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By: Sulistiowati
Faculty of Law
Universitas Gadjah Mada

• Any business entity which is doing fixed and

sustainable business with the purpose to
share profit, organized by person or business
entity whether incorporated or not,
established and domiciled in Indonesia Article
1 (1) Law Nr. 3/1982
Types of company

Non Legal Entity (Partnership):

• Maatschap
• Firma (Fa)
• Commanditaire Venootschap (C.V.)

Legal Entity:
• Limited liability company
Phases of business
Sole trader


Closed Limited Liability Company

Public Company

Group of Companies

• Provisions: Article 1618-1652 Civil Code.

• A contract by which two or more persons
associate to contribute a capital with the
purpose to share profit among each party
thereby achieved (article 1618CC).
• Contribution and cooperation are crucial
element for the existance of maatschap.
• Contribution: money, goods or skill.

• Maatschap can be established:

• Unwritten,
• Written,
• no formal filing or govermental approval.
Legal relation in a maatschap

1. Internal
a. With manager
- The partners may appoint one of them or athird
person as manager;
- A manager is entitled to perform all acts of
management, despite the disapproval of some
partners, provided that he is acting in good faith
(Art. 1637 CC).
- The manager is able to act in the partnership name
and to bind the partners to third parties and third
parties to the partners.

b. Without manager
- Each partner is deemed to have authorized the
others to act in the name of the maatschaap and on
their behalf.
- Each partner is entitled to act on behalf of the
partnership and bind the partners to third parties
and third parties to the partnership.
- Eventhough, each partner has right to object to the
action of another partner prior to the time of that
Liability to third parties

• In the absence of of specific authorization from the other

partners, the third party can look only to the acting partner
for liability on the contract (Art. 1642 CC).
• An exception to this generale rule, when the contract
executed by one partner is beneficial to the partnership as a
whole, so the third party can look to the partnership as a
whole for satisfaction of its claim (Art. 1644 CC).
• Where one party is liable to the third party, the said party
individually liable with his entire private capital.
• The partners are individually and severally liable with their
entire private capital directly or indirectly (through liability to
a partner who is bound) to third parties for all commitments
of partnership.
• Maatschap is not a legal entity.
Distribution of profits and losses

• Partners are free to decide how the profits of the

maatschap shall be divided among them.
• Where the partners have not decided upon the
proportions their respective shares in the profits, the
profits and/or losses will be shared according to the
value of each partner’s contribution.
• Partners contributing only skill will share in profits or
losses in proportion equal to that of partner which
contributes the least in terms of money or goods.

• Expired.
• The termination of maatschap activities at the
time specicified in the maatschap agreement.
• The destruction of the object or purpose for
which the maatschap was formed.
• The withdrawl of one or more partners.
• The death, placement underguardianship, or
bankruptcy of one of partners.
Winding up

• To identify the property of maatschap.

• To identify debts.
• To pay all debts.
• After payment of all debts, maatschap property
remains, the property will bi divided among the
partners according to the maatschap contract.
• If, the property is not sufficient to pay all debts, the
debts will be the burden of each partner according to
the provisions of the contract of maatschap.
Firma (General Partnership)

• Provisions: Article 16-35 Commercial Code.

• Firma is a partnership form usually used for
the performance of some sort of activity in the
sphere of trade or commerce and in the name
of partners. For example: Firma Sulis
• Where exlecitly stated otherwise, Article
1618-1652 Civil Code.

• A firma can come into existene by a written or oral

• In practice, it is best that a written contract or an
authentic dee be made when establishing a firma.
• After a firma has been incorporated by an authentic
deed, the deed should be registered in the Register
of Companies.
• The deed shoul be publisized in the Official Gazette

• Consequences of failure to register and

publicize the existence of a firma:
- Unregistered firma will be regarded as having
unlimited business purposes, parners with
unlimited liability, and indefinite periode of
The property of the firma

• The firma is capable of having separate

property from the property of the partners
(only economical)
• . As a consequence, the creditors of Firma
have a claim on Firma’s property with priority
over the creditors of each individual partner.
• The firma is not a legal entity.
Legal relations in a firma

• Internal: similar to a maatschap.

• External: Article 17 Commercial Code
Unless he has been expressly denied the the right,
each partner has right to act in the name of the firma
within the scope of its activities and bind the firma
toward third persons.
• Each partner is liable for each and every liability of
the firma toward thir persons, article 18 Commercial
Dissolution and winding up

• similar to a maatschap.
Partnership in AS

• 1. General Partnership (GP)

– Governed by a Partnership Agreement;
– Each partner has unlimited individual liability for
debts of the partnership;
– Evenly split between partners : equal authority,
each is an agent for the partnership, each partner is
jointly and severally liable and partnership files tax
return but partners are all the taxed individually
( pass –thruogh entity or flow –through entity ).

Differences between Maatschap and

• Firma uses a common trade name. Maatschap

does not.
• Firma is mostly used for trade and commerce.
Maatschap is mostly used for professions.
The Commanditaire Vennootschap
or Limited Partnership
• The C.V. is a partnership consisting of one or
more active partners and one or more silent
• A silent partner only contributes capital to the
Difference between active and
silent partners
Active partners Silent partners
-Having right to manage -No right.
the partnership.
-Personally liable for the -Liable only to the extent
entire debt of the of his contribution.

• similar to the Firma.

Property of C.V.

• similar to property of Firma, having separate

property from the property of the partners.
Legal status of C.V.

• similar to the firma, not a legal entity.

Legal relations in the C.V.

• Internal (between an active and other active

partners): similar to the firma.
• external: (with third parties):
-Third parties may not sue the silent partners.
- Third parties may sue only the C.V. or the
active partners.
Limited Partnership (LP) in USA

– At least one general partner and one limited

– General partner is an active managing partner;
– Limited partner acts more than like an investor
with little or no input in day to day business
– Governed by statute ( such as the Uniform Limited
Partnership Act and the partnership agreement );
– Created by filing document with a state;

Limited Partnership in USA

– Requires a written agreement among the partners;

– Liability : GP is fully liable and LP is liable to the extent
of investment;
– GP has full authority to bind the LP;
– LP may freely transfer their interest unless the
partnership agreement provides otherwise. However,
a GP cannot tranfer their interest unless all of the
other GP and LP consent;
– Generally, treated as a partnership for tax purposes;

The limited liability company
• Provisions: Law No. 40 of 2007.
• Limited Liability Company, hereinafter referred to as
the Company, means a legal entity constitutes a
capital alliance, established based on an agreement,
in order to conduct business activities with the
Company’s Authorized Capital divided into shares
and which satisfies the requirements as stipulated in
this Law, and it implementation regulations.
Name of the company

• The P.T. may not use a name, which has been

used legally by another P.T. or similar to the
name of another P.T. or is contrary to public
policy or good morals.

• At least 2 persons are required to incorporate a P.T.

(Art.7). The idea is that the Deed of incorporation is a
• If after the Company obtains its legal entity status
and the number of shareholders becomes less than 2
(two) persons, then within the period of not later
than 6 (six) months as from such condition, the
relevant shareholders is obliged to transfer part of
their shares to other persons or the Company shall
issue new shares to other persons (Art. 7 par.5).

• In the event that the time period as referred

to in paragraph (5) has exceeded, and there is
still less than 2 (two) shareholders, the
shareholders shall be personally liable for all
agreements/legal relationship and the
Company’s loss, and upon the request of the
interested party, the District Court may wind
up the Company.

• The provision which requires the Company to be

established by 2 (two) or more persons as referred to
in paragraph (1), and the provision on paragraph (5),
as well as paragraph (6) do not apply to :
• a. State Owned Limited Liability Company; or
• b. Companies managing security exchange, clearing
house and underwriting, custodian and settlement
institution, and other institutions regulated in the
Law on Capital Market.

• The Article of Incorporation establishing a P.T. must be drawn

up in an authentic form., by notariel deed. Failure to do so
renders the Act of Incorporation null and void.
• In order to obtain the Ministerial Decree regarding the
ratification of the Company’s legal entity as referred to in
Article 7 paragraph (4), the founders shall jointly submit an
application through an electronic legal entity administration
system information technology services to the Minister by
filling up the form.
• The Article of Incorporation should be registered in the
Register of Companies.
• The Article of Incorporation should be publicized in Additional
State Gazette.
Legal status of P.T.
• P.T. is a legal entity.
• Having separate ownership from the property of the share holders.
• May act independently.
• The Company’s Shareholders are not personally liable for agreements
made on behalf of the Company, and are not liable for the Company’s
losses in excess of their prospective shareholding (Art. 3 par. (1)
• The provision as referred to in paragraph (1) do not apply if (Piercing
the Corporate Veil) :
a. the requirements for the Company as a legal entity has not been or
are not fulfilled;
b. the relevant shareholders, either directly or indirectly, with bad
faith, exploits the Company for their personal interest;
c. the relevant shareholders are involved in illegal actions committed
by the Company; or
d. the relevant Shareholders, either directly or indirectly, illegally
utilizes the assets of the Company, which result in the Company’s
assets become insufficient to settle the Company’s debt (Art. 3 par.
Piercing the corporate veil

• Piercing the corporate veil can be imposed to:

1. Share holders
• Piercing the corporate veil can be extended to:
1. BOD (Board of Directors)
2. BOC (Board of Commisioners)
Personal Liabilities in Caselaws

Undue/Incomplete Registration Unapproved Company Action

Raden Roosman v. Perusahaan Otobis N.V. Sendiko PT Usaha Sandang v. PT Dhaseng Ltd, et al. [3264K/Pdt/1992];
[224/1950/Perdata]; Rama v. H. Abas Ubadi dan Tedjakusuma PT Greatstar Perdana Indonesia v. PT Indosurya Mega Finance
[1139K/Sip/1973] [030K/N/2000]
• “if the requirements to establish a limited • “a loan or promissory note made by the
liability have not been fulfilled, shareholders BoD without the approval of the BoC as
are personally liable for their actions.” stipulated in the AoA, shall become the
• “failure to register the company’s deed of personal liability of the BoD concerned.”
establishment causes the shareholders to be
personally liable.” Bad-faith or Unlawful Action
PT Bank Perkembangan Asia v. PT Djaja Tunggal et al.
Liability of a Single Shareholder
O. Sibarani v. PT Perusahaan Pelayaran Samudera “Gesuri • “the management of a Company may be held
Lloyd” [21/Sip/1973] personally liable if the legal action that they
• “the personal assets of a single shareholder undertake for and on behalf of the Company
of a Company may be confiscated to pay off include a conspiracy committed in bad faith
the debt of the Company.” causing losses on other parties.”
Conditions That May Invoke PCV

• The Shareholders’ personal assets and the Company’s assets have

been conjoined together so that the Company was established
merely as a tool of the Shareholders to reach personal gains.
• The company committed a wrongful act (onrechmatige daad), e.g.:
– It is undercapitalized, meanwhile the size of its business is
disproportionately huge;
– It was established to run an unlicensed/illegal business activity, e.g.
producing explosive substances.
• What about criminally punishable actions (strafbaar feit)? Can they
be used as grounds to invoke personal liability of the
Piercing the Corporate Veil Principle
in USA

Certain conditions shall be satisfied:

a. The controlled company (the subsidiaries do not
have a decision making power);
b. The Alter Ego company, e.g: intermingled assets
of parent and subsidiaries);
c. Undercapitalization;
d. Assumption of liability: shareholders can
personally assume liability for the obligation of
the company, especially if the company is new or
small or marginally successful.
on Share Holders
(Article 3 Sec. (2) point b & c)
• Mixing personal assets of share holders and
company assets so the company established
merely as a tool of share holders to fulfill their
own interest (explaination of art.3 sub art. (2).

• The implementation princple of piercing the

corporate veil because actions against law:
- if the business in a big amount but having
very small capital.
- if the PT specially established for doing
dangerous activities without government
license. Ex. Making explosive equipments
(Munir Fuady, 2001: 13)
Theory of corporation

• Entity theory considers a company as a

business entity.
• This theory assumes that there is separation
between personal interest of owners and their
• A business entity is a personification which
having own character and not similar with
Entity theory

• Accountibility to owners/equity holders is

condunted by considering operating
performance and company finance.
• This teory creates agency theory and
stewardship theory.
Enterprise theory

• This theory considers that a company being a

social institution operated to provide benefits
for its stakeholders, namely shareholders,
creditors, employees, customers, government,
and society.
• The theory focuses on stakeholders
Agency theory

• This theory elaborates contractual relation

between principal/shareholders and
• The theory focusess on the delivering
management to the professionals/directors.
• The objective is to encourage earning profit
Stewardship theory

• This theory discusses the relationship

between shareholders and management
• This theory emphasizes the beneficial
consequences on shareholders return if the
facilitative nature of authority structures
through unification of the top management-
CEO with leaders of supervisory organs-
Stewardship theory

• dual role of CEO and Chairman is expected to

increase the effectiveness and results
obtained, as well as superior returns to
sharehoders priority than the separation of
CEO and chairman roles.
• the role of CEO and Chairman will be held by
the same person
Advatages and disavantages of agency

• separation of executive functions and monitoring

functions required by the agency theory allows the
creation of checks and balances in the corporation
resulting in a healthy independence for managers to
generate a maximum corporate performance and an
adequate return for shareholders.
• potential weaknesses, if there is no checks and
balances, then the interaction between monitoring
function by chairman and management function by
CEO will be disrupted.
Advatages and disavantages of
stewardship theory

• unification of executive function and speed

control function will create and provide
greater authority to the CEO in the decision
making process.
• this can happen only if the coalition is
fundamental between the management and
the shareholders to perform effectively and
Stewardship theory

• if the relationship is fundamentally disturbed,

it tends to react to protect its own interests
Capital and shares

• The capital of P.T. consist of authorized capital, issued

capital, and paid up capital.
• Authorized Capital of the Company shall consist of
total nominal value of shares.
• Authorized capital of the Company shall be at least of
Rp 50.000.000,00 (fifty million rupiah).
• At least 25% (twenty five percent) of the authorized
capital as referred to in Article 32 must be issued and
paid-up in full.
Shares of P.T.

• The Company’s shares shall be issued under

the name of their owners (Art. 48).
• Shares provide rights to their owners to :
a. attend and cast vote in the GMS;
b. receive dividend payment and the
remainder or assets from liquidation;
c. exercise other rights under this
Law( Art.52).
Cross holding
(Art. 36)

• The Company shall not be allowed to issue shares,

either to be owned by the Company itself or other
Company, which shares are directly or indirectly
owned by the Company.
• (2) The prohibition on shares ownership as referred
to in paragraph (1) shall not valid for shares
ownership obtained based on transfer by operation
of law, by grant, or by request.
• The shares obtained as referred to in paragraph (2),
must be transferred to other party not prohibited
from owning the shares in the Company within the
period of 1 (one) year after the date of transfer.
Buy back of share
• The Company may buy back the shares which have issued under the
following conditions :
a. the buy back of shares shall not result in the net assets of the Company
becomes less than the issued capital plus the statutory reserve that has
been set aside; and
b. the amount of nominal value of all shares buy back by the Company
and the pledge of shares or the fiduciary security on shares held by the
Company itself, and/or other Company which shares are directly or
indirectly owned by the Company does not exceed 10% (ten percent)
from the amount of issued capital in the Company, except otherwise
regulated in the legislation in the field of capital markets.

• (2) The buy back of shares, either directly or indirectly, contrary with
paragraph (1) is considered void by operation of law.
• (3) The Board of Directors shall be jointly and severally liable for the losses
suffered by shareholders who have acted in good faith, resulting from the
buy back which is void by operation of law as referred to in paragraph (2).
• (4) The shares buy backed by the Company as referred to in paragraph (1)
may only be possessed by the Company for not more than 3 (three) years.
General Meeting of Shareholders
(Art. 75 & 78)
• GMS has the authority which is not conferred to the Board of
Directors and the Board of Commissioners, with due observance
to the limitation as stipulated herein and/or the articles of
• During the GMS, the shareholders shall have the right to receive
explanation relating to the Company from the Board of Directors
and/or the Board of Commissioners, as long as it is related to the
agenda of such GMS, and shall not in contrary with the interest
of the Company.
• GMS concerning other agenda shall not be entitled to adopt any
resolution, except all present and/or represented shareholders
in the GMS agree with the proposed additional agenda.
• Resolution on the additional agenda shall be approved
• GMS shall consist of annual GMS and other GMS
Formal Shareholder Meetings
In England

• Formal Shareholder Meetings in England are

required to elect the BOD and to carry out other
duties specified in the Articles of Association
• When meeting is held, a quorum in England is
two shareholders present (unless the Articles
specify otherwise)
Formal Shareholder Meetings

• In the USA most of the States allow the

shareholders to take all, or nearly all, action by
written consent rather than at a formal meeting
• Most state require a simple majority of the
voting shares to be represented, and while the
Articles of Incorporation may change the
quorum requirements, there is generally a
prohibition against setting the at less than a
third or a fourth of the voting shares.
Shareholders in UK

• No upper limit on the number of shareholders

in a private company
• Possible to have private companies which
have managerial structure similar to those of
the paradigm public company
Board of Directors
(Art. 92 & 94)
• The Board of Directors shall undertake its duty to
manage the Company for the interest of the Company in
the pursuit of its purposes and objectives (Art. 92).
• The Board of Directors shall have the authority to
manage the Company as referred to in paragraph (1) in
accordance with the policy which is considered accurate,
and shall be in accordance with the provision as
regulated under in this Law and/or the articles of
• Members of the Board of Directors are appointed by the
Board of Directors (BoD)

• Directors of the company has two functions,

namely the management function and
function representation
• Board members are workers while the
company is employer
• working relationships between directors and
the company was working relationships that
are subject to employment law
Fiduciary duty

• directors have a fiduciary relationship with the

• dependence between legal entities and board create
fiduciary relationship, where the board has always
been a trusted party and can use its authority to act
only for the interests of the company
• fiduciary duty would be created if there is a fiduciary
capacity (corporate director-corporation)
• fiduciary duty is divided into two main components
namely duty of care and duty of loyalty
Duty of care

• duty of care is basically an obligation for

directors not to act negligently, applying high
accuracy in gathering information used to
make business decisions, and doing business
with care and prudent that makes sense.
Duty of Care in USA

• The care an ordinarily prudent person in a like

position would exercise under similar
• Analysis on duty of care from two perspective
- Functions of directors: Decision making function
and overseeing function
- Misfeasance and nonfeasance
• Nonfeasance: is when a director does not do anything
toward discharging the job
Duty of care in USA - the causation

• In duty of care cases, the plaintiff has the burden to show :

(i) the defendant’s failure to meet the standard of care and
(ii) causation that the defendant’s failure to meet the duty of care
resulted in harm to the corporation.
• Difficult for a plaintiff to show causation in a nonfeasance
case, because it is often not clear that the director could
have stopped the damage from happening.
In some states, the initial burden is on the plaintiff to show
the defendant’s breach of the duty of care and then the
defendant has the burden to show entire fairness.

Duty of loyalty

• duty of loyalty includes the duty of directors

to not put his personal interests above the
interests of the company in carrying out
transactions in which the transaction can
benefit the board by using the costs borne by
the company
Fiduciary duty

• Fiduciary duty of directors containing the

following principles:
1. directors in performing their duties should not be
doing it for personal interests or interests of third
parties, without the consent and / or knowledge of
the company
2. directors shall not use his position as caretaker to
make a profit, either for himself or a third party,
except with the approval of the company
3. directors may not use or misuse corporate assets
for his own benefit and / or third party
Fiduciary duty

• directors should not make decisions outside of

its authority
• directors should be able to resist the
intervention of shareholders who forced him
to make the policy for personal gain
• every member of directors shall in good faith
and full responsibility for the duties and
business interests of the company
Fiduciary duty

• In carrying out fiduciary duties, all directors

must perform their duties as follows:
a. Performed in good faith
b. Performed bay proper purposes
c. Performed by fettered discretion
d. Having no conflict of interest
Liability of Board of Directors
(Art. 97)
• The Board of Directors shall be responsible for the management
of the Company as referred to in Article 92 paragraph (1).
• The management as referred to in paragraph (1) shall be
performed by each member of the Board of Directors with good
faith and full responsibility.
• Each member of the Board of Directors shall be fully and
personally liable over the loss of the Company if it resulted from
its fault or negligent in performing its duties, in accordance with
the provision as referred to in paragraph (2)in accordance with
the provision as referred to in paragraph (2).
• In the event the Board of Directors consist of 2 (two) members
or more, the responsibility as referred to in paragraph (3) shall
jointly and severally apply to each member of the Board of
Directors .
BoD in USA

• The BoD in USA is authorized to declare dividends.

• The only limits are the requirements that:
1. The corporation be solvent;
2. The issuance not violate the Articles of Incorporation;
3. The source of the dividends be of a certain type (i.e.
Earnings, surplus, etc).
• The BoD may be entirely dispensed with the
corporation may be run directly by the
Piercing the corporate veil
to BoD
• BoD Responsibility based on this principles, if:
- Financial report is incorrect and/or mislead,
article 69 sec. 3
- If the share holders can’t return the interim
dividens , Art. 72 Sec. 5&6
Interim Devidens will be distributed if the amount assets of net
worth of PT not becoming smaller than the amount of Placed
Capital & Paid Capital plus statutory reserve.
- BoD not doing fiduciary duty to PT, Article 97
Sec. (2) & (3)
Piercing the corporate veil
on BOD (cont)
• BOD not reporting to PT related with their
ownership of share and/ or family inside PT
and other PT, Art.101 Sec. (1) & (2).
• BOD guilt or negligent and causing bankruptcy
(art.104, sec 1 &2)
Board of Commissioners
(Art. 108, 111)
• The Board of Commissioners shall conduct
supervision over the management policy, the
implementation of the management in general,
either regarding the Company or its business, and
provides advice to the Board of Directors.
• Supervision and advice as referred to in paragraph (1)
shall be conducted for the interest of the Company,
and shall be in accordance with the purpose and
objective of the Company.
• Members of the Board of Commissioners shall be
appointed by GMS.
Liability of BoC

• The Board of Commissioners shall be responsible to

supervise the Company as referred to in Article 108
paragraph (1).
• Each member of the Board of Commissioners shall be
obliged with good faith, prudent and full of responsibility to
perform his supervisory duty and provide advices to the
Board of Directors as referred to in Article 108 paragraph (1)
for the interest of the Company and shall be in accordance
with the purpose and objective of the Company.
• Each member of the Board of Commissioners shall also be
personally liable for the loss suffered by the Company if it
resulted from its fault or negligent in performing its duties, in
accordance with the provision as referred to in paragraph
Piercing the corporate veil
on BOC
- Financial report is incorrect and/or mislead. Art.
69 Sec. 3
- If the share holders not able to return interim
devidens, Art. 72 ayat 5&6.
interim devidens distributed if the amount assets of net worth not becoming
smaller than the amount of Placed Capital & Paid Capital plus statutory reserve.

- BOC not doing fiduciary duty to PT, Art. 114 Sec.

(2) & (3)
• BOC is guilt or negligent and causing bankruptcy.
Art. 115 Sec. 1
Fiduciary duty

• Duty which appeared from fiduciary relations

between BOD and leading PT, causing BOD’s position
as trustee in the definition of trust law.
• BOD have to have high level of care and skill, good
faith, loyality and honesty towards PT.
• Duty of care mean BOD have to act carefully in order
to spared from negligent actions that might causing
losses for other parties (paying high attention
regarding the running of PT, complete information,
rational decision making)
• Fiduciary duty valid towards BOD’s function either
managerial function of representative function.
Fiduciary duty

• Fiduciary duty of BOD in PT is different from

Fiduciary duty of BOD as trustee.
• In Law no 40/2007 imposed to BOD and BOC.
• Art. 97 Sub art. (2) & (5), fiduciary duty of BOD
on managing PT.
• Art. 114 Sub art. (2) & (5), fiduciary duty of
BOC on supervising and advicing to BOD in
managing PT.
Ultra vires

• Priciple which set legal consequences when PT

acting beyond its autority that already
regulated in Articles of Association.
• Acknowladged in Art. 15 Sub art. (1), art. 18, 19
sub art. (1), 21 sub art (1) & (4), 88 sub art.(1).
• Art 15 sub art (1) recognize principle of ultra
vires by placing purposes,, objectives and also
activities of PT about important position.
Inspection of company

• Inspection over the Company may be performed with the

purpose to obtain data or explanation in the event that there
are suspicion concerning the following :
a. the Company has committed an illegal action which may cause
adverse effect to the shareholders or the third party; or
b. the members of the Board of Directors or the Board of
Commissioners has committed an illegal action that may
cause adverse effect to the Company or shareholders or
the third parties.

• (2) Inspection as referred to in paragraph (1) shall be

performed by submitting an application in writing together
with the reasons to the District Court which jurisdiction
covering the domicile of the Company.
Dissolution and Liquidation
• Liquidation of the Company occurs :
a. Based on the resolution of GMS;
b. Due to the termination of the Company’s duration as stipulated in the articles of
c. based on the court order;
d. Due to the revoked bankruptcy statement based on binding order of the
commercial court, and the bankrupt assets of the Company is not sufficient to pay
the bankruptcy cost;
e. Due to the condition that the bankrupt assets of the Company has been declared
in the condition of insolvency as regulated in the Law regarding Bankruptcy and
the Suspension of Debt Payment; or
f. Due to the revocation of the Company’s business permit, so that the Company is
obliged to conduct liquidation in accordance with prevailing regulation.
• In the event the Company’s dissolution as referred to in paragraph (1) occurs :
a. such dissolution shall be followed with a liquidation conducted by a liquidator or
curator; and
b. the Company is incapable to conduct any legal action, except it is required to settle
all of the Company’s business for the the purpose of liquidation.
• In the event the dissolution occurs based on the resolution of GMS, the duration as set
forth in the articles of association shall end, or by the revocation of the bankruptcy
based on the order of the commercial court and the GMS does not appoint any
liquidator, the Board of Directors shall act as the liquidator.
Business Judgement Rule
• Business judgement rule is a example of independence and
disretion of BoD in taking business decision, and becoming
legal protection for BoD which in good faith in implementing
their duties
• BoD decision on company activities can not be protested by
anyone. Incorect in decision making or honest mistake can
not be imposed responsibility to Bod as long as:
1. The decision in accordance with AoA .
2. Conducted in good faith.
3. Conducted with good purposes.
4. The decision having rational basis.
5. Conducted prudently.
6. Conducted by using good manner which is recoqnized as the best
one to the company.
Business Judgement Rule
(Art. 97 par. 5)
• A member of the Board of Directors shall not be liable for
the loss as referred to in paragraph (3) if it is proven
that :
a. such loss is not resulted from its fault or negligence;
b. it has performed the management of the Company
with good faith and prudent for the interest of the
Company in the pursuit of its purposes and
c. there is no conflict of interest, either directly or
indirectly over the management that result to the
loss; and
d. it has taken a precaution measure to avoid the loss.
Business Judgement Rule

• business judgment rule drafted to protect the interests of

the Directors and the responsibility of every corporate
decision that resulted in losses for the company
• business judgment rule is a rule in corporate governance
• in order to assess whether there has been a violation of
the business judgment rule there should be a standard of
review, which became the basis for the assessment of
whether an action is indeed appropriately and should do.
• In company law that is used as the standard of review is a
good faith, prudence, negligence, and fairness.
Business Judgment Rule

• In the US:
As long as a director acts in the good faith and
with due care in his decision making process,
the director can not be held responsible
although the decision is not equal to a
decision made by an ordinarily prudent
Duty of Care and Business
Judgment Rule

Opinion of the American Law Institute:

1. Duty of Care:
A director or officer has a duty to the corporation to
perform the director’s duty or officer’s functions in good
faith, in a manner that he or she reasonably believes to
be the best interests of the corporation, and with care
that an ordinarily prudent person would reasonably be
expected to exercise in a like position and under similar
2. Business Judgment Rule:
A director or officer who makes a business judgment in good
faith fulfills the duty if the director or officer:
1). Is not interested in the subject of the business
2). Is informed with respect to the subject of the business
judgment to the extent the director or officer
reasonably believes to be appropriate under the
circumstances; and
3). Rationally believes that the business judgment is in
the best interests of the corporation.
Derivative action/suit

• Is a suit which is based on primary right of a company,

done by share holders on behalf the company, the suit
done because of the failure of the company.
• Is a suit which is done by share holders for and on behalf
a company.
• Named derivative because the suit done by share
holders for and on behalf a company, and the suit is
derived from the company it self.
• The main legally elements of derivative suit are:
- There is a suit;
- The suit brougt to the court;
Derivative action/suit

• The suit brought by share holders of a company;

• Share holders bring a suit to the court for and on behalf
a company;
• Defendants are a company, members of BoD;
• Failure of a company;
• As the suit brought to the court for and on behalf a
company, so all result of the suit owned by the
• Derivative suit/action comes from anglo saxon legal
system, then also received in a lot of civil law countries.
Derivative action/suit on
Law No. 40 of 2007

a. suit towards members of BoD Fault

– Members of BoD have fiduciary duty to the company which
they lead.
– If members of BoD breach of the fiduciary duty, especially if
they do fault, so share holders as representative of a company
can sue members of BoD, and the result of the lawsuit owned
by the company not share holders.
• Article 97 sub art. (6)
– On behalf of the Company, the shareholders representing at
least 1/10 (one-tenth) from the total number of shares with
voting right, may submit a claim to a District Court against
member of the Board of Directors which causes loss to the
Company due to their fault or negligence.
Derivative suit

b. Suit towards members of BoC Fault

– Derivative suit can be brought to members of BoC.
– On behalf of the Company, the shareholders
representing at least 1/10 (one-tenth) from the
total number of shares with voting right, may
submit a claim to a District Court against member
of the Board of Commissioners which causes loss
to the Company due to their fault or negligence.