New company law<\/p>\n
The bill on limited liability companies, or Perseroan Terbatas
\n(PT), which was submitted to the House of Representatives last
\nweek is part of an overall reform of commercial laws, most of
\nwhich date back to the 1930s when the country was still under
\nDutch colonial rule. Bills on small business development and the
\ncapital market are expected to be completed within the next few
\nmonths. Hopefully, legislation on fair business competition and
\nmonopolies, both urgently needed since the economy is
\nincreasingly reliant on market forces, will follow.<\/p>\n
The bill, which was first drafted in 1974 but had to be
\nrevised several times to accommodate rapid changes in the
\nbusiness world, should be welcomed despite its imperfections. We
\nneed to start with something. After all, both the Commercial Code
\nof 1847 and Company Law of 1939 are outdated and are hindering
\nbusiness development.<\/p>\n
The new legislation will facilitate business by expediting the
\nprocedures needed to establish and liquidate a limited liability
\ncompany. That is important to ensuring market competition.<\/p>\n
But the relaxed procedures for setting up a company will not
\ntranslate into a mushrooming of \"fly-by-night\" companies at the
\nexpense of shareholders or creditors. Instead, the bill requires
\ncompanies to be more accountable by stipulating clear-cut
\nprovisions on annual financial reports and the use of the
\nnationally-accepted principles of accounting. Most companies will
\nalso be obliged to have their financial reports audited by
\ncertified public accountants.<\/p>\n
The new legislation provides much protection to minority
\nshareholders, thereby preventing majority owners from acting in
\nways detrimental to the interests of small shareholders,
\nespecially when it comes to such major transactions as mergers,
\nacquisitions and liquidations. Shareholders who represent up to
\n10 percent of a company are entitled to ask for a shareholders
\nmeeting. Minority owners are even allowed to request a court
\norder to investigate their company.<\/p>\n
Also significant are the provisions allowing a company to
\nrepurchase its issued shares. Until now, a limited liability
\ncompany was not allowed to re-purchase its issued shares. That
\nruling, based on the Commercial Code of 1847, has served as a
\nmajor barrier to the development of mutual funds (open-end
\ninvestment funds) which are much needed to enhance the capital
\nmarket. Most investors prefer mutual funds to closed-end funds
\n(investment trusts), the only type of investment funds currently
\nallowed on the capital market, as the former funds have a
\nfloating number of outstanding shares, thereby providing them
\nwith more flexibility, while trust funds have a fixed number of
\noutstanding shares.<\/p>\n
However, the implementation of many of the provisions depends
\non the judicial system and the efficiency and independence of the
\ncourt system. Unfortunately, the judicial system has been an area
\nof great concern among the business community. Over-burdened
\ncourts, inadequate supervision of court performances, especially
\nwith regard to civil courts, have forced most businessmen to shun
\ncourt proceedings, preferring to settle their disputes outside
\nthe court system. That of course is not only unsound and often
\nquite expensive, but leads to uncertainty surrounding the legal
\nredress of business disputes. It is therefore equally imperative
\nthat while the justice ministry is now busy drafting new laws
\nrelating to the business sector it should at the same time be
\npreparing judges to enforce those laws.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/new-company-law-1447899208",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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