Team close to finalizing new companies' legislation
JAKARTA (JP): A government-sanctioned team is close to finalizing the drafting of a new corporation law that will place emphasis on good corporate governance.
The new law will replace the existing Law No. 1/1995, which many say has yet to be fully implemented by all corporations in the country.
"We're close to finalizing the draft," Ratnawati Prasodjo, head of the Team for the Revision of Corporate Law, formed by the Ministry of Justice and Human Rights, told The Jakarta Post on the sidelines of the two-day seminar on the revision of the corporate law, which ended on Tuesday.
The team includes experts from the Ministry of Justice and Human Rights, the State Secretariat, the Capital Market Supervisory Agency (Bappepam), academics and other professionals.
She said the government intended to revamp the existing law because it was no longer regarded suitable to address issues that had arisen within the corporate sector over the past several years.
"With the rapid progress of technology and the current social and economic situation, it's necessary for us to review the existing corporation law," she said
"The 1997 financial crisis, which left many corporations in deep trouble, opened our eyes to the fact that we do not have a sufficient law to prevent illegal business practices from happening," Ratnawati said.
"When companies were closed down and liquidated in the aftermath of the 1997 economic turmoil, there were no laws to regulate who was going to be held responsible for their bad practices."
Following the crisis, most local companies stumbled into financial trouble due to their failure to repay debts because of the highly-appreciated dollar. That led many of them to face liquidation or be taken over by creditors.
Things then went from bad to worse as the country's legal system was not well equipped to deal with such problems.
Ratnawati further underlined the importance of the revision of the existing corporate law given that it was not compatible with several related laws enacted over the past several years, including the Bankruptcy Law No. 4/1998, the Consumer Protection Law No. 8/1999, and the Law No. 5/1999 on the Restriction of Monopolistic Practices .
"It (the new corporate law) will bring about clearer rules for all concerned parties, including employees, who often had to bear the brunt of negative impacts in the past caused by the uncertainty in corporate regulations," Ratnawati said.
She did not elaborate further as to which clauses of the existing law needed to be revised as it needed more input from the public.
"That's why we're having this seminar. This kind of forum will give us input from the public," Ratnawati explained, adding the team had earlier held several similar workshops to gather input from the public for the draft law.
Before being proposed to the House of Representatives (DPR), the draft law should be consulted with various ministries and sent to the State Secretariat for presidential approval.
After being approved by the President, the ministry will then submit it to the House for debate and approval. (10)