“As one of the important organs in the Limited Liability Company (a PT/Perseroan Terbatas), Law No.40 of 2007 concerning Limited Liability Company (“UU PT”) regulates the authority, the requirement and procedure also the clause about circular resolution.”
Limited Liability Company in Indonesia has three different important organs that operate its functions; Board of Directors, Board of Commissioners, and General Meeting of Shareholders (“GMS”). However, unlike the first two, GMS is not a job position but rather the investor. They do not work but would enjoy dividend according to the portion of their investment, similar to the passive partner in Limited partnership. However, unlike a passive partner, GMS still have the authority to decide the company’s policy.
Authority of GMS
In the Law No.40 of 2007 concerning Limited Liability Company (“UU PT”), Board of Directors is described as the ones responsible to manage the company, while Board of Commissioners is responsible to supervise the directors. However, GMS is described as a company organ which holds the authority that is not given to Board of Directors or Board of Commissioners. Which means GMS holds quite a wide authority as anything that is not under the authority of Board of Directors or Board of Commissioners would fall under the authority of GMS.
The authority of GMS includes but are not limited to:
1. Amend the company’s Articles of Association (“AoA”);
2. Approve merger, consolidation, and acquisition;
3. Assign or dismiss members of the Board of Directors or Commissioners;
4. Anything else that is not regulated by the law but otherwise agreed in the AoA.
Requirement and Procedures
Despite being treated as a company organ, GMS is still literally a meeting between shareholders. There are some regulations for the process of the meeting itself, such as:
a. Must be held at least once a year;
GMS is mandatory to be held at least once a year. Such a GMS is called annual GMS. However, if it’s deemed necessary, it is also possible to hold more than one GMS annually. Such GMS is called extraordinary GMS, and could be held depends on the need (such as, to approve a certain legal action).
b. Must be held in a specific place;
GMS shall be held in the Company’s domicile or in the place where the Company does its main business as specified in the Articles of Association. The location of the GMS must be located in the territory of the Republic of Indonesia. Also, the one who leads the GMS, which is Director or Commissioner, should attend physically in the GMS. Furthermore, GMS may also be held via teleconference, video conference, or others vehicles for electronic media which make it possible for all of the Participants in the GMS to directly see and hear each other and to participate in the meeting.
c. Must fulfil the quorum;
Just like in every meeting, to be able to pass a decision, a quorum must be met. For annual GMS, the attendance quorum Is ½ of all shareholders and decision could be passed if it’s approved by ½ of attendees. For GMS with the purpose to amend the company’s AoA, the attendance quorum is 2/3 and the amendment must be approved by 2/3 of the attendee. For GMS on merger, consolidation, and acquisition, the attendance quorum is ¾ and the legal action must be approved by ¾ of the attendee.
d. Must be recorded in writing;
The result of GMS must be recorded in writing. It could be in the form of Minutes of General Meeting, which must be signed by the chairman of the meeting and at least one of shareholders; or in the form of a notarial deed.
Circular Resolution
While normal GMS mechanism as explained above exists, sometimes it is just not possible for the shareholders to attend the meeting. In such a situation, it is possible to hold the GMS using the method of circular resolution. Instead of having the shareholders to gather together to review a certain policy, in this method, the policy would be given to each shareholder and must be approved circularly.
Author: Benedictus Giovanni
Gaffar & Co., Indonesian Boutique Law Firm which specializing and focus on commercial law areas e.g. Investment Regulatory.
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