House passes new law on companies, mergers
House passes new law on companies, mergers
JAKARTA (JP): The House of Representatives yesterday passed a bill on limited liability companies which will provide a new legal basis for business entities in Indonesia.
Minister of Justice Oetojo Oesman said during the House's plenary session that the new legislation was expected to provide a better legal framework and greater certainty for business activities, thereby making the country a better place for investors.
Oetojo said the bill had been designed not only to accommodate the rapid changes in the business world but also to implement the economic principles laid down in Indonesia's 1945 Constitution.
The law contains several provisions specifically designed to protect the interests of minority shareholders, employees and creditors and to prevent monopoly and monopsony in the case of mergers, liquidations and acquisitions.
"Mergers, liquidations and acquisitions will not extinguish the right of minority shareholders to sell their shares at a fair price," Oetojo said, quoting an article of the new law.
The law also empowers minority shareholders to call for a general shareholders meeting and to require, on the basis of a court order, that a limited liability company be investigated.
The bill was first drafted in 1974 but had to be revised several times to take account of rapid changes in the business world. The House began deliberating the bill last September.
All the four factions of the House -- the Armed Forces, the ruling Golkar group, the Moslem-based United Development Party and the Indonesian Democratic Party -- accepted the bill without reservations and asked the government to issue regulations to implement the legislation immediately.
Minister Oetojo said that his office had already prepared all the necessary implementing regulations.
"It's only a matter of time. Everything is already well- prepared," Oetojo told journalists after attending the plenary session.
The new law replaces the Commercial Law of 1847 and the Company Law of 1939 which were all enacted by the Dutch colonial rulers.
Capital
Under the new law, two or more persons can establish a limited liability company with a minimum authorized capital of Rp 20 million (US$9,090), of which 25 percent must be paid up.
The legislation provides that a company's capital can be issued in several classifications of equity shares, but that one of the classifications must have the characteristics of common shares.
A limited liability company shall be founded on the basis of a notarial deed and becomes a legal entity only after its incorporation deed has been ratified by the Minister of Justice.
The bill requires that the Minister of Justice ratify or reject an incorporation deed within 60 days of the application being lodged.
The legislation requires almost all limited liability companies to have their annual reports or financial statements audited by certified public accountants.
It also provides broad outlines on what should be included in a company's annual report and on the procedures for the convening of shareholders' meetings.
Given the increasing role of notary publics in implementing the law, Moh. Hatta Mustafa of the Golkar faction suggested that the Ministry of Justice ensure that every district, and if possible every subdistrict, has at least one notary public.
Hamzah Haz of the United Development Party noted that under the new law legal practitioners will play a crucial role in enhancing business development.
"They will have to shun collusion and what many people see as a judicial mafia. They should not treat the law as a commodity," Hamzah told the plenary session. (rid)