Corporate Governance in Indonesia – Relationship Between Companies and Shareholders

By Rusmaini Lenggogeni

Shareholders, since they provide the capital for the company, shall have rights and responsibilities toward the company in accordance with the relevant laws and regulations in Indonesia and the Articles of Association (AOA) of the company.

Although shareholders do not par­ticipate directly in the management or supervision of the company, they are nonetheless the highest authority in cor­porate governance. Shareholders control the appointment of the Board of Directors (BOD) and Board of Commissioners (BOC), and decide on major issues such as amendments to the AOA of the company, the liquidation of the company, the approval of annual reports and the pay­ment of dividends. In these areas shareholders‚Äô authority is exclusive, although the BOD may make recommendations to shareholders.

In a nutshell, shareholders are responsible for making deci­sions on significant actions and decisions of the company.

The General Meetings of Shareholders shall consist of the Annual GMS and any other GMS that may be held at any time depending on the needs or interests of the company. Shareholders have the right to vote during the GMS. This voting right is subject to the number of shares owned by the shareholder. Pursuant to Article 52 (1) of the Indonesian Company Law and in conjunction with Article 85 (1) of the Company Law, each share shall grant its owner the right to attend and cast one vote in the GMS (or be represented by a duly author­ized representative pursuant to a valid power of attorney) and receive dividend payments and the distribution of assets remaining after liquidation, as well as such other rights as provided under the Company Law.

Role of Shareholders in Company Management

Under the Company Law, the management of the company is under the authority of the company\'s BOD. Therefore, shareholders do not have any direct role in the company\'s management.

This first appeared in Chambers Corporate Governance 2019, published by Chambers and Partners. You can find the full chapter here. 

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