“The annual General Meeting of the Shareholders holds within 6 (six) months at the latest after the financial year ends.”
Company certainly has many activities every year. Within the corporation there are also running organs such as the Board of Directors, Board of Commissioners, or Staff and there are also Shareholders of the Company. As a form of accountability report for activities carried out by the Company within 1 (one) year or there is a certain important issue concerning the Company, it needs to be submitted and discussed through a General Meeting of Shareholders.
1. General Meeting of Shareholders
Article 1 Number 4 Law No. 40 of 2007 concerning Limited Liability Company (“Law 40/2007”) mentioned that definition of General Meeting of Shareholders (“GMS”) means the Company Organ which has authority not given to the Board of Directors or Board of Commissioners within limit specified in this Act and/or the Article of Association.
Article 78 Law 40/2007 stipulated that GMS consists of:
a. Annual GMS
Annual GMS shall be held within a period of not more than 6 (six) months after the financial year ends.
b. Another GMS
Other GMS may be hold at any time based on need for the Company’s interest.
During the GMS, the Shareholders shall have the right to receive explanation relating to the Company from the Board of Directors and/or the Board of Commissioners, as long as it is related to the agenda of such GMS and shall not in contrary with the interest of the Company as mentioned in Article 75 Law 40/2007.
As stipulated in Law 40/2007, GMS shall be held in the Company’s domicile or in the place where the Company does its main business as specified in the Article of Association and must be located in the territory of the Republic of Indonesia. However, GMS may also hold through teleconference, video conference, or other ways for electronic media which make it possible for all of the participants in the GMS directly see and hear each other and to participate in the meeting.
2. Annual General Meeting of Shareholders
As mentioned before, Annual GMS held within a period of not more than 6 (six) months after the financial year ends. Party that responsible to hold the Annual GMS is Board of Directors which is preceded with prior notice by GMS Invitation.
One of the agenda of Annual GMS is to ratify the annual reports as stipulated on Article 78 Law 40/2007.
Based on Article 66 paragraph (2) Law 40/2007, annual reports must contain at least:
- A financial report consisting of at least the last balance sheet for the financial year, a profit and loss statement for the financial year concerned, a cash flow report, and a report on changes in equity, and notes on the financial report that need to be compiled in accordance with the financial accounting standards;
- A report on the Company’s activities;
- A report on the implementation of Environmental and Social Responsibility;
- Details of problems which arise during the financial year which influenced the Company’s business activities;
- A report on the duty of supervision performed by the Board of Commissioners during the financial year just ended;
- The names of the members of the Board of Directors and members of the Board of Commissioners;
- Salaries and allowances for members of the Board of Directors and salaries or honoraria and allowances for members of the Board of Commissioners of the Company for the year just ended.
Annual report shall be signed by all members of the Board of Directors and Board of Commissioners during their service period at the relevant account year and it shall be provided in the Company’s office as of the date of notice for GMS in order to be examined by the Shareholders. In the event that the financial report provided turns out to be inaccurate and/or misleading, the members of the Board of Directors and members of the Board of Commissioners shall be jointly and severally liable to the inflicted loss party.
However, Law 40/2007 did not stipulate about consequences if the Annual GMS did not convene and if it convene more than 6 (six) months after the financial year ends. So, if the Annual GMS is not held, there is no ratification of the annual report and it is possible that the Company’s responsibilities that year are considered unfinished.
3. Annual General Meeting of Shareholders through the Circular Resolution
If the Annual GMS cannot be held (either online nor face-to-face), it is possible to replace the Annual GMS with a Circular Resolution. This is in accordance with Article 91 of Law 40/2007, that states that Shareholders may also adopt binding resolution outside GMS provided all Shareholders with voting rights approve them in writing by signing the proposal concerned. In the explanation given for Article 91 Law 40/2007, the adoption of resolutions outside GMS is known as Circular Resolutions.
Therefore, Circular Resolutions have the same legal force as the Annual GMS. In conclusion, the things that can be decided by the GMS, including Annual GMS, can also be decided by the Shareholders through Circular Resolution while still complying with the requirements as stipulated in Law 40/2007.
Author: Vania Aqilla Cahyaningrum
Gaffar & Co. is an Indonesian Boutique Law Firm which specialises and focuses on commercial law areas, e.g. Capital Market & Financial Services, Investment Regulatory and Corporate Secretarial, including Employment Law.
For further queries and information, contact us:
+62 21 2271 5060 | info@gaffarcolaw.com | www.gaffarcolaw.com
