Authority of the Board of Commissioners in a Limited Liability Company
The Board of Commissioners (“BOC”) is a corporate organ responsible for supervising and providing advice to the Board of Directors on the management of a limited liability company, according to Article 1 Number 6 Law No. 40 of 2007 on Limited Liability Companies (the “Company Law”). Article 1 paragraph (2) and Article 108 paragraph (1) of the Company Law, expressly state that the organs of a Company comprise General Meetings of Shareholders (“GMS”), the Board of Directors, and the Board of Commissioners. This provision implicitly affirms that every Limited Liability Company must have a Board of Commissioners as the organ responsible for supervising the policies and management conducted by the Board of Directors.
Given the above, the minimum corporate structure of a Limited Liability Company, in general, comprises GMS, at least one Director, and at least one Commissioner. For an ordinary (private/non-listed) Limited Liability Company, the Board of Commissioners must consist of at least one person, according to Article 108 paragraph (3) of the Company Law. Meanwhile, certain companies as referred to in Article 108 paragraph (5), are required to have more than one member. This means that the following companies must appoint at least two commissioners:
1.Companies conducting business activities based on the sharia principles;
2.Companies operating in specific sectors that collect funds from the public; and
3.Public companies.
In carrying out its duties, the Board of Commissioners is authorized to receive and review the annual work plan prepared by the Board of Directors prior to its submission to the GMS, according to Article 64 of the Company Law. In addition, for certain corporate actions, the Board of Directors is required to obtain the approval of the Board of Commissioners. Furthermore, the Board of Commissioners may receive delegated authority from the GMS to approve the repurchase of the company’s shares, as provided under Article 39 of the Company Law, as well as to grant approval for the implementation of capital increases according to Article 41 of the Company Law. The Board of Commissioners is also authorized to determine the remuneration and benefits of the Board of Directors. Moreover, the Board of Commissioners has the authority to approve the draft merger of the company according to Article 123 of the Company Law.
Duties of the Board of Commissioners in a Limited Liability Company
The Board of Commissioners has several duties under the Company Law. If legal actions are taken on behalf of a company that has not yet become a legal entity, Article 14 of the Company Law provides that the members of the Board of Commissioners are jointly responsible for the legal actions. The Board of Commissioners is also responsible for reviewing the annual report prepared by the Board of Directors for signing, according to Articles 66 and 67. In addition, the Board of Commissioners is required to provide explanations and information in the GMS as regulated in Article 75 of the Company Law. If the Board of Directors doesn’t convene a GMS, the Board of Commissioners may convene the meeting independently, as stated in Article 79. The Board of Commissioners is further required to announce the annulment of the appointment of the relevant member of the Board of Directors in a newspaper and to notify the Minister of Law and Human Rights for registration in the company register, as provided under Article 95. Furthermore, under Article 106 paragraph (1) of the Company Law, the Board of Commissioners may temporarily suspend a member of the Board of Directors by stating the reasons for the suspension and notifying the concerned director. Based on this provision, it can be understood that the Board of Commissioners is authorized to impose a temporary suspension on a director, while the final decision rests with the GMS.
May the Board of Commissioners Perform Management Functions in a Limited Liability Company?
According to Article 99 paragraph (2) of the Company Law, if the Board of Directors has a conflict of interest with the company or is involved in a court proceeding, the authority to represent the company shall be exercised by the Board of Commissioners, provided that all members of the Board of Directors are subject to the conflict of interest. For example: The Board of Directors of PT A plan to sign a construction cooperation agreement with PT B. However, it is known that:
a.The president director of PT A is also the majority shareholder of PT B.
b.The other director is the sibling of the president director and also has an indirect interest in PT B.
In the above example, all members of the Board of Directors have a conflict of interest in relation to the transaction. If the Board of Directors continues to represent PT A in signing the agreement, there is a risk of violating the fiduciary duty principle as well as the provisions of the Company Law. Therefore, according to Article 99 paragraph (2) of the Company Law, the party authorized to represent the company is the Board of Commissioners.
Furthermore, Article 118 of the Company Law provides that under the articles of association or a resolution of the GMS, the Board of Commissioners may carry out management actions of the company in certain circumstances and for a specified period of time. Moreover, members of the Board of Commissioners appointed to carry out the management functions in substitution for the Board of Directors shall be vested with all the rights, powers, and responsibilities of the Board of Directors in relation to the company and third parties. The specific circumstances referred to Article 118 paragraph (1) of the Company Law, among others are situations where the board of directors has a conflict of interest with the company, the directors are unable to perform their duties or are temporarily suspended and other circumstances as provided in the company’s article association. However, if the board of commissioners undertakes management actions outside of the circumstances mentioned above, those actions may be categorized as ultra vires.
Cases Example
If the Board of Commissioners does not exercise its authority according to the Company Law, its actions may be considered as a breach of duty. The board of commissioners holds the position of a supervisory and advisory organ to the board of directors. However, when a Commissioner uses his advisory position to effectively represent the Company without proper legal authority, it constitutes an abuse of position and may be categorized as an ultra vires act. This situation is reflected in the case of PT Condato Grup Indonesia (“PT CGI”) under ruling number 352/Pdt.G/2021/PN Jkt.Pst. In this case, the Commissioner is alleged to have misused the Board of Commissioners supervisory and advisory authority by influencing the Board of Directors to conduct transactions through supplier companies affiliated with him, thereby causing profits that should have accrued to PT CGI to be retained at the level of those affiliated entities. Under the Company Law and PT CGI’s Articles of Association, the Board of Commissioners is not authorized to represent the company in the same manner as the board of directors. This act violated PT CGI’s rights and caused financial loss to the company. However, the court did not clearly elaborate on each element of an unlawful act and did not explain the causal relationship between the act and the loss in the case as an ultra vires act.
According to ruling number 352/Pdt.G/2021/PN Jkt.Pst, the Commissioner used his advisory authority to influence the transaction structure, directing payments to supplier companies affiliated by the Commissioner. As a result, funds that should have been received by PT CGI were diverted to and retained by those affiliated entities and causing financial loss to the Company. These actions clearly exceeded the limits of his authority according to Article 114 paragraph (2) of the Company Law, because he did not perform his authority in good faith and acted for personal interest rather than for benefit of the company. This overreach of authority may create uncertainty and disorder in the corporate management. The Board of Commissioners may manage a Limited Liability Company if this is allowed by the Articles of Association or if they are temporarily appointed by a GMS resolution. This authority is based on Article 118 of the Company Law. Under this article, the Board of Commissioners who act as managers have the same responsibilities as Directors, including joint and several liability for any losses caused. However, it is important to remember that the main role of the Board of Commissioners is to supervise the Company. The authority given under Article 118 is only a limited power. Therefore, if the Board of Commissioners carry out management actions beyond what is allowed under Article 118, those actions can be considered ultra vires acts.
Conclusion
In conclusion, although the Board of Commissioners has certain powers under the Company Law, the main role of commissioners is to supervise the company. If a commissioner goes beyond this supervisory role or contrary to the provisions of the Company Law and Articles of Association of association, as any deviation may constitute an unlawful act and give rise to legal liability. Furthermore, if these actions cause losses to the company, the commissioner can be held personally liable for those losses.
Disclaimer
This material provides a general overview of the legal framework governing corporate governance under Indonesian Company Law, including the roles, authority, and liability of the Board of Directors and the Board of Commissioners, as well as issues relating to ultra vires acts and unlawful conduct. The discussion is intended solely for informational and academic purposes and does not constitute formal legal advice.
Circumstances may vary widely and the interpretation or application of the laws referenced herein may differ depending on specific factual situations. Readers are strongly advised not to make decisions based solely on this material without obtaining independent professional legal counsel. Regulations may also change over time and updated guidance may be required to ensure continued compliance. Should you require more tailored assistance or deeper analysis regarding the matters covered in this article, our team would be pleased to support you.
Perdana & Rekan,
March 2026.