Frequently Asked Questions: #corporategovernance

The key responsibilities of a Company Secretary in Indonesia include:

• Serving as the primary point of contact for company shareholders and officeholders
• Organizing and convening meetings of shareholders, directors, and commissioners as required
• Liaising with notaries public, lawyers, and accountants as needed
• Overseeing the acquisition and renewal of required company licenses and permits
• Providing guidance on work permits and visas
• Communicating with government agencies on behalf of the company
• Maintaining custody of original company documents
• Ensuring overall compliance with Indonesian legal requirements and regulations

Some key differences compared to other countries:

• In Indonesia, the Company Secretary often takes on a more active role in liaising with government agencies and handling regulatory compliance matters. This is due to the complex and frequently changing regulatory environment.

• The Company Secretary in Indonesia may be authorized to serve as President Chairman (komisaris) or President Director, which is less common in other jurisdictions.

• There is a strong emphasis on maintaining proper documentation and records, including custody of original company documents, due to Indonesia’s bureaucratic requirements.

• The role involves more hands-on assistance with immigration matters like work permits and visas, which may be handled separately in other countries.

• The Company Secretary plays an important part in ensuring compliance with Indonesia’s specific corporate governance requirements and reporting obligations.

Overall, the Company Secretary role in Indonesia tends to be broader and more involved in day-to-day regulatory and compliance matters compared to some other countries, reflecting the unique business environment and regulatory landscape in Indonesia.

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Our due diligence process covers several key aspects of a company or project:

• Legal and Regulatory Compliance
  • Verification of business licenses and permits
  • Review of corporate documents (Articles of Association, deeds, etc.)
  • Examination of regulatory filings and compliance history
• Financial Health
  • Analysis of financial statements
  • Review of tax compliance and history
  • Assessment of debt obligations and financial commitments
• Operational Review
  • Evaluation of business operations and processes
  • Assessment of key assets and infrastructure
  • Review of major contracts and agreements
• Market Position
  • Analysis of market share and competitive landscape
  • Evaluation of customer base and relationships
  • Assessment of industry trends and growth potential
• Management and Personnel
  • Review of key management team qualifications and experience
  • Assessment of organizational structure
  • Evaluation of human resources policies and practices
• Intellectual Property
  • Verification of IP ownership and protection
  • Review of patents, trademarks, and copyrights
  • Assessment of potential IP infringement risks
• Environmental, Social, and Governance (ESG)
  • Evaluation of environmental compliance and sustainability practices
  • Assessment of social responsibility initiatives
  • Review of corporate governance structures and practices
• Risk Assessment
  • Identification of potential legal, financial, and operational risks
  • Evaluation of risk management strategies and contingency plans
  • Assessment of insurance coverage and liability exposure
• Technology and Information Systems
  • Review of IT infrastructure and cybersecurity measures
  • Assessment of data management and privacy practices
  • Evaluation of technology assets and digital capabilities

Our due diligence process is tailored to the specific needs of each client and project, ensuring a comprehensive and relevant assessment.

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Due diligence investigations in Indonesia can uncover various risks and issues that potential investors or business partners should be aware of. Some examples of findings from past due diligence efforts include:

• Undisclosed Liabilities: Companies may have hidden debts, unpaid taxes, or pending legal claims not reflected in their financial statements.

• Regulatory Non-Compliance: Businesses operating without proper licenses or permits, or failing to meet industry-specific regulations.

• Ownership Discrepancies: Inconsistencies in company ownership records, or the presence of undisclosed beneficial owners.

• Environmental Issues: Violations of environmental regulations or potential liabilities related to land use or pollution.

• Labor Disputes: Ongoing conflicts with employees, unpaid wages, or non-compliance with labor laws.

• Intellectual Property Infringement: Unauthorized use of trademarks, patents, or copyrighted materials.

• Corrupt Practices: Evidence of bribery, kickbacks, or other forms of corruption in business dealings.

• Financial Irregularities: Discrepancies in financial reporting, unexplained transactions, or signs of fraud.

• Market Misrepresentation: Overstated market position, inflated customer base, or exaggerated growth projections.

• Operational Inefficiencies: Outdated technology, inefficient processes, or inadequate internal controls.

• Reputational Risks: Negative public perception, past scandals, or associations with controversial individuals or entities.

• Legal Disputes: Ongoing litigation, arbitration proceedings, or potential legal challenges not disclosed by the company.

• Inadequate Corporate Governance: Weak board oversight, conflicts of interest, or lack of proper decision-making processes.

• Supply Chain Vulnerabilities: Dependence on unreliable suppliers, or exposure to geopolitical risks in the supply chain.

• Cybersecurity Weaknesses: Inadequate data protection measures, history of security breaches, or non-compliance with data privacy regulations.

Thorough due diligence helps identify these and other potential risks, allowing investors and partners to make informed decisions and implement appropriate risk mitigation strategies when entering into business relationships or investments in Indonesia.

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Okusi Associates’ Company Secretarial service ensures ongoing compliance with Indonesian corporate laws and regulations through several key activities:

1. Serving as the primary point of contact for company shareholders and officeholders, keeping them informed of regulatory changes and compliance requirements.

2. Convening and documenting meetings of shareholders, directors, and commissioners as required by Indonesian corporate law.

3. Liaising with notaries public, lawyers, and accountants to ensure all legal and financial documentation is properly prepared and filed.

4. Overseeing the acquisition and renewal of required company licenses and permits to maintain good standing.

5. Communicating and liaising with government agencies on behalf of the company to address any compliance issues or inquiries.

6. Maintaining statutory company records and registers as required by law.

7. Assisting with organizing and documenting annual general meetings (AGM) and other corporate meetings to meet legal requirements.

8. Providing guidance on corporate governance best practices and ensuring the company adheres to Indonesian corporate laws and standards.

9. Monitoring changes in regulations and advising the company on necessary adjustments to maintain compliance.

10. Assisting with crisis management and problem-solving related to regulatory issues or unexpected business disruptions.

By handling these critical administrative and compliance tasks, Okusi Associates allows company leadership to focus on growing the business while ensuring the company remains in good standing and complies with all relevant Indonesian regulations.

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The key responsibilities of a Company Secretary in Indonesia include:

• Ensuring compliance with statutory and regulatory requirements
• Maintaining company records and statutory registers
• Organizing and attending board meetings and shareholder meetings
• Preparing meeting minutes and resolutions
• Liaising with government authorities and regulatory bodies
• Assisting with corporate governance matters
• Managing corporate communications
• Coordinating the preparation and filing of annual reports

Key differences from other countries:

• Indonesian language requirement: Most official documents and communications must be in Bahasa Indonesia
• Specific local regulations: Familiarity with Indonesian corporate law and regulations is crucial
• Dual language proficiency: Often need to work in both Indonesian and English
• Cultural understanding: Important to navigate Indonesian business culture and etiquette
• Government liaison: More frequent interaction with various government agencies
• Shareholder structure considerations: May need to manage complexities related to foreign ownership restrictions
• Regulatory updates: Must stay current with rapidly evolving Indonesian business regulations
• Corporate domicile services: May be involved in maintaining the company’s registered address
• Notary involvement: Coordinating with notaries for various corporate actions is more common

It’s important to note that while the core duties are similar, the specific legal and regulatory environment in Indonesia requires specialized knowledge and skills from a Company Secretary.

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Okusi Associates’ Company Secretarial service ensures ongoing compliance with Indonesian corporate laws and regulations through several key measures:

• Regular Compliance Checks: Conducting periodic reviews of the company’s legal and regulatory obligations to ensure all requirements are met.

• Regulatory Updates: Continuously monitoring changes in Indonesian corporate laws and regulations, and promptly informing clients of any updates that may affect their business.

• Document Management: Maintaining and updating all necessary corporate documents, including:

  • Articles of Association
  • Shareholder registers
  • Board meeting minutes
  • Annual reports

• Timely Filings: Ensuring all required reports and documents are filed with the relevant authorities within the stipulated deadlines, such as:

  • Annual tax returns
  • Financial statements
  • Investment activity reports to BKPM

• Corporate Governance Support: Assisting with organizing and documenting board meetings, shareholder meetings, and other corporate events in compliance with Indonesian regulations.

• Liaison with Government Agencies: Acting as a point of contact between the company and various government bodies, including:

  • Ministry of Law and Human Rights
  • Tax Office
  • Investment Coordinating Board (BKPM)

• License and Permit Renewals: Tracking expiration dates and managing the renewal process for various business licenses and permits.

• Compliance Training: Providing guidance and training to company directors and key personnel on their legal responsibilities and best practices for corporate governance.

• Risk Assessment: Identifying potential compliance risks and recommending mitigation strategies.

• Corporate Structure Maintenance: Ensuring the company’s ownership structure and capital status remain compliant with Indonesian FDI regulations.

By offering these comprehensive services, Okusi Associates helps PMA companies maintain good standing with Indonesian authorities and avoid potential legal issues or penalties related to non-compliance.

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Okusi Associates can provide valuable assistance in harmonizing accounting policies following an acquisition in several ways:

• Review of Existing Policies: Conduct a thorough review of the accounting policies of both the acquiring company and the acquired entity to identify differences and areas requiring harmonization.

• Gap Analysis: Perform a detailed gap analysis to highlight discrepancies between the two sets of accounting policies and practices.

• Policy Development: Assist in developing new, unified accounting policies that comply with Indonesian Accounting Standards (PSAK) and align with the parent company’s global standards if applicable.

• Implementation Plan: Create a comprehensive implementation plan for rolling out the harmonized accounting policies across the merged entity.

• Staff Training: Provide training sessions for accounting and finance staff to ensure proper understanding and application of the new harmonized policies.

• System Integration: Advise on necessary changes to accounting systems and processes to support the harmonized policies.

• Compliance Assurance: Ensure that the harmonized policies meet all relevant regulatory requirements and accounting standards in Indonesia.

• Documentation: Assist in documenting the new policies and procedures for future reference and audit purposes.

• Transition Support: Offer ongoing support during the transition period to address any issues or questions that arise.

• Audit Preparation: Help prepare the company for its first post-acquisition audit under the new harmonized policies.

• Reporting Alignment: Ensure that financial reporting processes are aligned with the new policies to provide consistent and accurate information to stakeholders.

By leveraging Okusi Associates’ expertise in Indonesian accounting standards and practices, companies can ensure a smooth transition to harmonized accounting policies, maintaining compliance and improving financial reporting consistency across the newly merged entity.

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Okusi Associates can assist with harmonizing accounting policies following an acquisition in several ways:

1. Policy review and analysis: Their team of experts, led by a Certified Public Accountant, can thoroughly review the existing accounting policies of both the acquiring company and the acquired company to identify differences and areas that need harmonization.

2. Tailored solutions: They provide customized solutions to address the specific challenges of harmonizing accounting policies post-acquisition, taking into account the unique circumstances of each company involved.

3. IFRS and GAAP expertise: With their knowledge of both International Financial Reporting Standards (IFRS) and Indonesian Generally Accepted Accounting Principles (GAAP), they can ensure the harmonized policies comply with relevant standards.

4. Technical accounting support: For complex technical accounting issues that arise during the harmonization process, Okusi Associates offers specialized support to resolve these challenges.

5. Staff training: They provide customized in-house training courses to help your finance team understand and implement the newly harmonized accounting policies.

6. Ongoing guidance: As you work through the harmonization process, their team can offer continuous advice and support to ensure smooth implementation.

7. Regulatory compliance: They ensure that the harmonized policies meet all regulatory requirements in Indonesia.

8. Efficiency improvements: By streamlining and standardizing accounting processes across the merged entity, they can help increase overall efficiency in financial reporting.

9. Quality assurance: Their services aim to improve the quality of financial reporting following the acquisition.

10. Updates on reporting developments: They keep clients informed about any relevant changes in domestic or international financial reporting standards that may impact the harmonized policies.

By leveraging Okusi Associates’ expertise, companies can more effectively navigate the complexities of accounting policy harmonization post-acquisition, ensuring compliance, accuracy, and efficiency in their financial reporting processes.

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PMA companies in Indonesia have several ongoing compliance requirements to maintain their legal status and good standing. These include:

Annual Reporting and Filings * Investment Activity Report (LKPM) to be submitted to BKPM every 6 months * Annual tax returns for corporate income tax, employee income tax, and VAT (if applicable) * Annual financial statements to be submitted to the tax office * Annual report to the Ministry of Law and Human Rights

Tax Compliance * Monthly tax payments and reporting for employee income tax and VAT (if applicable) * Quarterly installments of corporate income tax * Withholding tax obligations on various transactions

Employment Regulations * Compliance with Indonesian labor laws, including minimum wage requirements * Regular reporting to the Ministry of Manpower * Work permit (KITAS) renewals for foreign employees

Business Licenses * Renewal of business licenses as required (varies by industry) * Maintaining valid Company Domicile Certificate

Corporate Governance * Holding annual general meetings of shareholders * Maintaining proper company records and minutes of meetings * Updating company information with relevant authorities when changes occur

Foreign Investment Regulations * Adherence to foreign ownership restrictions as per the Negative Investment List (DNI) * Compliance with minimum capital requirements for PMA companies

Industry-Specific Regulations * Compliance with sector-specific regulations and reporting requirements

Bookkeeping and Accounting * Maintaining proper accounting records in accordance with Indonesian accounting standards * Preparing financial statements in Indonesian language and Rupiah currency

To ensure full compliance, many PMA companies engage professional services firms like Okusi Associates for ongoing support in areas such as:

• Accountancy and taxation services
• Corporate secretarial services
• Regulatory compliance monitoring and reporting
• Work permit and visa management for foreign employees

Staying compliant with these requirements is crucial for PMA companies to operate legally and avoid penalties or operational disruptions in Indonesia.

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Yes, foreigners can serve as directors or commissioners in Indonesian companies, including PMA (foreign-owned) companies. However, there are some important considerations:

Directors: * Foreigners can be appointed as directors in Indonesian companies. * At least one director must be an Indonesian resident (not necessarily an Indonesian citizen). * Foreign directors require a valid work permit (KITAS) and stay permit to reside and work in Indonesia.

Commissioners: * Foreigners can also serve as commissioners in Indonesian companies. * There is no residency requirement for commissioners. * If a foreign commissioner performs active duties in Indonesia, they will need a work permit.

Key points to note: * The composition of the board of directors and commissioners must comply with the company’s Articles of Association. * Some business sectors may have specific requirements or restrictions on foreign directors or commissioners. * The appointment of directors and commissioners must be approved by shareholders and properly documented. * Foreign directors and commissioners must have a tax identification number (NPWP) in Indonesia.

Work permit considerations: * Foreign directors working in Indonesia need to obtain: * Limited Stay Visa (VITAS) * Limited Stay Permit (KITAS) * Work Permit (IMTA) * The company must sponsor these permits for the foreign director.

Tax implications: * Foreign directors and commissioners may have tax obligations in both Indonesia and their home country. * It’s advisable to consult with a tax professional to understand the specific tax implications.

Professional support: * Due to the complexities of Indonesian corporate law and regulations, it’s recommended to seek professional assistance when appointing foreign directors or commissioners. * Okusi Associates can provide guidance on compliance requirements and assist with the necessary documentation and permit applications.

Remember to always check the latest regulations, as requirements may change over time.

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