Two-Tier Corporate System for PMA Companies
Indonesia Company Law establishes a two-tier corporate governance structure for all limited liability companies, including Foreign Investment Companies (PMA Companies).
This system separates executive functions and supervisory functions into two distinct bodies:
- Board of Directors (Direksi) – manages the company and represents it externally;
- Board of Commissioners (Dewan Komisaris) – supervises management and provides strategic oversight.
This framework promotes transparency, accountability, and balanced decision-making.
Role of the Board of Directors
The Board of Directors is responsible for managing the company’s daily operations.
Directors must act in line with the Articles of Association and Indonesian laws.
Key Responsibilities
Operational Management
Directors oversee business operations, finance, HR, and internal administration.
Legal Representation
They represent the company in contracts, transactions, and legal matters.
Execution of Corporate Strategy
Directors implement decisions taken by the General Meeting of Shareholders (GMS) and ensure that operations follow the company’s goals.
Compliance and Reporting
They ensure timely tax filings, statutory reports, and other legal obligations.
Foreign nationals may serve as directors if they meet work permit and immigration requirements. The company’s Articles of Association normally define the number of directors and their authority.
Role of the Board of Commissioners
The Board of Commissioners provides independent supervision over management.
While Commissioners do not manage day-to-day operations, they play a crucial role in corporate oversight.
Key Responsibilities
Supervision
They review management actions, performance reports, and major transactions.
Advisory Functions
Commissioners offer strategic input to ensure that management decisions support long-term business goals.
Approval Rights
The Articles of Association may require Commissioner approval for certain actions, such as asset sales, borrowing, or corporate restructuring.
Annual Reporting
Commissioners must present a supervisory report to shareholders during the GMS.
Commissioners may only act on behalf of the company in limited circumstances, usually when all Directors are unable to perform their duties and the Articles of Association allow such authority.
Coordination Between Directors and Commissioners
The two-tier system maintains a clear division of duties:
- Directors execute policies and run the company;
- Commissioners supervise decisions and ensure accountability.
This structure strengthens internal controls and helps protect shareholder interests, especially in foreign investment structures.
Role of the General Meeting of Shareholders (GMS)
The GMS is the highest authority in a PMA company.
Shareholders make decisions on key matters, including:
- Appointment and dismissal of Directors and Commissioners;
- Approval of annual financial statements;
- Dividend declarations;
- Corporate actions such as mergers, acquisitions, or capital changes.
The GMS ensures that both boards remain accountable and aligned with shareholder expectations.
Conclusion
A PMA Company in Indonesia operates under a clear two-tier governance structure:
- The Board of Directors manages daily operations and represents the company;
- The Board of Commissioners supervises management and offers strategic guidance;
- The GMS holds ultimate decision-making authority.
Together, these bodies create a governance framework that supports transparency, responsibility, and sound corporate conduct under Indonesia Company Law.