutions must be
agreed unanimously by all shareholders.
(i)
Legal actions of a company conducted prior to obtaining its legal entity status must be
conducted by all members of the Board of Directors, all founders and all members of the
Board of Commissioners. All of them will be jointly and severally liable for such actions.
Once the company obtains its legal entity status, the company will become responsible by law
for these legal actions.
If the legal actions are taken by the founders alone, the founders will be personally liable for
such actions. These legal actions will bind the company only if approved unanimously by the
shareholders in the first GMS (see item (f) above).
3.
Amendments to Articles of Association
Under the New Company Law, stricter corporate governance requirements are imposed in respect of
applications for approval and notification of amendments to the MOLHR. The key provisions relating
to amendments to the Articles of Association are as follows:
(a)
Amendments to the Articles of Association must be resolved by the GMS of the company.
(b)
The following amendments to the Articles of Association of a company must be approved by
the MOLHR:
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(i)
a change of name and/or domicile;
(ii)
a change of purposes and objectives and line of business;
(iii)
a change in the terms of incorporation;
(iv)
a change of authorized capital;
(v)
a reduction of issued and paid-up capital; and/or
(vi)
a change of status from a private company to a public company or otherwise.
(c)
Any amendments to the provisions of the Articles of Association other than those stated in
item (b) above need only be reported to the MOLHR.
(d)
All amendments to the Articles of Association can be made either in the form of (i) minutes
of the GMS drawn up in Indonesian in a notarial deed; or (ii) privately drawn minutes of
GMS or resolutions, provided that those privately drawn minutes of GMS or resolutions are
restated in a notarial deed no later than 30 days after the date of the resolutions.
The quorum requirement for amending the Articles of Association is two-thirds of the total
issued voting shares, and voting is based on the affirmative votes of at least two-thirds of the
total votes cast in the GMS, unless the Articles of Association provide for higher quorum and
voting requirements.
(e)
An application for approval from the MOLHR on the amendments as specified in items (b)
and (c) above must be submitted no later than 30 days after the date of the notarial deed or
notarization of the resolutions, otherwise, the company needs to re-convene the GMS or reexecute the resolutions for the same amendments.
(f)
The amendments as specified in item (b) above will become effective on the date of issuance
of the MOLHR’s approval of the amendments. The amendments specified in item (c) above
will become effective on the date a receipt of the notification of the amendments is issued by
the MOLHR.
4.
Company Registry
The New Company Law introduces a new Company Registry which will be maintained by the
MOLHR. This Company Registry will record, among other things, the following information about a
company:
(a)
the name, domicile, purposes and objectives, terms of incorporation and capitalization;
(b)
the address of the company;
(c)
the number and date of the Deed of Establishment, the MOLHR’s approval and deeds of
amendments of the Articles of Association, including details of the notaries responsible for
those deeds; and
(d)
the balance sheet and profit and loss statement of the relevant year for a company whose
books and records must be audited.
The data contained in the Company Registry will be open to the public.
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We are not aware when this Company Registry will be fully operational.
At the previously mentioned August 2007 socialization seminar, the Director General of General Law
Administration stated that this Company Registry would be separate from the company registry
maintained by the Department of Trade, through which Company Registration Certificates (TDP) of
companies are issued.
5.
Announcement in State Gazette
The New Company Law now provides that the MOLHR will arrange for the announcements in the
State Gazette of Deeds of Establishment and deeds amending Articles of Association. Previously, the
companies themselves had to make these arrangements.
6.
Increases in Capital
Under the New Company Law, increases in the capital of a company must be approved by the GMS.
The GMS may delegate its authority to implement increases in capital to the Board of Commissioners
for a maximum period of one year (five years under the previous Company Law).
The quorum required for increasing the authorized capital is at least two-thirds of the total issued
voting shares, and voting is based on the affirmative votes of at least two-thirds of the total votes cast
in the GMS (unless the Articles of Association provide for higher quorum and voting requirements).
The quorum requirement for increasing the issued and paid-up capital is more than one-half of the
total issued voting shares, and voting is based on the affirmative votes of more than one-half of the
total votes cast at the GMS (unless the Articles of Association provide for higher quorum and voting
requirements).
Similar to the previous Company Law, an issuance of new shares due to an increase of capital must
first be offered to existing shareholders in proportion to their respective shareholdings (before the new
shares can be offered to a third party), except now if the issuance of new shares is intended for the
company’s employees or holders of convertible bonds, or is carried out within the framework of a
corporate re-organization or restructuring.
7.
Reduction of Capital
Under the New Company Law, a reduction of capital must be based on a resolution of the GMS and
can be done by way of a share buy-back or a reduction in the nominal value of the shares.
The quorum requirement for a reduction of capital is at least two-thirds of the total issued voting
shares, and voting is based on the affirmative votes of at least two-thirds of the total votes cast in the
GMS (unless the Articles of Association provide for higher quorum and voting requirements).
A reduction of capital must be announced to creditors in one Indonesian national newspaper no later
than seven days after the resolution of the GMS. Creditors will have the right to file objections in
writing within 60 days after the announcement. The company must respond to an objecting creditor
within 30 days as of the date of the filing of the objection. If the company fails to respond or rejects
the objection, the creditor can file a claim with the relevant district court.
A reduction in capital must be approved by the MOLHR. The MOLHR will grant its approval when
the following requirements are met:
(a)
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there are no written objections from creditors;
(b)
all claims or objections by creditors have been settled; or
(c)
the creditors’ claims are dismissed by valid and binding court decisions.
8.
Transfer of Shares
The following provisions apply to a transfer of shares. Although not too dissimilar from those in the
previous Company Law, there are some variations:
(a)
a transfer of shares is conducted by way of executing a deed of share transfer. A copy of the
deed of transfer of shares must be provided to the company.
(b)
the Board of Directors must register every transfer of shares, including the date of transfer, in
the shareholders’ register (and update the special register, if applicable), and must notify the
MOLHR of the change of shareholders (to be recorded in the Company Registry) within 30
days after the date of the transfer of shares is recorded. If these requirements are not met, the
MOLHR will “reject” the change of shareholding.
(c)
transfers of shares in public companies are subject to the laws and regulations applicable to
public companies.
(d)
the Articles of Association may provide additional requirements for a transfer of shares, such
as, an offer to shareholders of a certain class of shares, an offer made to employees, and the
requirement to seek consent from third parties, the GSM etc.
(e)
shares can be pledged or now encumbered with fiducia security, unless otherwise provided
under the Articles of Association. Pledges and fiducia securities over shares must be
registered in the shareholders’ register. Voting rights of pledged shares or shares that are
subject to fiducia security remain with the shareholder. The concept of fiducia over shares
does not fit well with the requirements of the Fiducia Law.
There are specific additional provisions for an acquisition (including a subscription of shares) that
results in a change in control of a company (see below).
9.
Business Plan/Work Plan
The New Company Law now requires that the Board of Directors prepare an annual business plan
(including an annual budget) before the start of a financial year. The business plan must be presented
to the Board of Commissioners or the GMS for approval.
10.
Annual Report
There are no significant changes to the obligation to prepare an Annual Report. In general, the Board
of Directors is required to prepare and present an Annual Report to the GMS (after the report has been
reviewed by the Board of Commissioners) within six months after the close of the Company’s
financial year. An Annual Report must be signed by all members of the Board of Directors and the
Board of Commissioners who are in office for the relevant financial year.
Certain companies are required to have their financial statements audited by a public accountant, e.g.
companies with lines of business relating to the pooling of public funds, companies that issue
acknowledgments of indebtedness to the public, public companies, and companies with a turnover of
at least Rp.50,000,000,000.
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11.
Appropriation of Profit and Dividends
As in the previous Company Law, the New Company Law provides that a company is required to
reserve a certain amount from its net profit each year as a reserve fund if it has generated profits that
year. Contributions must be made to the reserve fund until it amounts to at least 20 percent of the
issued and paid-up capital of the company. The reserve fund need not be in the form of cash but can
also be in the form of liquid assets.
Unlike the previous Company Law, the New Company Law provides that:
(a)
dividends can be distributed only if the company has accumulated net profit; and
(b)
an interim dividend can be distributed before the end of the company’s financial year,
provided that:
(i)
it is permitted under the Articles of Association;
(ii)
the amount of the company’s net worth exceeds the amount of the issued and paid-up
capital plus the reserve fund; and
(iii)
the distribution of the interim dividends will neither cause the company to be unable
to pay its obligations to its creditors, nor disrupt the company’s operations.
The distribution of an interim dividend is decided by the Board of Directors after first obtaining
approval from the Board of Commissioners. If the company suffers losses at the end of the financial
year, the distributed interim dividend must be returned by the shareholders to the company. If the
shareholders fail to return the interim dividends, the Board of Directors and the Board of
Commissioners will be jointly and severally liable for the failure to return the distributed interim
dividends.
12.
Corporate Social Responsibility
The New Company Law provides that a company engaged in the business of natural resources and/or
in a business relating to natural resources must meet its corporate social and environmental
responsibilities. According to the elucidation, (i) a company which engages in a business activity of
natural resources refers to a company whose lines of business are managing and utilizing natural
resources and (ii) a company whose lines of business relate to natural resources means a company that
does not manage or utilize natural resources, but whose activities may have an impact on natural
resources.
The implementing regulations for this provision are yet to be issued. However, given the elucidation
of Article 74, it seems that this obligation will apply to most manufacturing companies whose
activities may impact the environment.
The New Company Law also requires that the funding of a company’s corporate social and
environmental responsibilities be part of a company’s budget.
13.
General Meetings of Shareholders
There are no significant changes to the provisions on General Meetings of Shareholders under the
New Company Law. However, the following changes should be noted:
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(a)
The New Company Law provides that a GMS can be conducted through teleconference, video
conference or other electronic media facilities, provided that all participants can see and hear
each other directly [emphasis added]. The minutes of a GMS held in this manner must be
approved and signed by all participants. Although many Articles of Association contain this
provision, the drafting under the New Company Law unfortunately clouds whether
teleconferences are permitted, given that participants using this kind of facility do not see
each other.
(b)
The New Company Law now makes it clear that non-voting shares need not form part of an
everyday quorum. The quorum and voting requirements for a GMS must be set out in the
Articles of Association and must comply with the following minimum requirements:
(i)
General GMS: The quorum is more than one-half of the total issued voting shares.
Resolutions are made based on consensus or, if consensus cannot be achieved,
resolutions are passed based on the affirmative votes of more than one-half of the
total votes cast at the meeting, unless a higher requirement is stated in the Articles of
Association or the New Company Law.
For an adjourned meeting (in the event of an initial inquorate meeting), the quorum is
one-third of the total issued voting shares, unless a higher requirement is stated in the
Articles of Association or the New Company Law;
(ii)
GMS for amending Articles of Association: The quorum is at least two-thirds of the
total issued voting shares. Voting is based on the affirmative votes of at least twothirds of the total votes cast in the GMS, unless the Articles of Association provide
for higher quorum and voting requirements.
three-fifths of the total voting shares and voting is based on the affirmative votes of at
least two-thirds of the total votes cast at the meeting, unless the Articles of
Association provide for higher quorum and voting requirements;
(iii)
GMS for approving mergers, acquisitions, consolidations, spin-offs, insolvency,
extensions of the term of incorporation, and liquidation of a company: The quorum is
at least three-quarters of the total issued voting shares. Voting is based on the
affirmative votes of at least three-quarters of the total votes cast at the GMS, unless
the Articles of Association provide for higher quorum and voting requirements.
two-thirds of the total issued voting shares and voting is based on the affirmative
votes of at least three-quarters of the total votes cast at the meeting, unless the
Articles of Association provide for higher quorum and voting requirements.
(c)
Shareholders can also adopt valid and binding resolutions in lieu of a GMS provided that all
shareholders agree in writing and sign the resolutions.
14.
Board of Directors
The New Company Law introduces some additional provisions in respect of directors. In general
terms, the New Company Law provides that:
(a)
the Board of Directors must act, in good faith and with full responsibility for the best interests
of the company.
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(b)
in general, a company should have at least one director. However, public companies and
companies that engage in the activities of pooling or managing public funds or issuing
acknowledgments of indebtedness should have at least two directors.
(c)
the members of the Board of Directors are appointed, replaced, and dismissed by the GMS.
The GMS should state the effective date of each appointment, replacement or dismissal,
otherwise, the date of the GMS itself will be deemed the effective date of the appointment,
replacement or dismissal. Furthermore, the New Company Law also requires that the
MOLHR be notified of any appointment, replacement, or dismissal of members of the Board
of Directors (for registration in the Company Registry) within 30 days after the date of the
GMS resolutions, otherwise, any application for registration will not be entertained by the
MOLHR.
(d)
each member of the Board of Directors is personally liable for all losses of the company if
he/she fails to perform his/her duties. If there are two or more directors, the liability will be
joint and several between the directors.
(e)
a director cannot be held liable for losses of the company if he/she can prove that:
(i)
the losses did not result from any error or negligence on his/her part;
(ii)
he/she has managed the company in good faith, with due care for the interests of the
company, and in line with the purposes and objectives of the company;
(iii)
he/she did not have a direct or indirect conflict of interest in the acts which may have
caused losses; and
(iv)
he/she has taken actions to prevent the occurrence or continuation of such losses.
(f)
The directors are the authorized representatives of the company within or outside the courts.
In the event there is more than one director, each director will be authorized to represent the
company, unless otherwise provided in the Articles of Association. The Articles of
Association may provide a limitation on the authority of the Board of Directors.
(g)
A director is not entitled to represent the company if he/she (i) is involved in court
proceedings between the company and him/herself or (ii) has a conflict of interest with the
company. In these circumstances, the authorized representative of the company will be
another director who does not have a conflict of interest, the Board of Commissioners (if all
directors have a conflict of interest), or other parties appointed by the GMS (if all directors
and all commissioners have a conflict of interest with the company).
(h)
The Board of Directors must obtain approval from the GMS to (i) transfer the assets of the
company or (ii) encumber assets of the company that constitutes more than 50 percent of the
total net assets of the company in one or more transactions, whether related or not. If GMS
approval is not obtained, the transaction will still bind the company if the other party acts in
good faith in the transaction. The quorum requirement for the GMS is three-quarters of the
total issued voting shares and voting is based on the affirmative votes of three-quarters of the
total votes cast at the meeting.
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15.
Board of Commissioners
The New Company Law introduces some additional provisions in respect of commissioners. In
general terms, the New Company Law provides that:
(a)
the Board of Commissioners must supervise the policy and management of the company by
the Board of Directors.
(b)
the Board of Commissioners must consist of at least one commissioner. However, public
companies, companies which engage in the pooling or management of public funds, or issue
acknowledgments of indebtedness must have at least two commissioners.
(c)
if there is more than one commissioner, the Board of Commissioners must function as a
collegial organ. Members of the Board of Commissioners may not take actions
independently, but must only take actions (e.g. granting approvals) based on the decision of
the Board of Commissioners.
(d)
the members of the Board of Commissioners are appointed, replaced, or dismissed by the
GMS. The effective date of the appointment, replacement, or dismissal of a member of the
Board of Commissioners is deemed to be the date of the GMS. The MOLHR must be
notified of any appointment, replacement, or dismissal of a member of the Board of
Commissioners (for registration in the Company Registry) no later than thirty days after the
date of the GMS, otherwise, any application for registration will not be entertained by the
MOLHR.
(e)
each member of the Board of Commissioners is personally liable for any losses incurred by
the company if he/she fails to perform his/her duties. If there are two or more members of the
Board of Commissioners, the liability will be shared jointly and severally by the members of
the Board of Commissioners.
(f)
a member of the Board of Commissioners cannot be held liable for losses of the company if
he/she can prove that:
(i)
he/she has provided supervision in good faith, with due care for the interests of and in
line with the purposes and objectives of the company;
(ii)
he/she did not have a direct or indirect conflict of interest in the acts which may have
caused losses; and
(iii)
he/she has given advice to the Board of Directors to prevent the occurrence or
continuation of a loss.
(g)
the Articles of Association may stipulate that the Board of Commissioners must give approval
or assistance to the Board of Directors in taking certain legal actions. If the Board of
Commissioners’ approval or assistance is not obtained, such legal actions will still bind the
company to the extent that the other party acts in good faith.
(h)
the Articles of Association may provide that the Board of Commissioners may take certain
management actions in certain circumstances and for a certain period of time (e.g. in the event
of the unavailability of members of the Board of Directors). In these circumstances, all
provisions on the rights, authorities, and obligations of the Board of Directors to the company
and third parties will apply to the Board of Commissioners.
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(i)
the Articles of Association may also provide for one or more independent commissioners.
Independent commissioners are appointed by the GMS and should be nominated from
persons not affiliated with the majority shareholders, members of the Board of Directors
and/or the Board of Commissioners.
16.
Cross Shareholdings
The New Company Law prohibits cross shareholding arrangements. This is a new provision and was
not incorporated in the previous Company Law. Effectively:
(a)
shares of Company A cannot be owned by Company B if the shares of Company B are owned
directly or indirectly by Company A. The term “indirectly” means share-ownership through
one or more intermediary companies (Article 36); and
(b)
companies which have cross-shareholding arrangements need to adjust with the New
Company Law (transfer the shares to a qualified party) within 1 year.
17.
Merger, Consolidation, Acquisition, and Spin-Off
Merger
The New Company Law provides for the following general procedures for the merger of companies:
(a)
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the Boards of Directors of the merging and surviving companies must prepare a merger plan
which should contain at least the following information:
(i)
the names and domiciles of the companies which are merging;
(ii)
the reasons and explanations from the Boards of Directors for the merging of the
companies and the requirements for the merger;
(iii)
the procedures for valuation and conversion of shares of the dissolving company into
the shares of the surviving company;
(iv)
the draft amendments to the Articles of Association of the surviving company, if any;
(v)
the financial statements (comprising at least the balance sheet of the preceding
financial year consolidated with the balance sheet of the previous financial years,
profit and loss statement from the relevant financial years, cash flow statement, and
equity movement report including notes on the financial statements) covering three
financial years of both the dissolving company and the surviving company;
(vi)
the plan for the continuity or termination of the business activities of the merging
companies;
(vii)
the pro-forma balance sheet of the surviving company prepared in accordance with
prevailing Indonesian GAAP (generally accepted accounting principles);
(viii)
the method for settling the status, rights, and obligations of the members of the Board
of Directors, the Board of Commissioners, and employees of the merging companies;
(ix)
the method for settling rights and obligations of the merging companies to third
parties;
(x)
the method for settling the rights of shareholders who disagree with the merger plan;
(xi)
the name of the members of the Board of Directors and the Board of Commissioners
of the surviving company, including details of salary, remuneration, and
compensation;
(xii)
the estimated timeline for completing the merger;
(xiii)
a report on the condition, development, and results achieved by each of the merging
companies;
(xiv)
the main line of business of the merging companies; and
(xv)
details of the problems encountered during the current financial year of both the
dissolving and surviving companies.
(b)
The Board of Directors of each of the merging companies must then submit the merger
proposal to the Board of Commissioners for approval.
(c)
The Board of Directors of each of the merging companies must then convene a GMS to
approve the merger plan in accordance with the Articles of Association and the New
Company Law.
The quorum for the GMS is at least three-quarters of the total issued voting shares and voting
is based on the affirmative votes of at least three-quarters of the total votes cast at the GMS,
unless the Articles of Association provide for higher quorum and voting requirements.
For any adjourned meeting (in the event of an initial inquorate meeting), the quorum is twothirds of the total issued voting shares and voting is based on the affirmative votes of at least
three-quarters of the total votes cast at the meeting, unless the Articles of Association provide
(d)
The New Company Law also requires the Board of Directors of each of the merging
companies, no later than 30 days prior to the date of notice of the GMS, to:
(i)
announce a summary of the merger plan in at least one Indonesian national
newspaper; and
(ii)
announce the merger in writing to the employees of each company.
The announcement must also state that the stakeholders of the company may obtain a
summary of the merger plan from the offices of the merging companies as of the date of the
announcement until the date of the GMS.
The New Company Law further provides that the merger of the companies must take into
account the interests of each of the dissolving and surviving entities, minority shareholders,
employees, creditors, business partners, the public and fair business competition.
(e)
Following the announcement, each of the creditors of the merging companies may file a claim
to each of the merging companies within 14 days after the announcement. If there is an
objection that cannot be settled before the date of the GMS, that objection must be presented
at the GMS for resolution.
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The merger cannot be completed until the objections of the creditors have been resolved.
(f)
A merger plan that has been approved by the GMS must be restated in a Deed of Merger
drawn up in Indonesian before a Notary.
(g)
A copy of the Deed of Merger must be attached by the surviving entity to the application for
approval by the MOLHR of the amendments to the Articles of Association or the notification
amendments to the Articles of Association as the case may be.
Amendments to the Articles of Association as a result of a merger are effective as of (i) the
date of the MOLHR’s approval, or (ii) a later date as stipulated in the MOLHR’s approval, or
(iii) the date of receipt of the notification of the amendments to the Articles of Association by
the MOLHR, or (iv) a later date as stipulated in the Deed of Merger.
If there are no amendments to the Articles of Association, a copy of the Deed of Merger must
be submitted to the MOLHR to be recorded in the Company Registry.
Acquisition
The New Company Law provides for the following general procedures for the acquisition of
companies (and some new provisions where there is a change in control, whether by way of transfer
or by way of subscription, of a company):
(a)
The New Company Law provides that an acquisition can be conducted through the Board of
Directors of the target company or directly by the shareholders. An acquisition is defined as a
share acquisition which results in a change of control in the company.
(b)
As in the previous Company Law, the New Company Law provides that if an acquisition is
instigated by the Board of Directors of the target company and the acquiring company, the
Board of Directors of the target company and the acquiring company must prepare an
acquisition plan which should contain at least the following information:
12
(i)
the names and domiciles of the target company and the acquiring company;
(ii)
the reasons and explanations for the acquisition from the Board of Directors of the
target company and the acquiring company;
(iii)
the financial statements of both the dissolving company and the surviving company
(comprising at least the balance sheet of the three preceding financial years
consolidated with the balance sheet of the previous financial years, profit and loss
statements from the relevant financial years, cash flow statements, and equity
movement reports including notes on the financial statements);
(iv)
the procedures for valuation and conversion of shares of the target company to the
shares to be sold in exchange for the sale shares, if the payment is made by way of
exchange of shares;
(v)
the number of shares to be acquired;
(vi)
the source of funding;
(vii)
the pro-forma balance sheet of the target company prepared in accordance with the
prevailing Indonesian GAAP;
(viii)
the method for settling the rights of shareholders who disagree with the acquisition
plan;
(ix)
the method for settling the status, rights, and obligations of the members of the Board
of Directors, the Board of Commissioners, and employees of the target company;
(x)
the estimated timeline for completing the acquisition, including a timeline for the
authorization of the transfer of shares;
(xi)
the draft amendments to the Articles of Association of the target company as a result
of the acquisition, if applicable.
The requirements for preparing this acquisition plan do not apply to acquisitions that are
conducted directly by the shareholders.
(c)
The Board of Directors of each of the companies must then submit the acquisition proposal to
the Board of Commissioners for approval.
(d)
The Board of Directors of each of the companies must then convene a GMS to approve the
acquisition plan in accordance with their respective Articles of Association and the New
Company Law.
The quorum for the GMS is at least three-quarters of the total issued voting shares and voting
is based on the affirmative votes of at least three-quarters of the total votes cast at the GMS,
unless the Articles of Association provide for higher quorum and voting requirements.
For any adjourned meeting (in the event of an initial inquorate meeting), the quorum is twothirds of the total issued voting shares and voting is based on the affirmative votes of at least
three-quarters of the total votes cast at the meeting, unless the Articles of Association provide
(e)
The New Company Law also requires the Boards of Directors of both the acquiring company
and the target company, no later than 30 days prior to the date of the notice calling the GMS,
to:
(i)
announce a summary of the acquisition plan in at least one Indonesian national
newspaper; and
(ii)
announce the acquisition plan in writing to the employees of each company.
The announcement must contain a statement that the stakeholders of the company may obtain
a summary of the acquisition plan from the offices of the respective companies as of the date
of the announcement until the date of the GMS.
The New Company Law further provides that the acquisition of a company must take into
account the interests of both the acquiring company and the target company, as well as the
minority shareholders, employees, creditors, business partners, the public and fair business
competition.
13
This notification procedure must be followed even where an acquisition is carried out directly
between the shareholders. This is a new requirement under the New Company Law.
(f)
Following the announcement, creditors may file a claim within 14 days after the
announcement. If there is an objection that cannot be settled before the date of the GMS, that
objection must be presented at the GMS for resolution.
The acquisition cannot be completed until the objections of the creditors have been resolved.
(g)
The acquisition plan that has been approved by the GMS must be restated in a Deed of
Acquisition drawn up in Indonesian before a Notary.
(h)
A copy of the Deed of Acquisition must be attached to the application for approval by the
MOLHR of the amendments to the Articles of Association or the notification amendments to
the Articles of Association as the case may be.
In the event of a direct acquisition, the copy of the Deed of Acquisition must be attached to
the notification to the MOLHR on the change of shareholding composition.
(i)
The Board of Directors must announce the result of the acquisition in one Indonesian national
newspaper within 30 days as of the effective date of the acquisition.
Spin-Off
The New Company Law introduces a concept of spin off. There are two types of spin-off recognized
by the New Company Law, namely:
(a)
a pure spin-off, where all of the assets and liabilities of a company are transferred by law to
two or more companies and the transferring company is dissolved by law; and
(b)
a semi-pure spin-off, where a part of the assets and liabilities of a company is transferred by
law to one or more companies and the transferring company still maintains its existence.
In general the procedures for mergers and acquisitions as set out above also apply to spin-offs,
including the requirement to obtain approval from the GMS, the announcement in newspapers, and
the notification to the MOLHR.
The Government is also planning to issue further implementing regulations on spin-offs.
18.
Dissolution, Liquidation, and Termination of Status as Legal
Entity
The New Company Law provides additional reasons for dissolving a company, other than by way of a
resolution of the GMS, the expiry of the term of incorporation, or a court decision, namely:
(a)
with the revocation of a bankruptcy petition pursuant to a final and binding commercial court
decision, the bankruptcy estate of the company is not sufficient;
(b)
the bankruptcy estate of the company is in an insolvent state as regulated under the
bankruptcy law;
14
(c)
the revocation of the company’s business license which requires the company to be liquidated
pursuant to applicable laws and regulations (this applies only to companies that hold specific
business licenses such as insurance companies, banks, etc).
Under the New Company Law, the dissolution of a company does not result in the
termination of the company’s legal entity status. After dissolution, the company must also be
liquidated.
As under the previous Company Law, following the dissolution of a company, the company is
prohibited from taking any legal action unless the action is required for liquidation purposes.
If any action is undertaken after dissolution, the company, the Board of Directors and the
Board of Commissioners will be jointly and severally liable for that legal action.
The liquidation process under the New Company Law is similar to that provided under the
previous Company Law and involves, among other matters, the following:
(a)
an announcement of the dissolution by the liquidator in a newspaper and the State Gazette and
notification of the dissolution to the MOLHR (to be recorded in the Company Registry)
within 30 days after the dissolution becomes effective. Failure to comply with these
requirements will mean that the dissolution is not binding on third parties and that the
liquidator is jointly and severally liable with the company for losses incurred by third parties;
(b)
the collection and registration of the company’s assets and indebtedness by the liquidator and
the settlement of obligations with creditors;
(c)
the payment to creditors and, later, payment of remaining liquidation assets to the
shareholders;
(d)
the reporting of the liquidation results to the GMS or the court, as applicable;
(e)
after the GMS or court ratification of the liquidation results, a notification of the liquidation
results must be sent to the MOLHR and announced in a newspaper within 30 days from the
date of the ratification of the liquidation results;
(f)
the recording of the termination of the legal entity status of the company by the MOLHR in
the Company Registry; and
(g)
the announcement of the termination of the legal entity status of the company by the MOLHR
in the State Gazette.
19.
Other and Transitional Provisions
The following transitional and administrative provisions apply:
(a)
The New Company Law applies to public companies if not regulated otherwise by the
prevailing capital market laws and regulations.
(b)
The provisions on the responsibilities of the Board of Directors and the Board of
Commissioners of a company under the New Company Law do not supersede the provisions
of the Indonesian Penal Code.
15
(c)
The Articles of Association of a company which have obtained a legal entity status and
amendments to Articles of Association which have been approved by or reported to the
MOLHR and registered in the Company Registry prior to the enactment of the New Company
Law will still be valid as long as they do not contravene the New Company Law.
(d)
Companies must, within one year after the enactment of the New Company Law (namely by
15 August 2008), amend their Articles of Association to be in accordance with the provisions
of the New Company Law, otherwise, the company may be dissolved pursuant to a decision
of the district court at the request of the attorney-general or an interested party.
(e)
Implementing regulations issued pursuant to the previous Company Law still apply to the
extent that they do not contravene the provisions of the New Company Law.
For further information, please contact: Mita Djajadiredja at [email protected].
With special thanks to Mark Innis: [email protected].
*********
September 2007
(revised November 2007)
16
www.hhp.co.id
The Indonesia Stock Exchange Building
Tower II 21st Floor Sudirman
Central Business District
Jl. Jend. Sudirman Kav. 52-53
Jakarta 12190, Indonesia
Tel: +62 21 515 5090
Fax: +62 21 515 4840
DISCLAIMER
It should be noted that the material in this book is designated to provide general information only. It is not offered as advice on any
particular matter, whether it be legal, procedural or other, and should not be taken as such. The authors expressly disclaim all
liability to any person in respect of the consequences of anything done or omitted to be done wholly or partly in reliance upon the
whole or any part of the contents of this book. No reader should act or refrain from acting on the basis of any matter contained in
it without seeking specific professional advice on the particular facts and circumstances at issue.
©2011 Hadiputranto, Hadinoto & Partners. All rights reserved. Hadiputranto, Hadinoto & Partners is a member firm of
Baker & McKenzie International, a Swiss Verein with member law firms around the world. In accordance with the common
terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent,
in such a law firm. Similarly, reference to an “office” means an office of any such law firm.
This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results don’t guarantee a similar outcome.

Indonesia`s New Company Law

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