THE INTERNAL CORPORATE
A. The Company Articles of Association (AoA)
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The Internal Corporate Documents The Company Articles of Association (AoA)
The AoA must include the following minimum provisions:6
• Name and domicile of the company;
• Company activities and purposes;
• Terms of the Company’ establishment;
• Capital structure: the amount of the authorized capital, subscribed capital, and paid up capital;
• the number of shares and classifications of the shares including number of shares for each classification
• Name, title and number of the board of Director and board of Commissioner
• Determination of the place and procedure to conduct the GMS;
• Procedures for the appointment, replacement, and dismissal of members of the Board of Directors and Board of Commissioners;
• the procedure for the use of profits and allocation of dividends.
In addition to the foregoing mandatory provisions, the company’s AoA may set forth other matters as agreed by the shareholders, but may not be inconsistent with provisions of the law.7
A. The Company Articles of
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The Internal Corporate Documents The Company Articles of Association (AoA)
The AoA should be amended when changes occur that affect any provisions. For example, a decision of the company to expand its business scope, amendment of the amount of the authorised capital, change its corporate name or its registered office, and other changes as stated in Article 21 of the ICL.
The amendment of the AoA which falls into the qualification of Article 21 paragraph (2) of the ICL, the amendment is subject to the MOLHR approval.
3. When to Amend the Articles of Association?
Pursuant to Article 19 of the ICL, only the GMS has the authority to stipulate the amendment of the AoA. The minimum requirements and thresholds set out in the ICL for the GMS regarding the amendments of the AoA are as follows:9
For public listed company, Article 83 of the ICL provides that the company is required to make an announcement in relation to the proposed GMS, at least 14 days prior to the date of GMS invitation.
4. Who can Amends the Articles of Association?
9 ICL, Article 88
Matters Notice Quorum Voting
Amendment of AoA(1st meeting) Amendment of AoA(2nd meeting)
Amendment of AoA(3rd meeting)
14 days prior notice
7 days prior notice.
The GMS may be convened within 10-21days after the preceding GMS 7 days prior notice.
The GMOS may be convened within 10-21days after the preceding GMS.
At least 2/3 of the total number of shares with legal voting rights.
At least 3/5 of the total number of shares with legal voting rights.
Based on the decision of the Chairman of the District Court.
At least 2/3 of the total number of votes legally cast at the meeting.
At least 2/3 of the total number of votes legally cast at the meeting.
Not expressly prescribed under the ICL,
however, undercurrent interpretation governed by Article 87(2) of the ICL, namely, more than ½ of the total number of votes legally cast at the meetin.
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The Internal Corporate Documents The Company Articles of Association (AoA)
The amendment of the AoA may only be conducted through a GMS, stating clearly the agenda items regarding the amendments of the AoA in invitations to a GMS.10 A special treatment is applicable for a company which has been declared as bankrupt, the amendment of said company being subject to the approval of its receiver.11
The amendment of the AoA is stipulated by the GMS. If there are any objections to the matters for the amendment, it has to be resolved by in the GMS. In addition, pursuant to Article 27 of the ICL, the amendment of the AoA must be rejected if it is contrary to the provisions regarding the procedures for amendment of the AoA, the content of the amendment are contrary to the provisions of legislative regulations, public order and/or morality, or there is any objection from the creditor upon the GMS decision regarding the decrease of the capital.
5. How to Amend the Articles of Association?
6. Objection to the Amendments of the Articles of Association
Best Practices
It is accepted practice that the company, through its legal counsel/
department, prepares the AoA amendments in cooperation with external legal consultants and with the participation of the Corporate Secretary.
The President Director should closely follow the process, in order to ensure that provisions of the AoA are formulated in accordance with the Board’s guidelines. The final text of the draft proposal must be evaluated and accepted at the Board of Directors meeting. That text will be submitted to the GMS as a proposal.
10 ICL, Article 19 11 ICL, Article 20
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The Internal Corporate Documents The Company Articles of Association (AoA)
The amendment of the AoA has to be acknowledged or obtain approval from the MOLHR. Article 21 paragraph (2) of the ICL stipulates that several amendments have to be approved by the MOLHR for the following matters:12
a. name of the company and/or the domicile of the company;
b. activities and purpose of the company;
c. terms of the company;
d. the amount of the authorized capital;
e. decrease of the paid-up and issued capital; and
f. change of the status of the company from a private company to a public company or vice versa.
For any amendment other than those stated above, only an acknowledgment from the Minister is required.
7. Acknowledgement and Approval from the Minister of Law and Human Right (MOLHR) to the Amendment of the Articles of Association
The amendment of the AoA which requires an approval from the MOLHR becomes effective as of the issuance date of approval, meanwhile for such amendments which only need to be acknowledged, they become effective as of the issuance date of the acknowledgement letter by the MOLHR. However, in regards to the change of status of the Company and in the context of a merger and acquisition, they shall apply the provisions as stated in Article 25 and 26 of the ICL.
In accordance to the Article 25 of the ICL, amendments to the AoA regarding a change in a Company’s status from a Private Company to a Public Company come into effect on:
a. the date on which the statement of registration submitted to the capital markets supervisory institution enters into effect for a Public Company; or
8. When does the Amendment of the Articles of Association Become Effective?
12 ICL, Article 21
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The Internal Corporate Documents The Company Articles of Association (AoA)
b. public offering is made by a Company submitting a declaration of registration to the capital markets supervisory institution to make a public offering of shares in accordance with the capital markets legislative regulations provisions.
The AoA are an important source of information for shareholders and potential investors. The original AoA document, as well as all its amendments, should be kept at the registered office of the company. Shareholders of the company are entitled to inspect and copy the AoA and its amendments.
The register of Companies shall be open to the public.13 According to Article 30 of the ICL, the MOLHR publishes the deed of establishment. The MOLHR shall announce in the Supplement to the State Gazette of the Republic of Indonesia14:
a. deeds of establishment of Companies together with the MOLHR’s Decree b. deeds of amendment to Companies’ AoA together with the MOLHR’s Decrees c. deed of amendment to AoA notification which has been received by the MOLHR The announcement above shall be made by the MOLHR no later than 14 (fourteen) days as from the date of the issuance of the MOLHR’s Decrees or as from the receipt of the notification.
9. Disclosure of the Articles of Association
13 ICL, Article 29 paragraph (5) 14 ICL, Article 30
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The Internal Corporate Documents The Internal regulations of a Company
Internal regulations are internal company documents that specify the AoA provisions and may contain any provision for managing the business and regulating the affairs of a company.
Internal regulations may be an optional or compulsory subject to each type of internal regulations and each type of company. In any case, the company’s internal regulations must be consistent with the AoA and cannot conflict with legislation. As between the AoA and internal regulations, the AoA are the dominant instrument so far as their provisions are mutually conflicting, the AoA prevail.
The company has no obligation to register its internal regulations with the business registration authority for the purpose of establishment. In other words, the company may be formed and may exist without the internal regulations. The application for the formation of the company does not have to be accompanied by the internal regulations.
There are various types of company internal regulations:
• Corporate governance internal rules which are required for listed companies.
(see section C of Chapter 3 below)
• Internal labor rules which are compulsory for all companies with 10 or more employees. According to the Article 1 point 20 of the Manpower Law, a company regulation is defined as written regulations made by the company and containing the working terms of the worker and the company’s code of conduct. It is an obligation for companies employing at least 10 workers.15 The obligation to establish a company regulation is not applicable for companies who already owned a collective working agreement (perjanjian kerja bersama). The Manpower Law stated in Article 111 that a company regulation must at least contain several things as follows:
a. rights and obligations of the entrepreneur/company;
b. rights and obligations of the workers;
c. working requirements;
d. code of conduct of the company; and e. validity period of the company regulation.