Company Establishment in Indonesia: Mandatory Organizational Structure

For many foreign entrepreneurs, once they have incorporated their companies, they would think that their jobs are done. However, this is not the case. Not only do you need to have a good understanding of the regulations of setting up a company in Indonesia, but you also need to have a good grasp of the mandatory organizational structure for the company.

An organizational structure in Indonesia may be confusing to foreign entrepreneurs. But, if you take the time to do it right, a strong organizational structure can boost your company’s efficiency tremendously, whether the company has only two employees or 300.

You need to ask yourself the following questions in your organizational structure early in the growth stage during company establishment in Indonesia.

• What are the roles of shareholder, director, and commissioner in your company?
• Who, in your company, is permitted to access your company’s bank account?
• When and how to terminate a commissioner or a director?

If you do not know the answer to those questions, the best thing to do would be to read this article until the end.

Mandatory Company Structure for Company Establishment in Indonesia

The hierarchy of the company structure in Indonesia goes like this:

• Shareholders
• Board of Commissioners (BOC)
• Board of Directors (BOD)

Shareholders of Company in Indonesia

On top of the hierarchy in a company structure are the shareholders. Shareholders, also known as stockholders, are the company’s owners and they inject capital or provide financial support in exchange for potential profits or dividends.

The daily business operations and activities of the company are not the responsibility of the shareholders. The main function of shareholders is to approve the decisions pertaining to the company’s performance and future goals in the general meeting of shareholders (GMS).

Board of Commissioners in Indonesia

The hierarchy is then followed by the Board of Commissioners or BOC. BOC supervises the company’s management regarding the company’s policies and gives advice to the Board of Directors. The effectiveness of those policies will also be monitored by the BOC on a continuous basis.

Board of Directors in Indonesia

Board of Directors, with the acronym BOD, are the company’s shareholders. They take the advice from the BOC and are responsible for the company’s overall operations and management in compliance with the Company Law in Indonesia. Compliance is achieved through the operational and strategic decisions by BOD.

Shareholders appoint the BOD to handle the daily affairs of the company. Oftentimes, BOD acts collectively but they can also give certain power or authority to members of the BOD.

Responsibilities of BOC and BOD in Indonesia

The main responsibilities of commissioners and directors of a company in Indonesia are:

Board of Commissioners

• Overseeing operations and supervise directors
• Analyzing budget for the next financial year
• Checking and approving financial statements

Board of Directors

• At least one Indonesian/local director must be present in BOD
• Dealing with third parties and maintaining partnerships with stakeholders
• Representing and managing the company
• Reporting to BOC
• Handling registers and minutes of GMS and BOD meetings
• Getting annual reports and other financial documents ready
• Maintaining the registers of shareholders
• Making decisions on behalf of the company (loan offers are not included)

How to Terminate a Director or a Commissioner

The termination of a director or a commissioner is performed through the shareholders’ general meeting. Below is the summarised process:

• A letter of termination will be provided by the company with the reasons for termination stated.
• The company will then hold a hearing with regard to the termination. The director or the commissioner has a chance to defend themselves.
• A signed statement letter is required as evidence that the defend opportunity has been granted to the terminated individual.
• The termination is finalized for the director or the commissioner.

How Cekindo Can Help with Business Setup in Indonesia

If you need further information on company establishment in Indonesia, do not hesitate to contact us by filling in the form below. You can also visit our offices in Jakarta, Bali, and Semarang.