Establishing a Business in Indonesia – Directors and Board Composition

Under the Indonesian Company Law, individuals capable of performing legal actions can be appointed as directors, except individuals who in the previous five years have been:

• Declared bankrupt.
• Members of a board of directors or board of commissioners found to be at fault in causing a company to be declared bankrupt.
• Sentenced for a crime that caused losses to the state or a crime related to the finance sector.

The relevant regulatory authority may impose additional requirements on the appointment of directors in specific business sectors. Foreign nationals cannot serve as human resources directors and there are a number of other directorship positions that foreign nationals cannot hold under the applicable employment laws and regulations.

Additionally, Minister of Manpower Decree No. 40 of 2012 dated 29 February 2012 regarding Certain Positions that Should Not Be Held by Foreign Nationals lists certain positions that foreign nationals cannot hold in companies, namely those related to personnel and industrial relations.

Generally, a director is not required to reside in Indonesia.

Board Composition

Indonesia recognises a two-tiered board structure. The Company Law does not regulate the structure of the board of directors (BOD) or board of commissioners (BOC), which can be determined by the company's articles of association. However, the laws and regulations relating to specific business sectors may regulate the structure of the BOD and/or BOC (for example, in the insurance and banking sectors).

Number of Directors or Members

The Company Law does not impose a minimum number of directors or commissioners. However, a company whose business is related to the collection or management of funds from the public (such as banks and insurance companies) must have at least two directors.

Employee Representation

There is no requirement for employee representation on the BOD under Indonesian law.

This first appeared in Establishing a Business in Indonesia, published by Thomson Reuters Practical Law.

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