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)