Directors’ roles and duties in Indonesia.

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Directors’ roles and duties in Indonesia

In this guide, you will learn everything you need to know about the directors’ roles and duties in Indonesia.

If you are new to being a director of a company, it is necessary that you understand the compliances that directors must follow.

Let’s have a look at the directors’ responsibilities and how to become a director.

Roles of a director

Roles of a director in an Indonesian company include:

  • Oversee matters related to the company
  • Achieve the objectives of the company
  • Managing the company in accordance with the articles of association

Who can be a company director?

To be a director of an Indonesian company, within five years of the appointment, you must have not been:

  • Declared bankrupt
  • A member of a board of directors or a board of commissioners found by a court to have caused a company to be declared bankrupt
  • Sentenced for a criminal offense which caused the state to suffer financial loss or related to the financial sector

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Appointment of a director

Directors of an Indonesian company are appointed by the general meeting of shareholders (GMS). The company’s article of association must state the procedures to appoint, replace and dismiss the directors.

Resignation of a director

A director can resign from their position before their period in office ends. The director must submit the resignation letter to the company, and the company will conduct a GMS to decide on the resignation of the director not more than 90 days after the resignation is received.

Removal of a director

Members of the board of directors may be removed under a resolution of the general meeting of shareholders (GMS). The director must be notified about the removal and given an opportunity to defend him/herself before the resolution of the removal.

Duties of a director

Directors of Indonesian companies are required to follow statutory and fiduciary duties.

Statutory duties

  1. Deliver annual reports after it has been reviewed by the board of commissioners to the GMS within six months of the end of the company’s financial year.
  2. Prepare business plans for the next financial year.
  3. Prepare and maintain a register of shareholders of the company and a special register including information of the share ownership of the member of the board of directors and board of commissioners.
  4. Archive the resolutions of the shareholders and board of directors of the company and other corporate documents.
  5. Acquire approval from the general meeting of shareholders for the transfer of more than 50% of total assets of the company in one or more transactions.
  6. Hold a general meeting of shareholders annually or extraordinary as necessary or as requested by the shareholders, commissioners or directors.
  7. Notify the Ministry of Law and Human Rights of any changes to the board of directors or commissioners of the company within 30 days of the date the resolution of the GMS regarding to the change.
  8. Record any transfer of shares of the company in the company register and notify the Ministry of Law and Human Rights.
  9. Notify the creditors of the company if there is a reduction in the capital of the company in at least one newspaper.

Fiduciary duties

Directors must always act in the best interest of the company, and the director is not allowed to put him/herself in a position that his/her interests conflicts with their duty to the company or stakeholders.

Liabilities of a director

Directors may be held liable for any losses of the company if the director breaches his/her duties.

A director will not be personally liable if he/she has evidence that:

  • The company loss is not a result of his/her actions or breach of his/her duty
  • The director managed the company in good faith and in accordance with the purpose and objectives of the company
  • The director has no conflict of interest in the management of the company
  • The director has taken the necessary actions to prevent bankruptcy

Directors may be held liable in the following situations:

  • Misleading financial reports
  • Failure to accept returned interim dividends
  • Failure to report their share ownership
  • Liability for bankruptcy losses

Resident directors

Resident directors serve as the director of a company but do not have any involvement in managing the company. The resident director also cannot act as a signatory for the company’s bank account.

Some business entities require resident directors, such as the foreign-owned company (PT PMA) and the locally owned company (PT), as they require one local director. Foreign directors need to have a KITAS before they can legally work in Indonesia. While obtaining their KITAS, they can appoint resident directors.

The procedures to appoint a resident director include:

  1. The shareholders make the decision of appointing a resident director in the GMS.
  2. The shareholder’s decision is drawn up in a deed of appointment by a notary public.
  3. The new arrangement is registered at the Ministry of Law and Human Rights, which they will issue a decree.
  4. Once the decree is issued, the resident director is officially appointed and can start acting as the company’s director.

Conclusion

It is important that directors act in accordance with their roles and duties in order for the company to have a positive outcome. If you desire to open a company in Indonesia and become a director, do not hesitate to contact Acclime, and we will help you through the process.

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