Director and Commissioner Liability in Indonesia: The Defences
Director liability in Indonesia: what a PT’s directors and commissioners answer for personally, the defences the Company Law gives, and unpaid tax.
References (5)
- The Company Law, UU No. 40 Tahun 2007, sets the duties of directors and commissioners, their personal liability and their defences in Articles 92, 97, 99, 108, 114 and 115, together with the official elucidation of Articles 92(2), 97(2), 97(5)(d) and 114(3).
- Liability for acts done before a company has legal status is set by Article 14 of the Company Law, and liability for untrue or misleading financial statements by Article 69(3) and (4).
- Liability where a bankruptcy is caused by fault is set by Article 104 of the Company Law for directors and Article 115 for commissioners.
- None of these articles has been amended since 2007. The Job Creation Law, UU No. 6 Tahun 2023, Article 109, amends only Articles 1, 7, 32 and 153 of the Company Law and inserts Articles 153A to 153J.
- Management’s liability for a company’s tax is set by Article 32(1), (2) and (4) of the General Tax Provisions and Procedures Law, UU No. 6 Tahun 1983, as restated by UU No. 7 Tahun 2021, read with the elucidation of Article 32 published with UU No. 28 Tahun 2007.
Director liability in Indonesia rests on fault. A director or commissioner of a PT (Perseroan Terbatas, a limited company) answers personally for loss the company suffers through their own fault or negligence (UU 40/2007, Articles 97(3) and 114(3)), and the Company Law gives them a defence alongside (Articles 97(5) and 114(5)).
The two seats do different jobs. Directors run the company; commissioners supervise it. Who may hold each seat is covered in our note on who may sit on the board.
What each seat is responsible for
The board of directors (Direksi) runs the company in its interest and within its purposes, under the policy it considers appropriate (Article 92(1)–(2)). The official elucidation published with the Law measures that policy against the director’s expertise, the opportunities available and normal practice in the same line of business (elucidation of Article 92(2)).
Each director must do the job in good faith and with full responsibility, which the elucidation explains as careful and diligent attention to the company (Article 97(2)). A resident director takes on exactly these duties.
The board of commissioners (Dewan Komisaris) supervises how the company is run and advises the directors. It does not manage (Article 108(1)). Where it has more than one member it acts as a body: no commissioner acts alone, only on the board’s decision (Article 108(4)).
Each commissioner must supervise and advise in good faith, with prudence and responsibly (Article 114(2)). That is the role a resident commissioner fills.
When director liability becomes personal
Each director is fully and personally liable for loss the company suffers when they are at fault or negligent in their duty (Article 97(3)). The loss in question is the company’s own. That is the core of director liability under the Company Law: the director’s own fault, and harm to the company.
With two or more directors, the liability is joint and several (Article 97(4)), and the same holds among two or more commissioners (Article 114(4)). A commissioner’s share is narrower still: the elucidation limits it to the extent of their own fault or negligence in supervising (elucidation of Article 114(3)).
The defence belongs to the officer, and so does the proof. A director shows the four points in Article 97(5); a commissioner shows the three in Article 114(5). A careful, good-faith decision that later disappoints is exactly what those defences are written for.
| Director | Commissioner | |
|---|---|---|
| Job | Runs the company (Article 92(1)) | Supervises and advises (Article 108(1)) |
| Liable for | The company’s loss, if at fault or negligent (Article 97(3)) | The company’s loss, only as far as their own fault or negligence (Article 114(3)) |
| With others | Jointly and severally (Article 97(4)) | Jointly and severally (Article 114(4)) |
| Care | Good faith and prudence, in the company’s interest (Article 97(5)(b)) | Good-faith, prudent supervision in the company’s interest (Article 114(5)(a)) |
| Interest | No conflict of interest in the act that caused the loss (Article 97(5)(c)) | No personal interest in the directors’ act that caused it (Article 114(5)(b)) |
| Prevention | Took steps to prevent or stop the loss (Article 97(5)(d)) | Advised the directors to prevent or stop it (Article 114(5)(c)) |
| Fault | The loss was not their fault or negligence (Article 97(5)(a)) | Already limited to their own fault |
A defence is something you show
The defences are cumulative, and the officer has to prove them: the Law says a director or commissioner is not liable “if they can prove” each point (Articles 97(5) and 114(5)). The elucidation counts getting information at board meetings as one of the steps to prevent a loss (elucidation of Article 97(5)(d)), and a director with a conflict of interest has no authority to represent the company in that matter (Article 99(1)).
So board minutes, advice from the commissioners given in writing, and stepping aside when conflicted are the material a defence is built from. That is ordinary governance, not extra work. Our resident directors and commissioners act only on what you explicitly ask of them.
Three situations that reach beyond the company
Three rules go further than loss to the company, and each carries its own defence.
A bankruptcy the board caused
Two conditions must both be met: the bankruptcy was caused by the directors’ fault or negligence, and the company’s assets cannot pay all its debts. Each director then shares liability for the shortfall (Article 104(2)), and commissioners share it where the fault lay in supervision (Article 115(1)). Each can show defences, including steps taken to prevent the bankruptcy (Articles 104(4) and 115(3)).
Accounts that prove untrue
If the financial statements the company provides prove untrue or misleading, its directors and commissioners are jointly liable to whoever is harmed, unless they show it was not their fault (Article 69(3)–(4)). This is the one Company Law rule here that runs to outside parties.
Tax the company leaves unpaid
For tax, a company acts through its management, which answers personally or jointly for tax the company owes, unless it shows the Director General of Taxes that in its position it could not be held responsible (General Tax Provisions and Procedures Law, or KUP, Article 32(1)–(2)). The tax law looks at who actually runs the company, not only the names on the deed (Article 32(4)). Our tax compliance work is what keeps the board clear of it.
Questions people ask
Who is liable for contracts signed before the company exists?
Who can bring a claim against a director or commissioner?
Does resigning end a director’s exposure?
What this means for you
Director liability in Indonesia asks for habits most well-run companies already have. Record what the board decides, keep the accounts true and the tax paid on time, and let an unconflicted colleague handle any matter in which you have a personal stake. Those habits are the evidence the Law’s defences rely on.
Where the company needs someone here to hold a seat, our resident director and resident commissioner services are there for it.