Company Establishment in Indonesia: Mandatory Organizational Structure

For many foreign entrepreneurs, once they have incorporated their companies, they would think that their jobs are done. However, this is different for company establishments in Indonesia. Not only do you need to have a good understanding of the regulations of setting up a company in Indonesia, but you also need to have a good grasp of the mandatory organizational structure.

An organizational structure in Indonesia may need to be clarified to foreign entrepreneurs. But, if you take the time to do it right, a solid organizational structure can boost your company’s efficiency tremendously, whether the company has only two employees or 300.

You need to ask yourself the following questions in your organizational structure early in the growth stage during company establishment in Indonesia.

• What are the roles of your company’s shareholders, directors, and commissioners?
• Who in your company is permitted to access your company’s bank account?
• When and how do you terminate a commissioner or a director?

If you do not know the answer to those questions, the best thing to do is read this article until the end.

Mandatory Company Structure for Company Establishment in Indonesia

The hierarchy of the company structure in Indonesia goes like this:

• Shareholders
• Board of Commissioners (BOC)
• Board of Directors (BOD)

Shareholders of the Company in Indonesia

On top of the hierarchy in a company structure are the shareholders. Shareholders, also known as stockholders, are the company’s owners, and they inject capital or provide financial support in exchange for potential profits or dividends.

The company’s daily business operations and activities are not the shareholders’ responsibility. The primary function of shareholders is to approve the decisions about the company’s performance and future goals in the general meeting of shareholders (GMS).

Board of Commissioners in Indonesia

The hierarchy is then followed by the Board of Commissioners or BOC. BOC supervises the company’s management regarding the company’s policies and advises the Board of Directors. The effectiveness of those policies will also be monitored continuously by the BOC.

Board of Directors in Indonesia

The Board of Directors, with the acronym BOD, are the company’s shareholders. They take advice from the BOC and are responsible for the company’s overall operations and management in compliance with the Company Law in Indonesia. Compliance is achieved through BOD’s operational and strategic decisions.

Shareholders appoint the BOD to handle the daily affairs of the company. BOD frequently collaborates but can also give specific power or authority to members of the BOD.

READ MORE:

• FAQ on How to Start A Business in Indonesia
• How to Start A Hospitality Business in Indonesia
• Does Every Company Setup in Indonesia Require Shareholder?

Responsibilities of BOC and BOD in Indonesia

The primary responsibilities of commissioners and directors of a company in Indonesia are:

Board of Commissioners

• Overseeing operations and supervising directors
• Analyzing the budget for the next financial year
• Checking and approving financial statements

Board of Directors

• At least one Indonesian/local director must be present in BOD
• Dealing with third parties and maintaining partnerships with stakeholders
• Representing and managing the company
• Reporting to BOC
• Handling registers and minutes of GMS and BOD meetings
• Getting annual reports and other financial documents ready
• Maintaining the registers of shareholders
• Making decisions on behalf of the company (loan offers are not included)

How to Terminate a Director or a Commissioner

The termination of a director or a commissioner is performed through the shareholders’ general meeting. Below is the summarised process:

• The company will provide a letter of termination with the reasons for termination stated.
• The company will then hold a hearing about the termination. The director or the commissioner has a chance to defend themselves.
• A signed statement letter is required to prove the defense opportunity has been granted to the terminated individual.
• The termination is finalized for the director or the commissioner.

How to Establish a Company in Indonesia

There are five essential steps in establishing your first company in Indonesia. Here are the details:

1. Choosing Your Business Structure

The first step is to choose the type of business you want to register. There are several options available in Indonesia, including:

• Limited Liability Company (PT)
• Limited Partnership (CV)
• Partnership (Firma)
• Cooperative
• Sole Proprietorship (PT Perorangan)

The chosen structure will impact your registration process and legal obligations.

2. Checking Your Company Name

Next, ensure your chosen company name is unique and needs to be taken. You can check this through the Ministry of Law and Human Rights (Kemenkumham) website.

3. Drafting the Articles of Association

The Articles of Association document key company details, such as name, business activities, authorized capital, and company organs. A notary must prepare this document, and all founders must sign it.

4. Company Registration

With your Articles of Association completed, register your company with Kemenkumham. This can be done online or in person at their office.

5. Opening a Business Bank Account

Finally, open a bank account under your company name. This is crucial for administrative purposes like receiving payments and paying bills.

Minimum Capital for Establishing a Company in Indonesia

The minimum capital required to establish a company in Indonesia varies. Investors must consider the type of their legal establishments, the size of the company, as well as the business sector that they’ll capitalize on. To find the details, please send your inquiry to our expert consultants at InCorp Indonesia.

Legal Basis for Establishing a Company in Indonesia

The primary legal basis is Law No. 40 of 2007 concerning Limited Liability Companies (UUPT). This law governs the establishment, organs, and dissolution of PTs.

Procedures and Requirements for Establishing a PT Perorangan (Sole Proprietorship)

The guidelines and requirements for establishing a PT Perorangan are similar to those for a regular PT, including:

• Choosing a company name
• Checking the name availability
• Drafting the Articles of Association
• Registering the company
• Opening a business bank account

The critical difference lies in the number of founders. A PT Perorangan can only have one founder, while a regular PT requires two or more. There are also additional requirements for PT Perorangan:

• The founder must be an Indonesian citizen or a foreign resident with a valid Indonesian visa.
• Investors must comply with the minimum capital stated by the regulations in Indonesia.
• Submit a certificate of physical and mental health.

How InCorp Can Help with Business Setup in Indonesia

If you need further information on the company’s establishment in Indonesia, do not hesitate to contact us by filling out the form below. You can also visit our offices in Jakarta, Bali, and Semarang.