An Overview on Indonesian Company Law

Every company in Indonesia must duly establish in accordance with Law Number 40 of 2007 on Limited Liability Companies (“Company Law”) and other laws or regulations which regulates type of such companies, investment model and industries specialization.

Basically Company Law regulates as follows :- 

• Establishment and its procedures; 
• Capital and Shares; 
• Work Plan, Annual Report and Use of Profits; 
• Social and Environmental Responsibilities (Mandatory obligation for company having business activities in the field of and/or related to natural resources) 
• General Meeting of Shareholders; 
• Board of Directors and Board of Commissioners; 
• Merger, Consolidation, Acquisition, and Corporate Split; 
• Inspection of Company; and 
• Dissolution, Liquidation, and Termination of Company's Status as Legal Entity. 

The Company Law is considered as an "umbrella" provisions for every company that runs its business in Indonesia along with other specific laws which regulates specific consideration.

In Indonesia there are two types of company, which are :-

Public Listed Company (Tbk) - Governs by Law Number 8 of 1995 on Capital Market; and
Private Company.

Public Listed Company means the company offers its securities (stock/shares, bonds/loans, etc.) for sale to the general public, typically through a stock exchange, on the other hand Private Company is on the contrary (do not offer its securities for sale to the general public). 

In relation with investment model there are two types of investment model for Indonesian company, which are :-

Foreign Direct Investment; and
Local Investment (both governs by Law Number 25 of 2007 on Investment).

In relation with company which capital owned by the State, such company also must comply with Law Number 19 of 2003 on State Owned Enterprise.

For specific company industry, there are many laws and regulation governs such company, such as :-

• Banking Industry (Governs by Law Number 10 of 1998 on Bank);
• Insurance Industry (Governs by Law Number 2 of 1992 on Insurance Industry);
• Telecommunication Industry (Governs by Law Number 36 of 1999 on Telecommunication);
• Mining Industry (Governs by Law Number 4 of 2009 on Mineral and Coal Mining);
• Plantation Industry (Governs by Law Number 18 of 2004 on Plantation);
• Et cetera.

There are also other laws that regulates company in its relation with third party, such as : -

• Transactional matters (Governs by Indonesian Civil Code, Mortgage Law, Fiduciary Law and Taxation Law);
• Employment Law (Governs by Law Number 13 of 2003 on Manpower); 
• Et cetera. 

In conclusions there is a broad spectrum of laws which regulates company running its business in Indonesia.


Download this article

TAJI & REKAN | Indonesian Law Firm - Indonesian Lawyers