Two-Tier Management System for PMA Companies
Indonesia Company Law (Law No. 40/2007, as amended by GRL No. 2/2022) adopts a two-tier governance structure for all limited liability companies, including Foreign Investment Companies (PMA Companies).
This framework separates management and supervision into two distinct organs:
- Board of Directors (Direksi) – handles daily operations and represents the company;
- Board of Commissioners (Dewan Komisaris) – supervises management and provides strategic oversight.
Because each body has a different mandate, Indonesian corporate governance remains transparent, structured, and accountable.
Role of the Board of Directors
The Board of Directors is responsible for the company’s day-to-day operations. Directors must manage the business in accordance with the Articles of Association and relevant Indonesian laws.
Key Responsibilities
Operational Management
Directors manage business activities, internal administration, human resources, and financial processes.
Legal Representation
They represent the company in contracts, negotiations, transactions, and legal matters.
Execution of Strategy
Directors implement resolutions approved by the General Meeting of Shareholders (GMS) and align operations with corporate objectives.
Compliance and Reporting
They ensure that the company submits tax filings, statutory reports, and other regulatory requirements on time.
Both Indonesian citizens and foreign nationals may serve as Directors as long as they comply with immigration and work-permit regulations. The Articles of Association generally specify the number of directors and their authority.
Role of the Board of Commissioners
The Board of Commissioners supervises the actions of the Directors and protects shareholder interests.
Although Commissioners do not manage day-to-day operations, they play a critical role in oversight and governance.
Key Responsibilities
Supervision
Commissioners oversee management activities, review periodic performance reports, and monitor compliance.
Advisory Functions
They provide input and guidance on strategic and operational decisions.
Approval Rights
In many companies, certain actions—such as asset transfers, debt arrangements, or mergers—require approval from the Commissioners before execution.
Annual Reporting
They must submit a supervisory report to shareholders during the GMS.
Commissioners cannot act on behalf of the company unless all Directors are unavailable and the Articles of Association expressly grant such authority.
Coordination Between Directors and Commissioners
The two-tier structure ensures a clear division of roles.
While Directors execute policies and manage operations, Commissioners supervise and guide them. As a result, the model strengthens internal control, reduces governance risks, and supports fair and responsible decision-making.
Role of the General Meeting of Shareholders (GMS)
The GMS is the company’s highest authority. Shareholders decide on matters such as:
- Appointment and dismissal of Directors and Commissioners;
- Approval of annual financial statements;
- Dividend distribution;
- Capital increases or reductions;
- Major corporate actions including mergers, acquisitions, or restructuring.
Through these powers, the GMS ensures that both boards remain accountable to shareholders.
Conclusion
A PMA Company in Indonesia operates under a corporate governance structure designed to maintain balance and transparency:
- The Board of Directors manages daily operations and represents the company externally;
- The Board of Commissioners supervises management and provides strategic guidance;
- The GMS remains the ultimate decision-making authority.
Together, these three bodies uphold strong governance standards consistent with Indonesia Company Law.
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