Team close to finalizing new companies' legislation

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)