The Company Structure

By AM | Oktarina Lawyers:

The Company structure is created based on the Law No 40 of 2007 Concerning Limited Liability Company (“Company Law”). According to this Company Law, the company organ can be established in 2 ways:

1. The establishment of the Board of Directors:

• According to the Company Law, the Directors can be appointed through the General Meeting of Shareholders (GMS). The GMS shall be responsible to determined who will become the Directors
• The Company Law and common practice by GMS provides that the Directors may be appointed for 5 consecutive years. During these years, the Directors shall be responsible for in and out of court obligation and all financial close.
• The Directors can be divided into 5 common titles: (i) the President Directors; (ii) the Vice President Directors; (iii) the Chief Executive Officer (CEO); (iv) Chief of Operation Officer (COO); and (v) Chief Financial Officer (CFO).
• The Directors is not an EMPLOYEE. According to the Company Law, the Directors are not part of the management team BUT part of the Executive level, which determined directly by the GMS. Therefore, Law No 13 of 2003 Concerning Employment (“Employment Law”) shall not apply for the Directors. Only the terms provided by GMS and the Company Law apply for the Directors. In this case, all rights reserve by the Company Law
• The Directors only answer to the GMS, however since the Directors has to provide a clarification once it’s needed by the Commissioner, in some cases the Directors has to answer to the Commissioner.

2. The establishment of the Board of Commissioners:

• Similar to the Board of the Directors, the Board of Commissioner can be appointed through the GMS and for 5 consecutive years. Commissioner only answer to the GMS
• The Board of Commissioner function is to provide the supervision mechanism for the Directors action. Therefore the Board of Commissioner has the authority over the Directors.
• In some cases, the Directors action based on the Article of Association shall require the written approval from the Board of Commissioner; ex: (i) Financing Process or borrowing money; (ii) pledging the company assets; (iii) purchasing other company assets; (iv) releasing some company assets to other third party.
• The Board of Commissioner shall entitled to the have Directors monthly report if required and warn the Directors should the Directors action beyond its company projected business plan
• Similarly apply with the Directors; the Employment Law not binds the Board of Commissioner. Only the Company Law and the GMS has authorization over the Board of Commissioner.

Both, the Directors and the Board of Commissioner shall be appointed by using the amendment of the Article of Association (Deed of the Article of Association). Therefore, it is very important to determine this deed after the GMS appointment through the Circular Resolution of the GMS and register it at the Ministry of Law and Human Rights. That being said, the validity of the deed is mandatory by law and shall become a strong evidence the Directors and Board of Commissioner titles.

For more detail, please contact our lawyer at info@amoktarina.co or n.pasaribu@amokatrina.