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2. Paripuma P. Sugarda (Dea4 Faculty of Iaw, UGM)
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(Dean'
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Organizations
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ALIN
Business, Repofi on the
(Manager' Inter2012-2013: Junseo LEE
TF' KLRI)
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b. President (KLRI)
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a. Denny Indrayana, 5.H., LL.M, Ph.D. (Yice
Minister of Law and Human Rights) and
b. Ir. M. I,{awir Messi, M.Sc. (Chairman of
Commission of Business Competition
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Moderator: Ms. Linda Yanti Sulistiawati, 5.H., M.Sc., Ph.D. (Lecturer, Faculty
of
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The Role of
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Iaw
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Faculty of
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of
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(l) Ningntm Natasya Sirait, 5.H.,
M.LI.
Paripurna P. Sugarda (Dean, Faculty
UGM)
Discussants
(Professor, Universitas Sumatera Utara)
(2) M. Hcrwin (Professor, Faculty of Law, UGM)
15:10
16:00
Room
Conference
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session #2
Faculty of
Law
UGM.
The Iatest Developmerts of Chinese Corporate Law
Presenter
Junhai Ziz (Professor, Renmin University)
Discussants
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Hyun Yoon Shin (Dean, Yonsei University
Law School)
(2) Aishah Bidin (Dean, Faculty of Law,
National University of Malaysia)
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b. President (KLRI)
2. Keynote Speeches from Indonesian Gov't
a. Denny Indrayana, 5.H., LL.M., Ph.D. {Yice
Minister of Law and Human Rights) and
b. Ir. M. Nawir Messi, M.Sc. (Chairman of
Commission of Business Competition
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Moderator: Ms. Linda Yanti Sulistiawati, 5.H., M.Sc., Ph.D. (Lecturer, Faculty
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Faculty of
Presenter
Law UGM,
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The Role of Indonesian Antimonopoly I-aw in
Encouaging fte Realization of Economic Democracy
Paripurna P. Sugarda (Dean, Faculty
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UGM)
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Hcna)in (Professor, Faculty of Law, UGM)
(2) M.
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l6:00
Faculty of
Ed
Law
UGM.
The Iatest Developments
of
Chinese Corporate Law
Presenter
Junhai
Ilz
(Professor, Renmin University)
Discussants
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Hyun Yoon Shin (Dean, Yonsei University
Law School)
(2) Aishah Bidin (Dean, Faculty of Law,
National University of Malaysia)
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of Malaysia)
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Joung Mee Han (Senior Research Fellow'
KLPJ)
(2) Sulistiowati, 5.H., M.Hum (Professor, UGM)
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Paripurna P. Sugarda (Dean, Faculty
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Tour of Ulen Sentalu
15:15
Retum to Hotel (Transportation by UGM)
CONTENTS
Session
The Role
of
I
Indonesian Antimonopoly Law
in
Encouraging
the Realization of Economic Democracy
PRESENTER Paripurnu P.
Sugardu
""""" """"""
1s
(The Role of Indonesian Antimonopoly I-aw in Encorraging the Realization of
""""""'1'7
Democracy)
Fronomic
Law
a. Economic Effrciency Approach
b. Protection Competitors and Fair Competition
1. The Objective of Antimonopoly
2. Indonesian Economic
3. Public
"""""""""""""" 21
"""" 21
"""" 23
Democracy
Interest
""
4.
Conclusion
5.
References
Presentation Slides " "
"""
DISCUSSANT Ningrum Natasya
DISCUSSANT M.
"
Hawin
Siruit""
"""""
25
"" """ " ""
28
"""""" "" " 30
""""" """""""
31
""""""
33
""""""'4s
""""""" "" """"'47
----
II
Session
Action in
and Shareholder's Derivative
Diligence
of
DutY
Directo/s
China
PRESENTER
Junhai Liu "
to
'
(DirectofsDutyofDiligenceandShareholdet'sDerivativeActioninChina)
Lrye v China Securities
litigation case of Ding
l.
The administrative
implications and questions
Regulatory Comml*'iont
2. rhe interpretation orrhe:j*t"t:.
" """
of Corporate Law of 2005
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the definition
"1bodies ""'
3. rhe efforts to clarifv
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and self-regulatory
;;;;istrative
t,1,1
f,l
the board meeting'
of the directors regarding
4. The diligence requirements
rule (BJR) in China
the business judgment
t':
5. The introduction of
duty of diligence
suits to enforce director's
6. Encouraging derivative
Presentation Slides
DISCUSSANT
'
I/Yzn Yoon Shin
-ilffi;;";;)
of Ditigence and
(commentaries on 'oDirector's Duty
1. Duty of care
/
Business Judgment Rule
Action
2. Shareholders' Derivative
3.
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Sharehot*.:.':n*l
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""" """ "
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Gross Negligence Standard"""
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Questions
DISCUSSANT
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Biitin
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Shareholdet':
Duty of Diligence and
(Commentary paper on Directot's
in China)
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11-
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1.ShouldtheStatutoryDerivativeActionrepea1the.................l]:
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2. Common Law Derivative
Action?
derivative action
3. Scope of the statutory
""""""'
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4.ThelssueofstandingtorrsetheStatutoryderivativeaction..........'.'......'1:
"""""""""'
5. Costs of proceedings
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6. CONCLUSTON
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Senior Lecturer at Faculty of Law Universitas Gadjah Mada
corporate law, capital market law, general commercial law,
and international business transaction law
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I Lecturer at Faculty of Law Universitas Gadjah Mada
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I Lecturer at Graduate School of N{anagement Universitas Gadjah Mada, Specializitg in general
commercial law.
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Head
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Specializing in intellectual properfy law.
2007
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sulisfyowatiugm@yahoo.co.id
TTM SPIRIT OF BUSINESS JUDGMENT RULES WTTIIIN
INDONESIAN LIMITED LIABILITY COMPANY ACT
By
Associate Professor Dr. Sulistiowati S.H., M.Hum.
Universitas Gadjah Mada - Indonesia
Faculty of Law
ABSTRACT
Law Number 40 of 2007 regarding Limited Liability Company becomes the
most fundamental rules that regulate companies in Indonesia. One of the most
interesting features given by the Limited Liability Company Act is the broad authority
of directorship to run the management and administration ("daad van beheer"). The
idea is based on the agency theory that gives clear division between the ownership of
the company that is held by the shareholders and the management of the company
that is vested to the directors. Therefore, the directors owe fiduciary duty to the
company (in this regard, the shareholder's interests) and possess a very broad
responsibility as the consequence of the authority given by the Limited Liability
Company Act of Indonesia. Nevertheless, as a human being, the appointed director
may suffer certain kind of conflict of interest that may result to an agency problem.
In order to overcome possibilities of conflict between the policies made by the
directors and the interests of the company, clear guidance and limitations needs to be
provided. The guidance will give the basic rules on how to carry out the company's
fiduciary and meet it with the personal capacity of a director in undertaking
day-to-day's management. Normative ideas on Good Corporate Governance are to be
ensured especially when it comes to a discussion on the fiduciary duties owed by a
director. In certain situation where the director had fulfilled its duties as a fiduciary,
therefore, the discussion of Business Judgment Rules can be continued. Lucid
apportionment and implementation on Business Judgment Rules also needs to be
guaranteed to achieve the best outcome a director can make under its authority to
tmderlake lhe bes/ o?lloft
fcr lhe
com?aftF.
169
PHILOSOPHICAL BASIS
It is
strongly believed that before
Judgment Rules doctrine, there
preliminary points
in
a
further discussion on the
are some elements need
order to understand the scheme
of
Business
to be covered as the
of the doctrine as a whole. The
a limited liability company, apart from the idea of
limiting the liability up to the personal wealth of the shareholders (beperhe
fundamental idea
aanspraakelijkheid),
having
is the division of company's management team and the owners of
the company.
The shareholders as the owner of the company do not take care of company's
in this regard, will be appointed and entrusted by the
to run the management.5) It would be premature to establish a discussion
management. The directors,
shareholders
upon the director's role, which may lead
Judgment Rules doctrine, before taking
constructing the idea
of
a
to a
fuither discussion upon
comprehensive elaboration
on
Business
it. Before
shareholders' duty, there should be an introductory elaboration
on how Malaysian Company Act sees the division between ownership of a limited
liability company and the management team. That very perspective would be the basis
for having a further discussion on the regulation of the director's role and to
create
the guidelines in determining director's liability in managing the company
accordance
in
with the duties vested to them.
In the light of the agency theory, a preliminary
upon the agency problem. As
a
nature
of
discussion shall also be made
human being, directors as the agents
company - at cefiain point- may be comrpted by the power vested to them.
of the
In a very.
ideal view set out by the agency theory, the directors shall be responsible in carrying out
the fiduciary given to them. Therefore, the owners of the company shall have
certam
to assure the fulfillment of directors' role. The company law will set out the
limitation of the directors' authority in managing the company. If a director is actin_e
measure
beyond the authonty vested to them, said situation
will be considered as an ultra
5) M. Yahya Harahap,2011, "Hukum perseroan Terbatas", sinar Grafika, Jakarta, p.59
t70
vires.
limitations for each board
in the system.
Whilst Malaysian Companies Acr 2965 prescribes that there should be at least
two directors within a company, Indonesian Limited Liability Company Act in
have't"'l 1 (one) or
Article 92 Sub-Section (3) gives the possibility to
directors
to
[...]" within the Company.
Malaysian Company
Nevertheless, there
the
more
is a unique feature - similar
Act- vested in the Sub-section
4 of the same Arlicle
that
requires every Company that collects fund and/or manages capital from the public, or
issued
a
debt-acknowledgement letter
to the public, or Public
Perusahaan Terbuka) shall have at least
Despite the idea
nature
of
directorship
of
2 Directors within the
two-board system,
I
Section
Company.
it is acceptable to consider that the
is central to company law in
Limited Liability Act Article
Company (Tbk. or
general. According
to Indonesian
5, Directors are "["']a body of a
compan,v
that possesses authority and fully-responsible for the management of the company in
accordance
to the
interests
company, including
rules specified
of the company
based on Purposes and Objectives
of
the
to represent the company outside or before the court based on the
in the Deed of
Establishment."
Directors are fiduciaries, because
if
there
is a body within a
company that
to execute day{o-day management and undertake decisions, that
would be the board of directors.6) Said idea applies in Indonesian Limited Liabilitl
should be reliable
Company
Act. The power vested to the directorship is very broad so that Arlicle
Section (1) prescribes that the authority
Objectives
of the Company". In
of a director
addition
explains that the authority mentioned
to that,
shall refer to the "Purposes
Section (2)
92
and
of the same Article
in the previous
Section shall be understood to
"["']
that is considerably appropriate
the extent that directorship may execute policies
for the company, within the guidelines and limitations that can be found within the
prevailing laws of this act and/or the Deed
of
Establishment".
The idea of reliability is emphasized on the power vested to the directorship.
Especially when
it
comes
to the broad authority given by Indonesian Limited Liabilit-r
6) Alastair Hudson, Stephen Girvin,
London, Chapter 7 p.1
Sandra Frisby, 2010, "Charlesworth's Company
112
Law", Sweet
&
Maxu'el1.
Act that may comrpt the
Act shall be able to
the role
r * -::
of
directors themselves. Therefore, Indonesian Limited Liability
accommodate features that can guarantee
directors,
in
the GCG Principles in
order to create clear distinction on "what-to" and "what
not-to" do.
MEASURES PROVIDED IN THE LAW NO. 40 OF
2OO7 TO ASSURE THE FULFILLMENT OF GOOD
CORPORATE GOVERNANCE PRNCIPLES
i :{r-
Board of Commissioners
Iir[
1]:
Before the discussion continues further on the spirit
i-.---
L l---"lL
Rule,
'e-
rsqi
-:
it is
provided
necessary
to
of
Business Judgment
point out several measures that Indonesian
in the latest changes of Law on Limited Liability
Legislators
Company. The most basic
that the legislation provides within its rules is the existence of Board of
;,i
:-l ,
assurance
L[
-l:
Commissioners.
Article 1 Section
6 of Limited Liability
Company Law defines the
Board of Commissioners as a body of the company that gives supervision in general
L4
J*,
and/or specific
to the directors including to give advice in
in the Deed of
Establishment.
accordance
with the rules
Said definition indicates that the directorship shall be subjected
LJ&Lrr rr*
supervision
t$Si rI
r
of the Board of
Commissioners, and advices given
to
by the Board shall
the
also
be taken into the directors consideration in making the policy for the company. Based
on that concept, the Law No. 40 of 2007 provides assurance on the accountability of
the directors' function in running the management of the company.
fffir]rI
iEIImr-.*;
r
ltr,rn'm
I
i,l
Board
of
Commissioners' authority
through several measures such
to
superuise
the directors can be
as:
1) Running a financial audit over the company;
numhit::
[-r&riL:-
2) Overseeing the organizational structure of the company;
3) Supervising the human
resources.T)
luEli[i !
7) M. Yahya Harahap, 2011, Op.Cit. p.
439
173
done
Advisory function of the Board can also be done through various methods. it
can be given
in the form of
considerations, giving directives, even warning
for
the
directors upon certain matters within the company. The most important issue needs to
be
ensured when the Board gives
its supervisory function is
regulated under the
Article 108 Sub-Section (2) that the advices shall be made for the interests of
the
company on1y.8;
Ensuring the Element of the Directors' Capability
Indonesian Limited Liability Company
Act also provides distinctive
features
that require certain criteria for anyone who would like to be appointed as a director.
Said requirements exist
to
obligation
to ensure the capability of the director when it
manage
comes
to
the
the company. Article 93 of the Law point out basic
requirements and certain prohibitions for being a director
in
Indonesian Company.
The two most fundamental requirements are the director shall be a person or
individual and capable before the law (bevoegd). In this regard, the law indicates that
rechtpersoon
or legal entity
or
cannot be chosen
appointed as
a director. In
addition,
is to be made to Burgerlijk Wetboek of Indonesia if it comes to the
discussion of bevoegd or personal competency before the law. In line with the
regulation pointed out in Burgerlijk Wetboek, Walter Woon indicates that the
reference
minimum age
there
to
consider someone
is
is no maximum age criterion for
director
in
Indonesia.
In
capable before
the law is 21 years old,
anyone who would
and
like to be appointed as
addition, said person shall not be mentally disturbed and
a
is
not put under anyone's custody.e) There is no further criterion upon the capability of
someone
to be
appointed
as a director.
If
"foreigner" can be appointed as a director
there
in
is a
Indonesia,
question whether
the law is silent upon
matter. Therefore, foreign nationalities can be appointed as
company. The
or not a
a director of
law is also silent upon the criteria of minimum
that
Indonesian
educational standard
8) Ibid, p.441
9) Ibid, p.354, see also Walter Woon, 1998, "Company Law", Longman Singapore Publisher Pte. Ltd.,
Singapore,
p. i65
t74
methods. It
ing for
re
the
needs to
I rmder the
for being a director.lo)
Despite there are no criteria on the basic educational standard, the elucidation
of Article 92
Sub-Section (2)
in the Law articulates that "the considerably
policy" refers to several criteria such
re*s of the
1)
Sha11
appropriate
as:
be made based on the skill sourced from knowledge and expertise of
the directors;
2) Based on available opportunity that is favorable and suitable for the
company;
3) Based on common business practice that a reasonable person in the directors'
ire
ttatures
a
director.
mes to the
rxlt
tF)'.
basic
position would have taken similar policy.ttl
Therefore, the Law implicitly requires the existence
expertise owned
certain knowledge and
by the directors in order to run the company well. The liability of
company's management
will be based on those abilities, despite said knowledge and
expertise can also be obtained without taking any formal educational level.
I lxrson
On top of those requirements, there are also several prohibited situation that
or
ilicates that
will block
h additions to the
r q-ith rhe
i that rhe
r old- and
ified a*. i.
Limited Liability Company Act.
hed anc
:,<
p$ihr-r ri
someone's opportunity
to be appointed as a
is within the last 5 years declared as bankrupt, or found guilty for causing bankruptcy
for a company while sitting as a board of directors or board of
company,
or found guilty for
of financial crime
causing state's financial losses
cannot be appointed as
It is clear that Limited
personal records
of
a
or involved in any kind
of Indonesia considers the
of a director is very important to reflect its capability in running
the
in the Article try to prevent the
the same mistake in the new company. It is inevitable
company's management. Said prohibitions set out
Ilpoc ::.ir
that said rules is very disputed because
of a person in
in the field of
doing
Indr-rne:1ro.
practice
f, mu,rrl
as irrelevant based on the issue
ir
commissioners
a director.
Liability Company Act
tendency
-
director based on Indonesian
It is prescribed in the same article that someone who
trnoi&
Itr Ih.
of
l0) Ibid,
l1) Ibid,
if reference to be made to American common
company law, said prohibitions are inapplicable and considered
of "equality
p.354-355
p.372
t75
before the law". Nevertheless, Indonesian
Act tries to ensure the highest protection in
throughout its territory. As cicero said, Summun
Limited Liability company
the
of
Ius
development
companies
Summa Iniura, the highest justice
is the highest injustice'
Director's Responsibility and Accountability through Annual
Working Plan and Company's Budgeting Report
Obligation
to
run
the company's management is the main obligation of
director. Thus director holds
a
management function
a
that comprises planning'
It is necessary for a director to
as the guidance to run the management of the companl'
organizing and controlling organizational resources.t2)
a working Plan
establish
throughout
a
in
fisca1 Year. The working plan shall also be accountable and reported
is the board
the end of fiscal Year in order to be reviewed by its supelisor, which
of
commissioner.
Said measures are ensured
requires Directors
or
to
in
Indonesian Limited Liability Company
Act
that
(RKAP
establish Annual working Plan and company's Budgeting
Rencana Kerja dan Anggaran Perusahaan).
The obligation to establish RKAP
is
of Director's Role Principle that consists of obligation to hire and fire top
plans
officer, set compensation for top corporate officers, develop succession
also a parl
corporate
for key colporate officers, set budgets, review and approve financial
disclosures,
set
of debt and equity claims'
fulfrll legal
approve capital budgets (limit below which board does not review),
dividends, approve capital structure and approve issuance
requirements, idiosyncratic: attend
to
environmental and political issues, and respond t"
crises and other challenges that only arise
in specific
situations.l3)
Act, th:
According to the Arlicle 63 and 64 of the Limited Liability company
contract between
Annual Working Plan and Company's Budgeting is a management
the
to protect t1:;
directors and the commissioners as the supervisory body, in order
of Shareholders' Th.
interests of the company which is also the interests of the Board
t2) Richard L. Daft, 2006, "Manajemen",
Salemba Empat, Jakarta' p 6
Govemance on The Boarcl Room conference", Kellog
of
Chicago, Illinois, p'80
Management, Northwester University
L3) Thomas
z. Lys, 2008, "Corporate
t76
Schooi
Working Plan will set out performance indicators for the directors throughout the fiscal
year. Indonesian Limited Liability Company Act tries
to
ensure binding guidelines for
the Directors to carry out the fiduciary duty vested to them by the company. Unability
to conform with the performance indicators set out in the working plan will lead to
an
imminent possibility of dismissal for the directors position.
The idea is also applied to the Company's Budgeting. Directors in a company
shall set out the Budgeting Forecast in the early fiscal year. The budgeting document
will be the guideline for the directors in managing the company's finance along the
year. In the end of fiscal year, the budgeting plan will also be assessed and shall be
delivered by the Directors to both Board of Commissioners and Board of
Shareholders. According to the stewardship concept, the objective of making financial
reporl in the end of fiscal year is to show what the directors had beeen done along
the year over the company's financial resources. It is used to ensure the responsibility
of the directors
towards the fiduciary given
by the company to manage its own
assets
and capital.l+)
In
addition, Indonesian Limited Liability Company
Act gives possibilities for
the Directors and the Company to use the RKAP as the "basic test" that leads to the
further discussion on business judgment rules concept.
DI]TIES OF THE DIRECTORS AND THE
EXTENDED FIDUCIARY DUTY TOWARDS THE
COMMISSIONERS
Directors as fiduciaries shall be liable
According
owned
to
for the
management
of the company.
Indonesian Limited Liability Company Act, there are several basic duties
by the directors in running their function.
14) Slamet Sugiri Sodikin, Bogat Agus Riyono, 2012, "Akuntansi:
Tinggi Ilmu Manajemen YKPN, Yogyakarla,
p.1
177
Pengantar
1", Eighth Edition,
Sekolah
Duty to Manage the Company
Article 97 of the Limited Liability Company Act articulates that the directors
shall be responsible for the company's management as prescribed under Article 92
As
explained before, Article
in running the
function
92 (1) gives a very broad power for the
company based on the purpose and objectives
(Il.
directorshrp
of the compan\
and shall take the measures that are to be considered as appropriate for the compan\'.
The management of the company as prescribed by the law shall also be referred to
the prevailing laws and regulations and the Deed
of
Establishment
of the company.
Duty of Exercise Good Faith Principle and Responsibility
It
would be insufficient to consider that fiduciary duty owed by the directors
shall only be based on the pulposes and objectives of the company. The management
of
shall also be done based on the principle
good faith and responsibility towards
what the directors have undertaken. The good faith principle or goeder trouw
extended
in the practice and legal
is
doctrines as follows:
l) Fiduciary Duty
The directors are entrusted by the company to run the management. Therefore
in
running their function they should
(trustworthiness) and shall always
Harahap
in his book "Hukum
Marshall explains an idea that:
as he
is
be
based
on the bona fide principle
be honest in running their function. M.
Perseroan Terbatas" elaborated that
"["']
Yahya
MC Oliver and EA
a director is permitted to be very stupid so long
honest".l5)
15) M. Yahya Harahap, Op.Cit.,
Eleventh Edition, The
M&E
p. 374, see also: MC Oliver and
Handbook Series, p.313
178
EA Marshal, 1991, "Company
Law".
2) Duty to Act For A ProPer
PurPose
The management of the company shall also be undertaken through proper
interest of
measures. The idea is to balance out the action of the director in every
EElUms
3 t;
the company. The proper measure means that every interest of the company is to
uMur
be
considered and taken care of.
W:;
@a
3) Statutory
DutY
md rr
The directors also owe statutory duty that requires them to be conformed with
the prevailing laws and regulation including the Establishment Deed of the company'
take
Statutory duty leads to the obligation for the director to obey the law and shall
Nti-
into consideration every related rule existed in Indonesian legal framework in taking
any policy for the company. Conducting onrechtmatig daad or unlawful act would
m(ilurs
@rr
violate the duty of the director to run the company in good faith.
lmrnm[i
personal liability
of the director towards losses
It
may lead to the
occurred'16)
Im5
4) Loyalty Duty
The directors also owe loyalty duty to the company.
keep confidential information
crffirr
I@'rf
towards its position.
of the company and
It
includes obligation to
maintain the trust
In this regard, the loyalty duty
terms
of the company
is equal to the good faith
duty prescribed above.l7)
Y@*
Dd E-r
o
lo-'rnn
5) Duty to Avoid Conflict of Interest
As a human being, the director is obliged to manage its personal interest and
try not to be commingled with the interest of the company. Especially, when said
conflict leads to an unfavorable situation for the company and brings certain benefit
towards the director's personal interest.
Dayden Pressm
16) Howell, Allison and Prentice, "Business Law, Text and cases", Fourth Edition, The
m
[",,,rp
"
1988, p.870
17) Ibid,
p.
870
179
Obligation to avoid conflict
of
interest comprises several elements such
as:
Obligation not to use company's wealth for his own interest;
Misuse the company's information for his own interest;
Misuse his position to obtain personal benefit such as being bribed;
Taking the company's profit partly or wholly for his own benefit;
Making personal transaction with the company (affiliated transaction); and
Prohibition to make competition with the company
Duty to Run the Company in Due Care
Duty of the due cares or known as prudential duty is also a duty owed by
the directos
tolerable
cares
in the company. Careless management or negligence
by the
company under this very duty. The basis
is the kind of
to
would not
analyze the duty
be
of due
care that an ordinary prudent person would do. Every
policymaking shall be undertaken based on reasonable judgment and the director shall
take into consideration every appropriate element that need to be considered. In this
particular situation, necessary enquiries can be made
Commissioners.
function
by the director to the Board of
This action can be done based on the supervisory and
of the Board of
Commissioners
advisory
in the company.
Extended Fiduciary Duty towards the Board
of
Commissioners
As explained in the previous part, the Directors can make certain enquiries
the Board of
Commissioner. Indonesian
Limited Liability Company Act
to
gives
possibility for the Director to do so, not only to obtain the advices from the Board
of
Commissioners
but also to
release partly
of the Directors fiduciary duty to
the
Commissioners.
In
lndonesian legal context, the Board
lrduciary duty within certain extent.
Commissioners owes fiduciary duty
the director
in
of
Commissioners also
In the Article
possesses
114 Sub-Section (2),
to run the superuision and
the
advisory function to
good faith and due care. The next sub-section of the same article
180
articulates that failure
Commissioners
jointly
to
conform
with its obligation will put the Board
of
liable.
M' Yahya Harahap
prescribed that member
always be honest and bona fide
in
of Board of
commissioner shall
running their supervisory and advisory function
within the company. The implementation of their function shall
be done in a proper
purpose' Even more, the Board of Commissioners also
possesses statutory duty,
loyalty duty, duty to avoid conflict of interest and shall be
run in reasonable skill
and diligent
in all condition or
circumstances.ls) Therefore, that very feature gives
very distinctive legal system for company law
framework of fiduciary duty analysis.
in
Indonesia especially
in
a
the
BUSINESS JUDGMENT RULE WITHIN THE
LAW NO. 40 0F
2007
The management of a company is entrusted ultimately to the
directors, function.
A
company
is a rechtpersoon, which is
Therefore, reliability
of a
unable
to physically
director should not be compromised
interest, personal incapability or even small errors and mistakes
Neveftheless, director
conduct the management.
is also a
by any conflict of
in undertaking
decisions.
human being that can be comrpted, might take some
bad decisions and do some enors along the way.
Business judgment rules
seles as the balancing norm that try to
ensure that
the directors take the best measures in running the company,
but in the other hand
also gives some room for unpredictability of the future that
may lead to ceftain losses
for the company'
Business judgment rules
is a nofin that
ensure the innocence
of
the
directors for certain losses or possible lawsuit towards the company
as a result
of
the
directors' policy making, provided that the policy making has
been conducted based
on the utmost good faith and principle of prudential.re)
18)
M.
Yahya Harahap, Op.Cit., p.455-459
19) Angela scheeman, 1997, "The Law of corporations, Partnerships,
and Sole proprietorship,,, Delmar
Publisher, Albany, p,2'15 see also Ridwan Khairandy, 2009. "perseroan
Terbatas: Doktrin, peraturan
Perundang-undangan, dan yurisprudensi", Revise
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Welcome Addresses
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2. Paripuma P. Sugarda (Dea4 Faculty of Iaw, UGM)
3. Marc Spitzkatz (Director, KAS)
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09:00
1
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(Dean'
Paripurna P' Sugarda
FacultY of Law, UGM)
Moderato
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SPeech
(Dean' Faculty of
a. Paripurna P' Sugarda
Law, UGM)
b. PRESIDENT, KLRI
3. lntroduction of ALIN Partner
4.
Introduction
Organizations
of New Partners and ALN
ALIN
Business, Repofi on the
(Manager' Inter2012-2013: Junseo LEE
TF' KLRI)
national Legal Collaboration
Business
for 2014 Conference
5. Election of Host Partner
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a. Paripurna P. Sugarda (Dean, Faculty of
Law, UGM)
b. President (KLRI)
2. Keynote Speeches from Indonesian Gov't
a. Denny Indrayana, 5.H., LL.M, Ph.D. (Yice
Minister of Law and Human Rights) and
b. Ir. M. I,{awir Messi, M.Sc. (Chairman of
Commission of Business Competition
Supervisory)
Moderator: Ms. Linda Yanti Sulistiawati, 5.H., M.Sc., Ph.D. (Lecturer, Faculty
of
Law UGM)
l4:10
l5:00
Room
Conference
3.1.1.
session
#l
The Role of
Indonesian Antimonopoly
Iaw
in
Encouaging the Realization of Economic Democracy
Faculty of
Presenter
Law UGM.
of
Law,
(l) Ningntm Natasya Sirait, 5.H.,
M.LI.
Paripurna P. Sugarda (Dean, Faculty
UGM)
Discussants
(Professor, Universitas Sumatera Utara)
(2) M. Hcrwin (Professor, Faculty of Law, UGM)
15:10
16:00
Room
Conference
3.1.1.
session #2
Faculty of
Law
UGM.
The Iatest Developmerts of Chinese Corporate Law
Presenter
Junhai Ziz (Professor, Renmin University)
Discussants
(l)
Hyun Yoon Shin (Dean, Yonsei University
Law School)
(2) Aishah Bidin (Dean, Faculty of Law,
National University of Malaysia)
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b. President (KLRI)
2. Keynote Speeches from Indonesian Gov't
a. Denny Indrayana, 5.H., LL.M., Ph.D. {Yice
Minister of Law and Human Rights) and
b. Ir. M. Nawir Messi, M.Sc. (Chairman of
Commission of Business Competition
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Moderator: Ms. Linda Yanti Sulistiawati, 5.H., M.Sc., Ph.D. (Lecturer, Faculty
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14:10
15:00
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session
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Faculty of
Presenter
Law UGM,
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The Role of Indonesian Antimonopoly I-aw in
Encouaging fte Realization of Economic Democracy
Paripurna P. Sugarda (Dean, Faculty
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of Law,
UGM)
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@rofessor, Universitas Sumatera Utara)
Hcna)in (Professor, Faculty of Law, UGM)
(2) M.
15:10
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3.1.1.
session #2
l6:00
Faculty of
Ed
Law
UGM.
The Iatest Developments
of
Chinese Corporate Law
Presenter
Junhai
Ilz
(Professor, Renmin University)
Discussants
(l)
Hyun Yoon Shin (Dean, Yonsei University
Law School)
(2) Aishah Bidin (Dean, Faculty of Law,
National University of Malaysia)
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Faculty of
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Rahmah Ismail (Ptofessor, National University
I]GM.
of Malaysia)
Discussants
(l)
Joung Mee Han (Senior Research Fellow'
KLPJ)
(2) Sulistiowati, 5.H., M.Hum (Professor, UGM)
l7:00
17:30
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Paripurna P. Sugarda (Dean, Faculty
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UGM)
Faculty of
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UGM.
17:30
Room
Official
Take Official Photograph (Photographer
3.1.1.
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l8:00
Faculty of
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UGM.
18:00
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Retum to Hotel (Transportation by UGM)
18:20
19:00
21:00
Hotel
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PRESIDENT, KLRI
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Travel back to Hotel (Transportation by UGM)
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by KLRI)
iged
Travel to Ulen Sentalu (Transportation by UGM)
13:15
Tour of Ulen Sentalu
15:15
Retum to Hotel (Transportation by UGM)
CONTENTS
Session
The Role
of
I
Indonesian Antimonopoly Law
in
Encouraging
the Realization of Economic Democracy
PRESENTER Paripurnu P.
Sugardu
""""" """"""
1s
(The Role of Indonesian Antimonopoly I-aw in Encorraging the Realization of
""""""'1'7
Democracy)
Fronomic
Law
a. Economic Effrciency Approach
b. Protection Competitors and Fair Competition
1. The Objective of Antimonopoly
2. Indonesian Economic
3. Public
"""""""""""""" 21
"""" 21
"""" 23
Democracy
Interest
""
4.
Conclusion
5.
References
Presentation Slides " "
"""
DISCUSSANT Ningrum Natasya
DISCUSSANT M.
"
Hawin
Siruit""
"""""
25
"" """ " ""
28
"""""" "" " 30
""""" """""""
31
""""""
33
""""""'4s
""""""" "" """"'47
----
II
Session
Action in
and Shareholder's Derivative
Diligence
of
DutY
Directo/s
China
PRESENTER
Junhai Liu "
to
'
(DirectofsDutyofDiligenceandShareholdet'sDerivativeActioninChina)
Lrye v China Securities
litigation case of Ding
l.
The administrative
implications and questions
Regulatory Comml*'iont
2. rhe interpretation orrhe:j*t"t:.
" """
of Corporate Law of 2005
:::*:::: li ^::l: li:
1*
"""
i:^::: :::i: ili::t"*
the definition
"1bodies ""'
3. rhe efforts to clarifv
'
and self-regulatory
;;;;istrative
t,1,1
f,l
the board meeting'
of the directors regarding
4. The diligence requirements
rule (BJR) in China
the business judgment
t':
5. The introduction of
duty of diligence
suits to enforce director's
6. Encouraging derivative
Presentation Slides
DISCUSSANT
'
I/Yzn Yoon Shin
-ilffi;;";;)
of Ditigence and
(commentaries on 'oDirector's Duty
1. Duty of care
/
Business Judgment Rule
Action
2. Shareholders' Derivative
3.
i<
" "" ""
/
1'r:
Sharehot*.:.':n*l
"
""" " " "
""" """ "
i0-
Gross Negligence Standard"""
""" ""
,oir-i!
1119
Questions
DISCUSSANT
""
Biitin
'4isft ah
Shareholdet':
Duty of Diligence and
(Commentary paper on Directot's
in China)
""':ll:
"
11-
"Ldlort'
1.ShouldtheStatutoryDerivativeActionrepea1the.................l]:
" " i:
2. Common Law Derivative
Action?
derivative action
3. Scope of the statutory
""""""'
'
4.ThelssueofstandingtorrsetheStatutoryderivativeaction..........'.'......'1:
"""""""""'
5. Costs of proceedings
" "" """ " "
""
"'
"
"
6. CONCLUSTON
10
1:
1:
1:
(Photo)
,,,,1
Senior Lecturer at Faculty of Law Universitas Gadjah Mada
corporate law, capital market law, general commercial law,
and international business transaction law
1988 :"'
I Lecturer at Faculty of Law Universitas Gadjah Mada
Present
_-_''--_--,i,
]
I Lecturer at Graduate School of N{anagement Universitas Gadjah Mada, Specializitg in general
commercial law.
I
2004
-
Presenl
I
-
of
Business Law Department, Faculty
Universfjay G^adjah Mada,2011 - pJesert:
Head
Member
in the Board of
Researchers
Transportation and Logistics Studies
2004
3AS€
.
fu95'---:1"
:-
-:
Lrt- --.-*:- *
2004
of
^ ^ - \i Uead
- 2001
__
__"'
Law
Center for
Lecturer at Doctoral School- Institut Seni Indonesia,
Specializing in intellectual properfy law.
2007
:"
*::-r-:
-
of
Intellectual Property Development Service
.
I
Unllersrtalcadjah
Doktor (eq. to Doctor of Laws)
Iudr__
-
-
_
Universitas Gadjah Mada -
Indonesia
e---
;L\
r"
-:-
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Magister Humaniora (eq. to Master of Humanities)
Gadjah Mada - Indonesia
Sarjana Hukum (eq.
res:'a :s l'l'---:- 3:
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-_
L:E--.-_T'
l-,t
-
to Bachelor of Laws)
!3=-i. a.'xDa:!:a
Universitas
Universitas Gadjah Mada
Indonesia
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sulisfyowatiugm@yahoo.co.id
TTM SPIRIT OF BUSINESS JUDGMENT RULES WTTIIIN
INDONESIAN LIMITED LIABILITY COMPANY ACT
By
Associate Professor Dr. Sulistiowati S.H., M.Hum.
Universitas Gadjah Mada - Indonesia
Faculty of Law
ABSTRACT
Law Number 40 of 2007 regarding Limited Liability Company becomes the
most fundamental rules that regulate companies in Indonesia. One of the most
interesting features given by the Limited Liability Company Act is the broad authority
of directorship to run the management and administration ("daad van beheer"). The
idea is based on the agency theory that gives clear division between the ownership of
the company that is held by the shareholders and the management of the company
that is vested to the directors. Therefore, the directors owe fiduciary duty to the
company (in this regard, the shareholder's interests) and possess a very broad
responsibility as the consequence of the authority given by the Limited Liability
Company Act of Indonesia. Nevertheless, as a human being, the appointed director
may suffer certain kind of conflict of interest that may result to an agency problem.
In order to overcome possibilities of conflict between the policies made by the
directors and the interests of the company, clear guidance and limitations needs to be
provided. The guidance will give the basic rules on how to carry out the company's
fiduciary and meet it with the personal capacity of a director in undertaking
day-to-day's management. Normative ideas on Good Corporate Governance are to be
ensured especially when it comes to a discussion on the fiduciary duties owed by a
director. In certain situation where the director had fulfilled its duties as a fiduciary,
therefore, the discussion of Business Judgment Rules can be continued. Lucid
apportionment and implementation on Business Judgment Rules also needs to be
guaranteed to achieve the best outcome a director can make under its authority to
tmderlake lhe bes/ o?lloft
fcr lhe
com?aftF.
169
PHILOSOPHICAL BASIS
It is
strongly believed that before
Judgment Rules doctrine, there
preliminary points
in
a
further discussion on the
are some elements need
order to understand the scheme
of
Business
to be covered as the
of the doctrine as a whole. The
a limited liability company, apart from the idea of
limiting the liability up to the personal wealth of the shareholders (beperhe
fundamental idea
aanspraakelijkheid),
having
is the division of company's management team and the owners of
the company.
The shareholders as the owner of the company do not take care of company's
in this regard, will be appointed and entrusted by the
to run the management.5) It would be premature to establish a discussion
management. The directors,
shareholders
upon the director's role, which may lead
Judgment Rules doctrine, before taking
constructing the idea
of
a
to a
fuither discussion upon
comprehensive elaboration
on
Business
it. Before
shareholders' duty, there should be an introductory elaboration
on how Malaysian Company Act sees the division between ownership of a limited
liability company and the management team. That very perspective would be the basis
for having a further discussion on the regulation of the director's role and to
create
the guidelines in determining director's liability in managing the company
accordance
in
with the duties vested to them.
In the light of the agency theory, a preliminary
upon the agency problem. As
a
nature
of
discussion shall also be made
human being, directors as the agents
company - at cefiain point- may be comrpted by the power vested to them.
of the
In a very.
ideal view set out by the agency theory, the directors shall be responsible in carrying out
the fiduciary given to them. Therefore, the owners of the company shall have
certam
to assure the fulfillment of directors' role. The company law will set out the
limitation of the directors' authority in managing the company. If a director is actin_e
measure
beyond the authonty vested to them, said situation
will be considered as an ultra
5) M. Yahya Harahap,2011, "Hukum perseroan Terbatas", sinar Grafika, Jakarta, p.59
t70
vires.
limitations for each board
in the system.
Whilst Malaysian Companies Acr 2965 prescribes that there should be at least
two directors within a company, Indonesian Limited Liability Company Act in
have't"'l 1 (one) or
Article 92 Sub-Section (3) gives the possibility to
directors
to
[...]" within the Company.
Malaysian Company
Nevertheless, there
the
more
is a unique feature - similar
Act- vested in the Sub-section
4 of the same Arlicle
that
requires every Company that collects fund and/or manages capital from the public, or
issued
a
debt-acknowledgement letter
to the public, or Public
Perusahaan Terbuka) shall have at least
Despite the idea
nature
of
directorship
of
2 Directors within the
two-board system,
I
Section
Company.
it is acceptable to consider that the
is central to company law in
Limited Liability Act Article
Company (Tbk. or
general. According
to Indonesian
5, Directors are "["']a body of a
compan,v
that possesses authority and fully-responsible for the management of the company in
accordance
to the
interests
company, including
rules specified
of the company
based on Purposes and Objectives
of
the
to represent the company outside or before the court based on the
in the Deed of
Establishment."
Directors are fiduciaries, because
if
there
is a body within a
company that
to execute day{o-day management and undertake decisions, that
would be the board of directors.6) Said idea applies in Indonesian Limited Liabilitl
should be reliable
Company
Act. The power vested to the directorship is very broad so that Arlicle
Section (1) prescribes that the authority
Objectives
of the Company". In
of a director
addition
explains that the authority mentioned
to that,
shall refer to the "Purposes
Section (2)
92
and
of the same Article
in the previous
Section shall be understood to
"["']
that is considerably appropriate
the extent that directorship may execute policies
for the company, within the guidelines and limitations that can be found within the
prevailing laws of this act and/or the Deed
of
Establishment".
The idea of reliability is emphasized on the power vested to the directorship.
Especially when
it
comes
to the broad authority given by Indonesian Limited Liabilit-r
6) Alastair Hudson, Stephen Girvin,
London, Chapter 7 p.1
Sandra Frisby, 2010, "Charlesworth's Company
112
Law", Sweet
&
Maxu'el1.
Act that may comrpt the
Act shall be able to
the role
r * -::
of
directors themselves. Therefore, Indonesian Limited Liability
accommodate features that can guarantee
directors,
in
the GCG Principles in
order to create clear distinction on "what-to" and "what
not-to" do.
MEASURES PROVIDED IN THE LAW NO. 40 OF
2OO7 TO ASSURE THE FULFILLMENT OF GOOD
CORPORATE GOVERNANCE PRNCIPLES
i :{r-
Board of Commissioners
Iir[
1]:
Before the discussion continues further on the spirit
i-.---
L l---"lL
Rule,
'e-
rsqi
-:
it is
provided
necessary
to
of
Business Judgment
point out several measures that Indonesian
in the latest changes of Law on Limited Liability
Legislators
Company. The most basic
that the legislation provides within its rules is the existence of Board of
;,i
:-l ,
assurance
L[
-l:
Commissioners.
Article 1 Section
6 of Limited Liability
Company Law defines the
Board of Commissioners as a body of the company that gives supervision in general
L4
J*,
and/or specific
to the directors including to give advice in
in the Deed of
Establishment.
accordance
with the rules
Said definition indicates that the directorship shall be subjected
LJ&Lrr rr*
supervision
t$Si rI
r
of the Board of
Commissioners, and advices given
to
by the Board shall
the
also
be taken into the directors consideration in making the policy for the company. Based
on that concept, the Law No. 40 of 2007 provides assurance on the accountability of
the directors' function in running the management of the company.
fffir]rI
iEIImr-.*;
r
ltr,rn'm
I
i,l
Board
of
Commissioners' authority
through several measures such
to
superuise
the directors can be
as:
1) Running a financial audit over the company;
numhit::
[-r&riL:-
2) Overseeing the organizational structure of the company;
3) Supervising the human
resources.T)
luEli[i !
7) M. Yahya Harahap, 2011, Op.Cit. p.
439
173
done
Advisory function of the Board can also be done through various methods. it
can be given
in the form of
considerations, giving directives, even warning
for
the
directors upon certain matters within the company. The most important issue needs to
be
ensured when the Board gives
its supervisory function is
regulated under the
Article 108 Sub-Section (2) that the advices shall be made for the interests of
the
company on1y.8;
Ensuring the Element of the Directors' Capability
Indonesian Limited Liability Company
Act also provides distinctive
features
that require certain criteria for anyone who would like to be appointed as a director.
Said requirements exist
to
obligation
to ensure the capability of the director when it
manage
comes
to
the
the company. Article 93 of the Law point out basic
requirements and certain prohibitions for being a director
in
Indonesian Company.
The two most fundamental requirements are the director shall be a person or
individual and capable before the law (bevoegd). In this regard, the law indicates that
rechtpersoon
or legal entity
or
cannot be chosen
appointed as
a director. In
addition,
is to be made to Burgerlijk Wetboek of Indonesia if it comes to the
discussion of bevoegd or personal competency before the law. In line with the
regulation pointed out in Burgerlijk Wetboek, Walter Woon indicates that the
reference
minimum age
there
to
consider someone
is
is no maximum age criterion for
director
in
Indonesia.
In
capable before
the law is 21 years old,
anyone who would
and
like to be appointed as
addition, said person shall not be mentally disturbed and
a
is
not put under anyone's custody.e) There is no further criterion upon the capability of
someone
to be
appointed
as a director.
If
"foreigner" can be appointed as a director
there
in
is a
Indonesia,
question whether
the law is silent upon
matter. Therefore, foreign nationalities can be appointed as
company. The
or not a
a director of
law is also silent upon the criteria of minimum
that
Indonesian
educational standard
8) Ibid, p.441
9) Ibid, p.354, see also Walter Woon, 1998, "Company Law", Longman Singapore Publisher Pte. Ltd.,
Singapore,
p. i65
t74
methods. It
ing for
re
the
needs to
I rmder the
for being a director.lo)
Despite there are no criteria on the basic educational standard, the elucidation
of Article 92
Sub-Section (2)
in the Law articulates that "the considerably
policy" refers to several criteria such
re*s of the
1)
Sha11
appropriate
as:
be made based on the skill sourced from knowledge and expertise of
the directors;
2) Based on available opportunity that is favorable and suitable for the
company;
3) Based on common business practice that a reasonable person in the directors'
ire
ttatures
a
director.
mes to the
rxlt
tF)'.
basic
position would have taken similar policy.ttl
Therefore, the Law implicitly requires the existence
expertise owned
certain knowledge and
by the directors in order to run the company well. The liability of
company's management
will be based on those abilities, despite said knowledge and
expertise can also be obtained without taking any formal educational level.
I lxrson
On top of those requirements, there are also several prohibited situation that
or
ilicates that
will block
h additions to the
r q-ith rhe
i that rhe
r old- and
ified a*. i.
Limited Liability Company Act.
hed anc
:,<
p$ihr-r ri
someone's opportunity
to be appointed as a
is within the last 5 years declared as bankrupt, or found guilty for causing bankruptcy
for a company while sitting as a board of directors or board of
company,
or found guilty for
of financial crime
causing state's financial losses
cannot be appointed as
It is clear that Limited
personal records
of
a
or involved in any kind
of Indonesia considers the
of a director is very important to reflect its capability in running
the
in the Article try to prevent the
the same mistake in the new company. It is inevitable
company's management. Said prohibitions set out
Ilpoc ::.ir
that said rules is very disputed because
of a person in
in the field of
doing
Indr-rne:1ro.
practice
f, mu,rrl
as irrelevant based on the issue
ir
commissioners
a director.
Liability Company Act
tendency
-
director based on Indonesian
It is prescribed in the same article that someone who
trnoi&
Itr Ih.
of
l0) Ibid,
l1) Ibid,
if reference to be made to American common
company law, said prohibitions are inapplicable and considered
of "equality
p.354-355
p.372
t75
before the law". Nevertheless, Indonesian
Act tries to ensure the highest protection in
throughout its territory. As cicero said, Summun
Limited Liability company
the
of
Ius
development
companies
Summa Iniura, the highest justice
is the highest injustice'
Director's Responsibility and Accountability through Annual
Working Plan and Company's Budgeting Report
Obligation
to
run
the company's management is the main obligation of
director. Thus director holds
a
management function
a
that comprises planning'
It is necessary for a director to
as the guidance to run the management of the companl'
organizing and controlling organizational resources.t2)
a working Plan
establish
throughout
a
in
fisca1 Year. The working plan shall also be accountable and reported
is the board
the end of fiscal Year in order to be reviewed by its supelisor, which
of
commissioner.
Said measures are ensured
requires Directors
or
to
in
Indonesian Limited Liability Company
Act
that
(RKAP
establish Annual working Plan and company's Budgeting
Rencana Kerja dan Anggaran Perusahaan).
The obligation to establish RKAP
is
of Director's Role Principle that consists of obligation to hire and fire top
plans
officer, set compensation for top corporate officers, develop succession
also a parl
corporate
for key colporate officers, set budgets, review and approve financial
disclosures,
set
of debt and equity claims'
fulfrll legal
approve capital budgets (limit below which board does not review),
dividends, approve capital structure and approve issuance
requirements, idiosyncratic: attend
to
environmental and political issues, and respond t"
crises and other challenges that only arise
in specific
situations.l3)
Act, th:
According to the Arlicle 63 and 64 of the Limited Liability company
contract between
Annual Working Plan and Company's Budgeting is a management
the
to protect t1:;
directors and the commissioners as the supervisory body, in order
of Shareholders' Th.
interests of the company which is also the interests of the Board
t2) Richard L. Daft, 2006, "Manajemen",
Salemba Empat, Jakarta' p 6
Govemance on The Boarcl Room conference", Kellog
of
Chicago, Illinois, p'80
Management, Northwester University
L3) Thomas
z. Lys, 2008, "Corporate
t76
Schooi
Working Plan will set out performance indicators for the directors throughout the fiscal
year. Indonesian Limited Liability Company Act tries
to
ensure binding guidelines for
the Directors to carry out the fiduciary duty vested to them by the company. Unability
to conform with the performance indicators set out in the working plan will lead to
an
imminent possibility of dismissal for the directors position.
The idea is also applied to the Company's Budgeting. Directors in a company
shall set out the Budgeting Forecast in the early fiscal year. The budgeting document
will be the guideline for the directors in managing the company's finance along the
year. In the end of fiscal year, the budgeting plan will also be assessed and shall be
delivered by the Directors to both Board of Commissioners and Board of
Shareholders. According to the stewardship concept, the objective of making financial
reporl in the end of fiscal year is to show what the directors had beeen done along
the year over the company's financial resources. It is used to ensure the responsibility
of the directors
towards the fiduciary given
by the company to manage its own
assets
and capital.l+)
In
addition, Indonesian Limited Liability Company
Act gives possibilities for
the Directors and the Company to use the RKAP as the "basic test" that leads to the
further discussion on business judgment rules concept.
DI]TIES OF THE DIRECTORS AND THE
EXTENDED FIDUCIARY DUTY TOWARDS THE
COMMISSIONERS
Directors as fiduciaries shall be liable
According
owned
to
for the
management
of the company.
Indonesian Limited Liability Company Act, there are several basic duties
by the directors in running their function.
14) Slamet Sugiri Sodikin, Bogat Agus Riyono, 2012, "Akuntansi:
Tinggi Ilmu Manajemen YKPN, Yogyakarla,
p.1
177
Pengantar
1", Eighth Edition,
Sekolah
Duty to Manage the Company
Article 97 of the Limited Liability Company Act articulates that the directors
shall be responsible for the company's management as prescribed under Article 92
As
explained before, Article
in running the
function
92 (1) gives a very broad power for the
company based on the purpose and objectives
(Il.
directorshrp
of the compan\
and shall take the measures that are to be considered as appropriate for the compan\'.
The management of the company as prescribed by the law shall also be referred to
the prevailing laws and regulations and the Deed
of
Establishment
of the company.
Duty of Exercise Good Faith Principle and Responsibility
It
would be insufficient to consider that fiduciary duty owed by the directors
shall only be based on the pulposes and objectives of the company. The management
of
shall also be done based on the principle
good faith and responsibility towards
what the directors have undertaken. The good faith principle or goeder trouw
extended
in the practice and legal
is
doctrines as follows:
l) Fiduciary Duty
The directors are entrusted by the company to run the management. Therefore
in
running their function they should
(trustworthiness) and shall always
Harahap
in his book "Hukum
Marshall explains an idea that:
as he
is
be
based
on the bona fide principle
be honest in running their function. M.
Perseroan Terbatas" elaborated that
"["']
Yahya
MC Oliver and EA
a director is permitted to be very stupid so long
honest".l5)
15) M. Yahya Harahap, Op.Cit.,
Eleventh Edition, The
M&E
p. 374, see also: MC Oliver and
Handbook Series, p.313
178
EA Marshal, 1991, "Company
Law".
2) Duty to Act For A ProPer
PurPose
The management of the company shall also be undertaken through proper
interest of
measures. The idea is to balance out the action of the director in every
EElUms
3 t;
the company. The proper measure means that every interest of the company is to
uMur
be
considered and taken care of.
W:;
@a
3) Statutory
DutY
md rr
The directors also owe statutory duty that requires them to be conformed with
the prevailing laws and regulation including the Establishment Deed of the company'
take
Statutory duty leads to the obligation for the director to obey the law and shall
Nti-
into consideration every related rule existed in Indonesian legal framework in taking
any policy for the company. Conducting onrechtmatig daad or unlawful act would
m(ilurs
@rr
violate the duty of the director to run the company in good faith.
lmrnm[i
personal liability
of the director towards losses
It
may lead to the
occurred'16)
Im5
4) Loyalty Duty
The directors also owe loyalty duty to the company.
keep confidential information
crffirr
I@'rf
towards its position.
of the company and
It
includes obligation to
maintain the trust
In this regard, the loyalty duty
terms
of the company
is equal to the good faith
duty prescribed above.l7)
Y@*
Dd E-r
o
lo-'rnn
5) Duty to Avoid Conflict of Interest
As a human being, the director is obliged to manage its personal interest and
try not to be commingled with the interest of the company. Especially, when said
conflict leads to an unfavorable situation for the company and brings certain benefit
towards the director's personal interest.
Dayden Pressm
16) Howell, Allison and Prentice, "Business Law, Text and cases", Fourth Edition, The
m
[",,,rp
"
1988, p.870
17) Ibid,
p.
870
179
Obligation to avoid conflict
of
interest comprises several elements such
as:
Obligation not to use company's wealth for his own interest;
Misuse the company's information for his own interest;
Misuse his position to obtain personal benefit such as being bribed;
Taking the company's profit partly or wholly for his own benefit;
Making personal transaction with the company (affiliated transaction); and
Prohibition to make competition with the company
Duty to Run the Company in Due Care
Duty of the due cares or known as prudential duty is also a duty owed by
the directos
tolerable
cares
in the company. Careless management or negligence
by the
company under this very duty. The basis
is the kind of
to
would not
analyze the duty
be
of due
care that an ordinary prudent person would do. Every
policymaking shall be undertaken based on reasonable judgment and the director shall
take into consideration every appropriate element that need to be considered. In this
particular situation, necessary enquiries can be made
Commissioners.
function
by the director to the Board of
This action can be done based on the supervisory and
of the Board of
Commissioners
advisory
in the company.
Extended Fiduciary Duty towards the Board
of
Commissioners
As explained in the previous part, the Directors can make certain enquiries
the Board of
Commissioner. Indonesian
Limited Liability Company Act
to
gives
possibility for the Director to do so, not only to obtain the advices from the Board
of
Commissioners
but also to
release partly
of the Directors fiduciary duty to
the
Commissioners.
In
lndonesian legal context, the Board
lrduciary duty within certain extent.
Commissioners owes fiduciary duty
the director
in
of
Commissioners also
In the Article
possesses
114 Sub-Section (2),
to run the superuision and
the
advisory function to
good faith and due care. The next sub-section of the same article
180
articulates that failure
Commissioners
jointly
to
conform
with its obligation will put the Board
of
liable.
M' Yahya Harahap
prescribed that member
always be honest and bona fide
in
of Board of
commissioner shall
running their supervisory and advisory function
within the company. The implementation of their function shall
be done in a proper
purpose' Even more, the Board of Commissioners also
possesses statutory duty,
loyalty duty, duty to avoid conflict of interest and shall be
run in reasonable skill
and diligent
in all condition or
circumstances.ls) Therefore, that very feature gives
very distinctive legal system for company law
framework of fiduciary duty analysis.
in
Indonesia especially
in
a
the
BUSINESS JUDGMENT RULE WITHIN THE
LAW NO. 40 0F
2007
The management of a company is entrusted ultimately to the
directors, function.
A
company
is a rechtpersoon, which is
Therefore, reliability
of a
unable
to physically
director should not be compromised
interest, personal incapability or even small errors and mistakes
Neveftheless, director
conduct the management.
is also a
by any conflict of
in undertaking
decisions.
human being that can be comrpted, might take some
bad decisions and do some enors along the way.
Business judgment rules
seles as the balancing norm that try to
ensure that
the directors take the best measures in running the company,
but in the other hand
also gives some room for unpredictability of the future that
may lead to ceftain losses
for the company'
Business judgment rules
is a nofin that
ensure the innocence
of
the
directors for certain losses or possible lawsuit towards the company
as a result
of
the
directors' policy making, provided that the policy making has
been conducted based
on the utmost good faith and principle of prudential.re)
18)
M.
Yahya Harahap, Op.Cit., p.455-459
19) Angela scheeman, 1997, "The Law of corporations, Partnerships,
and Sole proprietorship,,, Delmar
Publisher, Albany, p,2'15 see also Ridwan Khairandy, 2009. "perseroan
Terbatas: Doktrin, peraturan
Perundang-undangan, dan yurisprudensi", Revise