Newly passed law on limited liability companies hailed
Newly passed law on limited liability companies hailed
JAKARTA (JP): A noted corporate lawyer praised the new law on limited liability firms, which was approved by the House of Representatives (DPR) on Thursday.
"This is a good move. Not only is the new law more comprehensive than previous regulations, it also provides more of a legal framework and more certainty," lawyer Todung Mulya Lubis told The Jakarta Post yesterday.
The long-awaited Law on Limited Liability Companies, passed by the DPR Thursday in a plenary session with Minister of Justice Oetojo Oesman, will replace the Commercial Law of 1847 and the Company Law of 1939. Both previous laws were enacted by the Dutch colonial government and are the foundation of the Code of Commerce, the current legal reference for business practices.
The bill for the new law was originally drafted in 1974 but final deliberations did not begin until last September. In the end, the bill had to be revised several times to take the rapid changes of today's business world into account.
The law contains several provisions specifically designed to protect the interests of minority shareholders, employees and creditors. It has also been designed to prevent monopolies from being created in the case of business takeovers and mergers.
The justice ministry, however, has yet to release the regulations required for its implementation.
"I think the fact that the new law addresses the rights of the minority shareholders is important, especially since this had never been done previously," Lubis said.
Professionalism
He also said that the new law will encourage boards of directors and commissioners to be more professional and more accountable to the minority shareholders.
"Since minority shareholders can now demand more transparency and disclosures from the management and commissioners, we can expect to see fewer 'sleeping partners'," Lubis said.
The lawyer was referring to the phenomenon where a business person, especially one with political connections, can sit on different boards of commissioners in hundreds of different companies.
Lubis, however, warned that minority shareholders could possibly abuse their new legal rights by obstructing business progress.
"When any form of obstruction occurs, both management and the public shareholders must settle their differences in court. From there on, everything depends on the judiciary," he said.
Lubis also praised the new law's requirement forcing the Minister of Justice to ratify or reject an incorporation deed within 60 days of when the application was lodged.
"I just hope the justice ministry has the required administrative means to meet this requirement," he said. (hdj)