Director’s Duties and Obligations in Indonesia Explained

Board of Directors overview

The Board of Directors (Direksi) is the company organ that runs an Indonesian limited liability company, known as a PT. Article 1(5) of the Company Law gives directors the authority and full responsibility to manage the company for its interests, in line with its purposes and objectives. Directors also represent the company inside and outside court.

This is different from the Board of Commissioners (Dewan Komisaris). Commissioners supervise and advise. They do not run daily operations unless the law gives them a temporary role. The General Meeting of Shareholders (GMS) appoints and removes both boards and decides matters reserved for shareholders.

A PT can have one director or several. If there is more than one, every director may represent the company by default, unless the articles of association say otherwise. The articles may require joint signatures, assign titles such as President Director, or divide authority by function. Read the articles before signing contracts, opening accounts, or giving powers of attorney.

A PT PMA uses the same two-board structure. Before forming one, review EZPZ’s overview of foreign company registration options in Indonesia and the separate roles of commissioners and directors in an Indonesian company.

Eligibility requirements for directors

A director must be an individual person. A corporate entity cannot itself sit as a director. The person must have legal capacity to take legal actions.

The company’s articles of association may require further qualifications, such as industry experience, education, age, or an Indonesian tax number. Sector regulators can also add rules. Banks, insurers, listed companies, financing businesses, mining companies, and construction businesses may have fit-and-proper, certification, or nationality requirements beyond the general Company Law.

What are the director disqualification rules in Indonesia?

Article 93 gives a five-year lookback test. A person cannot be appointed as a director if, in the five years before appointment, they:

• Were declared bankrupt
• Served as a director or commissioner found responsible for a company’s bankruptcy
• Were convicted of a crime that caused loss to state finances and/or a crime connected to the financial sector

This is a minimum test. A technical agency can impose additional conditions. A company should obtain written candidate declarations, perform public-record checks where possible, and retain the evidence in its corporate file.

Disqualification is not only a paperwork issue. A flawed appointment can create risk in bank KYC, licensing, investor due diligence, and later disputes over board decisions.

Nationality and residency considerations

The Company Law does not impose a general nationality rule for directors of an ordinary PT. A foreign national can be appointed as a PT PMA director if the company’s business line and any sector rules allow it.

A foreign director who works in Indonesia needs the right immigration status and work authorization. Holding the title on paper is not a substitute for an appropriate stay permit. A director based overseas may be possible for some companies, but a PT PMA should also have a director who can practically handle local signing, bank processes, tax correspondence, and regulator communication.

Do not rely on a nominee director. The named director has legal duties and possible personal liability. For a practical overview, see EZPZ’s guide to the roles of foreign company directors in Indonesia.

Appointment and removal procedures

The articles of association set the detailed procedure. Company Law supplies the key rules: directors are appointed by the GMS, appointed for a stated term, and can be reappointed. The founders appoint the first directors in the deed of establishment.

A GMS may take place in person, electronically when legal conditions are met, or through a unanimous written circular resolution. The decision should identify the person, title, term, effective date, authority arrangement, and any resignation or removal being accepted.

Director appointment

A typical appointment follows these steps:

1. Check the articles, shareholder agreement, and sector rules.
2. Confirm the candidate’s identity, legal capacity, Article 93 declaration, and immigration position if foreign.
3. Hold a GMS or obtain unanimous written shareholder approval.
4. Put the resolution into a notarial deed where required.
5. File the change in the Ministry of Law company register within 30 days.
6. Update OSS, NIB data, bank signatories, tax records, licences, and internal authority lists as needed.

The GMS determines the effective date. If it does not state one, the change takes effect when the GMS closes. A director who is not yet recorded may face practical issues with Ministry of Law filings, even if the shareholders already voted.

What are the resignation procedures for a director in Indonesia?

Article 107 requires the articles of association to explain how directors resign and how vacancies are filled. Start there. Most articles require a written resignation letter delivered to the company, often with a notice period.

The directors should convene a GMS to acknowledge the resignation, appoint a replacement if needed, and set the effective date. The company then makes the 30-day Ministry of Law notification. Do not assume sending an email ends the director’s role. Until the correct corporate action and filing are complete, outside parties may still see the former director in the registry.

A resigning director should hand over records, company property, bank access, signing tokens, and ongoing contract information. This protects both the company and the outgoing person.

How is a director removed under Indonesian law?

The GMS may remove a director at any time, but it must state the reason. The affected director must receive an opportunity to defend themselves in the GMS, unless they do not object to the removal decision. A unanimous circular resolution can also remove a director if its procedure satisfies the Company Law.

Commissioners may suspend a director temporarily by written notice stating the reason. A GMS must then decide within 30 days whether to end the suspension or permanently remove the director. If it does not, the suspension lapses.

Removal does not erase liability for earlier acts. It only ends the person’s authority from the effective date.

Statutory duties

Directors must manage within the company’s business purpose, articles of association, and applicable law. “The shareholder told me to do it” is not a full defence if the act was illegal, conflicted, or careless.

Annual reporting and financial statements

Directors prepare the annual report. It must be submitted to the GMS within six months after the financial year ends. It normally covers financial statements, business activities, corporate social and environmental responsibility where applicable, major issues, the commissioners’ supervisory report, board names, and board remuneration.

The directors and commissioners sign the annual report. If a director refuses, the reason must be stated in writing. The company makes the report available to shareholders before the GMS.

From 1 June 2026, submission of company annual reports through SABH became available under Permenkum No. 49 of 2025. Directors should plan the GMS, notarial deed, and electronic filing as one compliance calendar. Failure to maintain these filings can later affect access to Ministry of Law services.

Corporate record maintenance

Article 100 requires directors to create and maintain:

• The shareholder register and special register
• Minutes of GMS meetings
• Minutes of Board of Directors meetings
• The annual report and financial documents
• Other company records

These records should be complete, secure, and easy to produce. Minutes are especially important when a director relies on a board decision, conflict disclosure, or dissent to defend against a later claim.

Directors also need to keep licence data current. This includes the company’s NIB, registered address, KBLI code, board data, and investment reports where applicable.

Business planning and major transactions

Directors can set management policy within Company Law and the articles. They should prepare budgets, cash-flow plans, risk controls, business plans, and approval limits that fit the company’s scale.

Some acts need shareholder approval. Article 102 requires GMS consent before the company transfers or grants security over more than 50% of its net assets in one or related transactions. This rule applies over one financial year, or a longer period if the articles say so.

Directors also need GMS approval before filing the company’s own bankruptcy petition. Major transactions may need extra approval under the articles, shareholder agreement, financing documents, or sector rules.

Meeting obligations and regulatory notifications

The Company Law requires Board of Directors meetings, with minutes signed by the directors present. The articles determine notice, quorum, voting, and the use of online meetings.

Directors should schedule regular meetings even in a small company. Written minutes create proof that the board reviewed finances, risks, contracts, conflicts, and compliance.

Directors must also make timely notifications after changes to directors, commissioners, shareholders, capital, or articles. For director changes, the Ministry of Law notification deadline is 30 days from the GMS decision. Missing it can cause the Ministry to reject later company applications filed by an unrecorded director.

Fiduciary duties

Indonesian Company Law does not use one short statutory definition of “fiduciary duty.” In practice, Articles 92 and 97 produce the same core standards.

A director must:

• Act for the company’s benefit and within its stated purposes
• Act in good faith
• Use reasonable care and responsibility
• Avoid or properly manage conflicts of interest
• Keep company interests separate from personal interests
• Follow the law, articles, GMS resolutions, and valid internal limits

A director has a conflict if the company is on the other side of a dispute with the director, or if the director has a personal interest in the transaction. In that case, Article 99 prevents that director from representing the company. Another non-conflicted director represents the company. If all directors are conflicted, the commissioners act; if both boards are conflicted, the GMS appoints another representative.

Good governance makes these duties easier to prove. Use a conflicts register, require early disclosure, keep board minutes, and obtain independent advice for large related-party deals.

Director liabilities

Limited liability belongs to the company and its shareholders. It does not give directors unlimited protection. Article 97 says each director is personally and fully liable for company losses if they are at fault or negligent in carrying out their duties. If there is more than one director, liability can be joint and several.

Liability can also arise under tax, labor, environmental, competition, anti-corruption, consumer, capital-market, and criminal laws. The exact exposure depends on the act, the director’s role, and the evidence.

Circumstances triggering personal liability

Common triggers include:

• Approving or carrying out an act outside the company’s legal purpose or authority
• Negligent management that causes a company loss
• Failing to keep required records or prepare required reports
• Self-dealing, undisclosed conflicts, or misuse of company assets
• Making material misstatements to shareholders, lenders, regulators, or customers
• Entering a major asset transfer or security without required GMS approval
• Continuing to trade without proper attention to insolvency risk
• Filing a bankruptcy petition without GMS approval

In insolvency, Article 104 can make directors jointly and severally liable if the company’s bankruptcy is caused by the directors’ fault or negligence and company assets do not cover obligations.

Defences against personal liability

Article 97(5) gives directors a clear defence. A director must prove all four points:

1. The loss did not result from their fault or negligence.
2. They managed in good faith and with prudence for the company’s purpose and interests.
3. They had no direct or indirect conflict of interest in the management act that caused the loss.
4. They took action to prevent the loss from happening or continuing.

This is close to a business-judgement protection. It does not protect fraud, hidden conflicts, illegal acts, or a decision made with no reasonable information.

Practical evidence includes agendas, board packs, financial analysis, legal opinions, conflict disclosures, votes, dissent in the minutes, and prompt mitigation steps.

Resident directors for foreign-owned companies

A PT PMA needs a workable local management presence. Some incorporation and immigration processes expect a director who can be present in Indonesia and handle filings, bank KYC, tax correspondence, and licences. A foreign director residing in Indonesia must maintain valid immigration and work documentation.

There is no safe universal shortcut here because sector rules and immigration treatment can differ. Before appointing an offshore director only, check the articles, OSS record, bank policy, work permit requirements, and the company’s real operating model. The appointment must match the person who actually manages and represents the business.

A director in Indonesia is not only a name in the company deed

The role brings authority to manage and represent the PT, but it also brings legal duties to act carefully, honestly, and for the company’s benefit.

The compliance basics are clear: appoint directors through the GMS, maintain company records, prepare the annual report, obtain approval for reserved major acts, disclose conflicts, and file board changes within 30 days. Directors who follow these steps create evidence for the Article 97 defence if a business decision later produces a loss.

For a PT PMA, combine Company Law compliance with the correct immigration, investment, and licensing plan. If you need help appointing a director, updating the Ministry of Law record, or setting up a compliant PT PMA structure, get a free quote from EZPZ Indonesia.

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Sources: UU No. 40 Tahun 2007 tentang Perseroan Terbatas; Pasal 92; Pasal 93; Pasal 94; Pasal 97; Pasal 98; Pasal 99; Pasal 100; Pasal 102; Pasal 104; Pasal 105; Pasal 106; Pasal 107.

Frequently Asked Questions

What is the main duty of a company director in Indonesia?

A director manages and represents the company for its benefit and in line with its stated purposes, Company Law, and the articles of association.

Can a foreigner be a director of an Indonesian PT PMA?

Yes, subject to the company’s business line and any sector rules. If the person works or lives in Indonesia, they also need the correct immigration and work authorization.

Can a director resign at any time?

A director may resign, but the articles of association set the procedure. The company should formalize the resignation through the GMS or valid written resolution and notify the Ministry of Law within 30 days.

Can shareholders remove a director?

Yes. A GMS may remove a director at any time by stating the reason and giving the director a chance to defend themselves, except where the legal exception applies.

When can a director be personally liable?

A director can be personally liable when their fault or negligence causes a company loss. The director may defend the claim by proving good faith, due care, no conflict of interest, no fault or negligence, and action to prevent or limit the loss.