Shareholder Rights in Indonesia: Voting Requirements for Passing Resolutions at General Meetings

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 is one of the leading corporate and commercial law firms 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 excerpt 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, resolutions of a general shareholders' meeting (GMS) are adopted by consensus. Failing this, a resolution must be approved by more than one-half of the shares in attendance or represented. In all cases, Indonesia's Company Law permits the Articles of Association (AOA) of a limited liability company (Perusahaan Terbatas (PT)) to require a greater percentage of votes to approve resolutions submitted to the GMS.

In addition, shareholders can adopt a resolution without convening a GMS provided that:

• The matter to be resolved has previously been notified in writing to all shareholders.
• All shareholders agree to and sign the relevant Unanimous Written Resolution of Shareholders (UWRS).

For PT Tbk, a resolution can be adopted in the first and second GMS if approved by a simple majority. Shareholders who attend the GMS but abstain from voting will be deemed as voting with the majority.

Corporate Actions and Shareholder Approvals/Resolutions

The following are the quorum and voting requirements for certain corporate actions as required by the Company Law:

Amendments to the Articles of Association (AOA). Amendments to the AOA must be approved at a meeting at which at least two-thirds of the PT's voting shares are represented and at least two-thirds of the shares in attendance approve the resolution.

In the event the quorum for attendance is not reached, a second GMS can be held. The second GMS will be valid and entitled to make a resolution if not less than three-fifths of the total shares with valid voting rights are present or represented, and at least two-thirds of the shares in attendance approve the resolution. In the event the quorum for the second GMS is not reached, the company can request the chairman of the District Court whose jurisdiction covers the company's domicile to determine the quorum for the third GMS.

The notice for a third GMS must indicate that a second GMS was convened but the quorum was not reached, and the third GMS will be held with a quorum determined by the chairman of the District Court.

Merger, consolidation, acquisition, bankruptcy and/or dissolution. A merger, consolidation, acquisition, bankruptcy and/or dissolution of the company, as well as the transfer or pledge of the company's assets as security for a loan which comprise more than 50% of the company's net assets in one or more related or unrelated transactions, must be approved at a GMS at which at least three-fourths of the company's voting shares are represented, and at least three-fourths of the shares in attendance approve the resolution.

In the event the quorum is not reached, a second GMS can be held. The second GMS will be valid and entitled to approve a resolution if not less than two-thirds of the total shares with valid voting rights are present or represented, and at least three-fourths of the shares in attendance approve the resolution.

Increase of issued and paid-up capital. A GMS can be validly convened if attended or represented by more than one-half of the total shares with valid voting rights, and the resolutions of that meeting must be approved by more than one-half of the shares in attendance. In the event the quorum for the first GMS is not reached, a notice for a second GMS can be issued. The notice for the second GMS must indicate that the first GMS was held and that the quorum was not reached.

The second GMS will be valid and entitled to adopt resolutions if attended by shareholders representing not less than one-third of all shares with valid voting rights, and the resolutions of that meeting must be approved by more than one-half of the shares in attendance. If the quorum for the second GMS is not reached, the company can request the chairman of the District Court whose jurisdiction covers the company's domicile to determine the quorum for the third GMS.

The notice for a third GMS must indicate that a second GMS was convened but the quorum was not reached, and the third GMS will be held with a quorum determined by the chairman of the District Court. The stipulation by the chairman of the District Court concerning the notice for a GMS will be final and have permanent legal force.

The following are the quorum and voting requirements for certain corporate actions specifically for PT Tbk:

Amendments to the AOA. Two-thirds of shareholders holding shares with voting rights must attend or be represented at the GMS to amend the AOA, and the resolution must be approved by at least two-thirds of shareholders attending or represented at the meeting. If the quorum is not reached, a second GMS can be held with an attendance quorum of three-fifths, and the resolution at the second GMS can be approved by a simple majority. If the quorum at the second GMS is not reached, a third GMS can be held with a quorum stipulated by the Financial Services Authority (Otoritas Jasa Keuangan (OJK)).

Merger, consolidation, acquisition, bankruptcy and/or dissolution. At least three-fourths of shareholders with voting rights must attend or be represented at a GMS to resolve:

• a transfer of more than 50% of the company's net assets;
• the imposition of a security over more than 50% of the company's net assets;
• a merger;
• a consolidation;
• an acquisition;
• a spin-off;
• a bankruptcy petition;
• an extension of the company's term of establishment;
• a dissolution.

The resolution must be approved by at least three-fourths of shareholders attending or represented at the meeting. If such quorum is not reached, a second GMS can be held with an attendance quorum of two-thirds, and the resolution must be approved by three-fourths of shareholders attending or represented at the meeting. If the quorum at the second GMS is not reached, a third GMS can be held with a quorum stipulated by the OJK.

Conflict of interest. A GMS to resolve a transaction with a conflict of interest must be attended by independent shareholders holding more than one-half of the shares with voting rights held by independent shareholders. The resolution must be approved by more than one-half of independent shareholders with voting rights. If such quorum is not reached, a second GMS can be held if it is attended by more than one-half of independent shareholders with voting rights, and the resolution must be approved by more than one-half of independent shareholders attending the meeting.

If the quorum at the second GMS cannot be reached, a GMS can be held with an attendance quorum stipulated by the OJK, and the resolution must be approved by more than 50% of independent shareholders attending the meeting. Shareholders who attend the meeting but abstain from voting will be deemed as voting with the majority.

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