Based on Article 1 number 4 of Law Number 40 of 2007 (“Company Law”), the General Meeting of Shareholders (“GMS”) is the organ of the company that has authority not granted to the Board of Directors or the Board of Commissioners.
Furthermore, in accordance with Article 78 of Company Law, GMS consist of:
- Annual GMS, which must be held within a maximum period of 6 (six) months after the end of the last financial year;
- Other GMS, commonly known in practice as extraordinary GMS, which can be held at any time the company requires approval from shareholders.
Article 79 paragraph (1) of Company Law states that the Board of Directors is required to convene an annual RUPS preceded by the summoning of the GMS. The summoning of the RUPS must be done within a maximum period of 15 (fifteen) days from the date the request for the convening of the GMS is received. This obligation is in line with the fiduciary duty of the Board of Directors towards the Company as regulated in Article 97 paragraph (2) and (3) of Company Law:
“Article 97:
- The Board of Directors is responsible for managing the company as referred to Article 92 paragraph (1)
- The management referred to paragraph (1) must be carried out by each member of The Board of Directors with good faith and full responsibility”
The annual GMS is one of the Board of Directors responsibility in managing the company, so based on Article 1 number 5 jo. Article 97 paragraph (3) of Company Law, Directors who fail to fulfil their obligations are personally liable for the company losses.
Then, can the Directors be sanctioned if they do not hold the annual GMS?
The company law does not regulate sanctions against the Board of Directors of a company that does not convene and hold it annual GMS. However, the failure to hold the annual GMS means that the responsibility of the Board of Directors for that year has not been fulfilled.
What Legal Steps Shareholders Can Take if The Private Company Does Not Conduct the Annual GMS?
- Request for Annual RUPS to the Board of Directors via Registered Letter
The convening of the annual RUPS can be initiated upon the request of 1 (one) or more shareholders collectively representing 1/10 (one-tenth) or more of the total voting shares, unless the articles of association stipulate a smaller proportion. The request must meet the following requirements:
- The request is made in the form of a Registered Letter accompanied by reasons for the request;
- It is submitted to the Board of Directors, with copies sent to the Board of Commissioners.
Reasons that can be the basis for requesting an Annual RUPS are not limited to:
- The Board of Directors failing to hold an annual RUPS;
- The term of office of Directors and/or Commissioners is about to expire.
- Re-submission of Annual RUPS Request to the Board of Commissioners
If after submitting a request for an Annual RUPS to the Board of Directors and the Board fails to convene the RUPS within 15 (fifteen) days, shareholders can resubmit the request to the Board of Commissioners. Upon such a request, the Board of Commissioners is obliged to convene the RUPS within 15 (fifteen) days from the date the request for convening the RUPS is received.
- Application to the Chief Judge of the District Court
If the Board of Directors and the Board of Commissioners fail to convene the RUPS after the shareholders have submitted a request for the annual RUPS, shareholders may apply to the chief judge of the district court in the jurisdiction where the Company is domiciled to grant permission for the applicant to convene the RUPS themselves. The decision of the chief judge of the district court is final and legally binding. However, if the decision is unfavourable, the shareholders may file a cassation appeal.
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