Bill on limited liability firms to meet global standard

Bill on limited liability firms to meet global standard

JAKARTA (JP): Minister of Justice Oetojo Oesman told the House
of Representatives yesterday that the bill on limited liability
companies was written not only to meet the global standard of
business activities, but also to implement the economic
principles of the 1945 Constitution.

"Indonesia's economy should not close itself to the influence
and the demands of the economic globalization process," Oesman
said when he presented the bill at a House plenary session.

He claimed that the bill adheres to Article 33 of the 1945
Constitution which stipulates that the economy be managed as a
common endeavor based on the principle of the family system.

According to Oesman, the bill, which contains 12 chapters and
128 articles, will replace the old Commercial Code and Company
Act which was enacted in 1847 and 1939, respectively, during the
period of Dutch colonial rule.

"The old laws, besides already being obsolete, mainly
reflected the principle of liberalism and individualism ... to
defend the political system of the (Dutch) Kingdom," he said.

The bill on limited liability companies (Perseroan Terbatas or
PT), was initially proposed to the State Secretariat by Oesman's
predecessors 20 years ago, but rapid changes in the business
world required it to be revised several times.

Oesman told the House yesterday that the bill stipulates
several provisions specifically designed to protect the interests
of minority shareholders and creditors, for example, in case of
mergers, acquisitions and liquidations.

"The bill empowers minority shareholders to call for a general
shareholders meeting and to ask, on the basis of a court order,
for investigations of a limited liability company," Oesman
added.

Transparency

He said that the proposed legislation also requires companies
to be more transparent.

The bill, for example, requires companies to use the
nationally accepted general principles of accounting, to have
their financial reports audited by certified public accountants
and to announce their annual reports through the mass media.

Legislator Aberson Marle Sihaloho of the Indonesian Democratic
Party, however, said on Thursday that the bill does little to
address the dangers of laissez faire capitalism in Indonesia,
which has spurred the excessive growth of conglomerates and
monopolies.

Sihaloho contends that the one-share-one-vote principle as
stipulated in the bill will harm the interest of minority
shareholders, adding that the government should find a mechanism
to limit the power of the capitalists.

President of Sigma Batara securities Frank Taira Supit, who is
also a noted lawyer, argued, however, that the one-share-one-vote
principle is an internationally recognized standard.

Supit told The Jakarta Post yesterday that a bill that opposes
such a principle will impede not only foreign investors in
Indonesia but also local companies.

Oesman acknowledged that the bill does not fully address all
aspects of business activities, saying that the idea is to make
the legislation flexible enough to accommodate the rapid changes
in the business world.

"It's more or less a flexible bill, even though we did our
best to stipulate the rules of the game," he said.

According to the bill, two or more persons can establish a
limited liability company with minimum authorized capital of Rp
10 million (US$4,640), of which 50 percent shall have been paid.

The bill stipulates that the capital can be issued in several
classes of equity shares, but one of them shall have the
characteristics of common shares.

A limited liability company shall be founded on the basis of a
notary deed and the company becomes a legal entity only after its
incorporation deed has been ratified by the Minister of Justice.

The bill requires the Minister of Justice to ratify an
incorporation deed within 60 days after the application. (09)