General Shareholder Rights in Indonesia

Legal Updates
General Shareholder Rights in Indonesia
7 October 2015

SSEK Legal Consultants founding partner Ira A. Eddymurthy and Tengku Almira Adlinisa, an associate at the firm, have contributed the Indonesia chapter of the new Practical Law global guide to Shareholders' Rights in Private and Public Companies.

SSEK Legal Consultants is a leading corporate and commercial law firm in Indonesia. It works with international and domestic companies on all aspects of their business in Indonesia. SSEK is widely experienced in the establishment of businesses in Indonesia and their ongoing operation.

The following is an extract from the Indonesia chapter of the Practical Law global guide to Shareholders' Rights in Private and Public Companies written by SSEK Legal Consultants.

In general, the Indonesian Company Law grants the following rights to each shareholder:

  • Attend and cast one vote in the general meeting of shareholders (GMS).
  • Receive dividend payments and distribution of remaining assets after liquidation.
  • File a lawsuit against the PT in the relevant District Court if the shareholder suffers losses as a result of actions by the PT that are considered unfair and unreasonable as a consequence of a resolution of the GMS, Board of Directors (BOD) or Board of Commissioners (BOC).
  • Request the PT to repurchase his or her shares at a reasonable price in the event of certain specified corporate transactions.
  • Pre-emptive right to subscribe to newly issued shares in proportion to his or her shareholding for the equivalent class of shares.

The Articles of Association (AOA) of PTs can either give shareholders a right of first refusal to purchase the shares of other shareholders and/or provide that a shareholder intending to sell his shares first obtain prior approval from the GMS, BOD or BOC of the company, or oblige the shareholder to obtain prior approval from the competent authorities in accordance with the applicable laws and regulations.

In addition, the Company Law allows the issuance of different classifications of shares, as follows:

  • Shares with or without voting rights.
  • Shares with the special right to nominate members of the BOD and/or BOC.
  • Shares that, after a certain period, are revocable or exchangeable with another class of shares.
  • Shares granting the holder the pre-emptive right to receive dividends prior to holders of other classes of shares for cumulative or non-cumulative dividend distributions.
  • Shares granting the holder the preemptive right to receive the PT's remaining assets upon liquidation prior to holders of other classes of shares.

Other rights can also be granted to shareholders under a shareholders' agreement and the AOA of the PT, to the extent that these rights do not violate the provisions of the Company Law and other applicable laws and regulations. For example, it is common to grant certain shareholders the right to nominate members of the BOD and BOC.

Rights of Minority Shareholders

The following are the rights of minority shareholders under the Company Law:

  • At the request of one or more shareholders who jointly represent one-tenth of the total number of shares having valid voting rights, or a lesser number as may be stipulated in a PT's AOA:
    • the BOD is obligated to hold an annual general meeting of shareholders (AGMS) or an extraordinary general meeting of shareholders (EGMS); and
    • the head of the relevant District Court can authorize such shareholders to call an AGMS if the BOD or BOC of the PT has not convened an AGMS at the stipulated time.
    • Shareholders who jointly represent one-tenth of the total number of shares having valid voting rights can file a lawsuit at the relevant District Court against members of the BOD and/or BOC who have caused losses to the PT as a result of wrongdoing or negligence.
    • One or more shareholders who jointly represent one-tenth of the total number of shares having valid voting rights can submit a written request to the relevant District Court to investigate the PT for the purpose of obtaining data or information if there is any reason to believe that:
      • the PT has committed an unlawful act that has resulted in damage to the shareholders or a third party; or
      • a member of the BOD or BOC has committed an unlawful act that has caused losses to the PT, shareholders or a third party.
      • One or more shareholders who jointly represent one-tenth of the total number of shares having valid voting rights can request the relevant District Court to dissolve the PT if it is deemed the PT is not able to continue its operations.

A shareholder can request the PT to repurchase his or her shares at a reasonable price in the event of certain specified corporate transactions.

This publication is intended for informational purposes only and does not constitute legal advice. Any reliance on the material contained herein is at the user\'s own risk. You should contact a lawyer in your jurisdiction if you require legal advice. All SSEK publications are copyrighted and may not be reproduced without the express written consent of SSEK.

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