“Amendments to the Articles of Association must be stipulated in the General Meeting of Shareholder (“GMS”) and made in the form of a notarial deed in Indonesian. Further, the amendment shall obtain approval or acknowledgement from the Minister of Law and Human Rights, depending on type of the agenda as stated in Law 40/2007.”
Based on Article 8 of the Law No. 40 of 2007 concerning Limited Liability Company (“Law 40/2007”), the Deed of Establishment contains the Articles of Association in addition to other provisions relating to the establishment of the Company. The Articles of Association are part of the Deed of Establishment which contains the base of the Limited Liability Company which determine each of the rights and obligations of the parties in the articles of association as stated in Article 15 of Law 40/2007. The companies are required to have Articles of Association since each company operates in accordance to the company’s Articles of Association.
Definition of Articles of Association
In Article 15 of Law 40/2007, the Articles of Association contain at least:
- Name and domicile of the company;
- The aims and objectives and business activities of the company;
- Period of establishment of the company;
- The amount of authorized capital, issued capital and paid-up capital;
- Number of shares, share classification if any, including the number of shares for each classification, the rights attached to each share, and the nominal value of each share;
- Name of position and number of members of the Board of Directors and Board of Commissioners;
- Determination of the place and procedures for holding the General Meeting of Shareholders (“GMS”);
- Procedures for appointing, replacing and dismissing members of the Board of Directors and Board of Commissioners;
- Procedures for using profits and distributing dividends.
Amendments to the Articles of Association are made in the form of a notarial deed in Indonesian. After getting the notarial deed, then the amendment shall obtain approval from the Minister. In Article 21 of the Company Law, changes to the Articles of Association that must obtain Ministerial approval include:
- Name of the Company and/or place of domicile of the Company;
- The aims and objectives and business activities of the Company;
- Period of establishment of the Company;
- The amount of authorized capital;
- Reduction of issued and paid-up capital; and/or
- The status of a private company becomes a public company or vice versa.
Moreover, as stated in Article 21 para. (3) of Law 40/2007 that besides of any matters mentioned above, changes to the Articles of Association need to be notified to the Minister. Any amendment for Articles of Association shall submitted to the Minister in the maximum period of 30 (thirty) days from the date of the notarial deed containing the changes to the articles of association. Changes to the Articles of Association that do not require approval come into effect from the date of issuance of a letter of acceptance of notification of changes to the articles of association by the Minister.
As stated in Article 21 paragraph (5) on Law 40/2007, in a condition that the amendment to the Articles of Association is not included in the notarial deed of the GMS, they must be stated in the notarial deed no later than 30 (thirty) days from the date of the GMS’s decision. Amendment to the Articles of Association may not be stated in a notarial deed after the 30 (thirty) day deadline has passed.
In Article 23 of the Company Law, changes to the Articles of Association come into effect from the date of publication of the Ministerial Decree regarding approval of changes to the articles of association.
Procedure for the Amendment of Articles of Association
The GMS shall have the authorities not vested in the Board of Directors or the Board of Commissioners, within the limits set out under this Law 40/2007 and/or the articles of association. As stated in Article 75 of Law 40/2007, within the forum of a GMS, shareholders are entitled to acquire information relating to the company from the Board of Directors and Board of Commissioners, so long as it is relevant to the agenda of the meeting and not contrary to the interest of the company. Furthermore, the GMS shall be held at the place of domicile of the company or at the place where the company conducts its main business activities as set out under the Article of Association.
According to Article 19 of Law 40/2007, the amendment of the Articles of Association must be stipulated at the GMS. The GMS to conduct an amendment of the Articles of Association must meet the quorum for attendance and approval in accordance with the provisions of Article 88 of the Law 40/2007.
The GMS to conduct an amendment for Articles of Association can be done if at least 2/3 (two-thirds) of the total shares with voting rights are present or represented in the GMS. The resolution shall be valid if approved by at least 2/3 (two-thirds) of the total casted votes, unless the Articles of Association already sets out a greater attendance and/or provisions on the adoption of a GMS resolution.
According to Article 88, if the quorum has not been reached, then the Company should conduct the second GMS. The second GMS shall be valid and entitled to adopt a resolution if at least 3/5 (three-fifths) of the total shares with voting rights are present or represented in the GMS, and the resolution shall be valid if approved by at least 2/3 (two-thirds) of the total casted voted, unless the Articles of Association sets out a greater attendance quorum and/or provisions on the adoption of a GMS resolution.
The GMS for the change of Article of Association may also be conducted through the media of teleconference, video conference or other electronic media facilities that enables all participants of the GMS as stated in Article 77 of Law 40/2007. Therefore, the decisions taken at the GMS which are held through online meeting method are binding as the same way as the GMS which is held in offline meeting,
Furthermore, the shareholders can also make decision outside of GMS which the practice can be defined as the procedure of Circular Letter. According to Article 91 of Law 40/2007, shareholders may also adopt binding resolutions outside a GMS on condition that all the shareholders with voting rights approve them in writing by way of signing the proposal concerned.
The decision-making outside of GMS can be done without holding a physical GMS. Still, the decisions are taken by sending in writing the proposal to be decided upon to all shareholders, and the proposal is approved in writing by all shareholders. The circular letter is also forced and binding as the same as the GMS’s decision. Furthermore, suppose the shareholders sign the circular abroad; it should be legalized or apostille in the local country.
Author: Naomi Catherine Felencia
Gaffar & Co. is an Indonesian Boutique Law Firm focusing on commercial law, Investment Regulatory and Corporate Secretarial.
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