In Indonesia, your job as an foreign entrepreneur when starting your company does not stop after you have finished the company incorporation.
Not only that you need to have a deep understanding of the statutory requirements for setting up and operating a company in Indonesia, but you will also need to possess a good interpretation of the mandatory organisational structure in the country.
Within the organisational structure, a resident director is compulsory and it plays a vital role in the company’s operation.
In this guide, you will have a better understanding of what the mandatory organisational structure is and the things you need to know about the resident director in Indonesia.
Mandatory Company Structure in Indonesia
In accordance with Indonesian Law, an Indonesian organisational structure for both local and foreign companies must have a minimum of one director, one commissioner and two shareholders.
The company structure’s hierarchy can be summarised into:
- Shareholders
- Board of Commissioners (BOC)
- Board of Directors (BOD)
If a company in Indonesia has foreign ownership involved, the company should then have at least one resident director.
The Necessity of a Professional Non-Executive Director in Indonesia
The Indonesian Company Law states that foreign-owned limited liability companies (PMAs) are required to have one resident director at the minimum for their board of directors. As the name implies, a resident director must be a resident of Indonesia.
A resident director, also recognised as a professional non-executive director by foreign investors, plays a critical role in the company’s managerial hierarchy. The role of a resident director is below the shareholders and the BOC and they are in charge to make sure that all shareholder’s strategic objectives are met and to report the company performance to the company’s shareholders.
Though reporting to shareholders, a resident director is not an employee of the company and they can only be appointed or removed by the shareholders.
There are many other reasons companies require a resident director, which are often overlooked by many businesses. Some of the reasons are in the following:
- It is part of the regulatory requirements
- A resident director is involved in the company’s day-to-day management
- Leads employees to achieve strategic goals and objectives
- Acts as the signatory to the back account of the company
- Serves as the company’s representative and represent shareholders’ view
- Signs agreements and contracts on behalf of the company
- Takes out loans and mortgage company assets for company’s capital raise
- Accelerates and facilitates the receipt of employment visa for new employees
Eligibility for Being a Resident in Indonesia
In order to be eligible for being a resident director in Indonesia, the individual must be a resident or a local.
Therefore, a resident director has to fulfill either one of these requirements to be regarded as an Indonesian resident:
- An Indonesian citizen with a tax ID
- A foreign individual with valid Indonesian work and stay permit (KITAS)
- A foreign individual with valid permanent residency
