May the Company hold a General Meeting of Shareholders outside the Company’s domicile?

Law Number 40 of 2007 concerning Limited Liability Companies (“Company Law”) explains that included in the Company’s Organs are the General Meeting of Shareholders, Board of Directors, and Board of Commissioners. The definition of the General Meeting of Shareholders (“GMS”) is stated in Article 1 number 4 of the Company Law, which is an Organ of the Company that has authority not granted to the Board of Directors or Board of Commissioners within the limits specified in this Law and/or the Articles of Association.

The concrete form of GMS is a forum where Shareholders have the authority to obtain information related to the Company from the Board of Directors and/or the Board of Commissioners, as long as it relates to the agenda of the meeting and does not conflict with the Company’s interests, as regulated in Article 75 paragraph (2) of the Company Law. However, Articles 75 paragraph (3) and (4) of the Company Law explain that the GMS forum may provide information and/or decisions outside the meeting agenda provided that the GMS is attended by all Shareholders and/or represented by their proxies, and they all agree to add agenda items or meeting agenda unanimously. The information provided at the GMS serves as the basis for determining the Company’s policies and strategic steps in making decisions as a legal entity.

GMS is divided into 2 (two) types:

• annual GMS and;
• other GMS or in practice often referred to as Extraordinary GMS.

Basically, GMS must be held at the Company’s domicile or at the place where the Company conducts its main business activities as determined in the Articles of Association.

This provision is stated in Article 76 paragraph (1) of the Company Law, which states:

      “(1) The GMS is held at the Company’s domicile or at the place where the Company conducts its main business activities as determined in the articles of association.”

The provisions regarding the venue for holding GMS for Public Companies are contained in Article 76 paragraph (2) of the Company Law which states  that the GMS of Public Companies can be held at the location of the stock exchange where the Company’s shares are listed. Furthermore, the venue for holding GMS for Public Companies is regulated in Article 11 of the Financial Services Authority Regulation of the Republic of Indonesia Number 15/POJK.04/2020 concerning the Plan and Conduct of General Meetings of Shareholders of Public Companies, which states:

     “(1) GMS must be held within the territory of the Republic of Indonesia.

      (2) Public Companies must determine the venue and time of the GMS.

      (3) The venue for holding the GMS as referred to in paragraph (2) must be done at:

            a.The domicile of the Public Company;

            b. The place where the Public Company conducts its main business activities;

            c. The provincial capital where the domicile or the main business activities of the Public Company are located; or

           d. The province where the stock exchange is located that lists the shares of the Public Company.”

However, there is an exception if the GMS wants to be held outside the Company’s domicile or outside the place where the Company conducts its main business activities as determined in the articles of association, namely the GMS can be held anywhere as long as it is still within the territory of the Republic of Indonesia and attended and/or represented by all Shareholders and all Shareholders agree to hold the GMS with specific agendas, as stipulated in Article 76 paragraphs (3) and (4) of the Company Law. Thus, the Company may hold a GMS outside the Company’s domicile provided it is still within the territory of the Republic of Indonesia and the GMS is attended and/or represented and approved by all shareholders for specific agendas.

Then, if there is a Company that holds a GMS in another location within Indonesia but there are shareholders who are absent and do not agree to hold the GMS, can the decision of the GMS be considered valid?

Clearly, the decision of the GMS is not valid because it contradicts Article 76 paragraphs (3), (4), and (5) of the Company Law, so an action for the cancellation of the decision of the GMS can be filed. Regarding the holding of GMS that contradicts the Company Law, legal actions can be taken which can be consulted with a Lawyer.

In addition, GMS can also be conducted using teleconference or video conference technology, or other electronic media that allow all GMS participants to see and hear each other directly and participate in the meeting (“E-GMS”), as regulated in Article 77 paragraph (1) of the Company Law. Regarding the conduct of E-GMS, minutes of the meeting must be prepared and approved and signed by all GMS participants either physically or electronically. However, further provisions regarding the implementation of E-GMS are only for Public Companies, as regulated in the Financial Services Authority Regulation No. 16/POJK.04/2020 concerning the Implementation of General Meetings of Shareholders of Public Companies Electronically, which should also apply to Closed Companies. Thus, there is a clear legal vacuum regarding the implementation of E-GMS for Closed Companies.