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New Provisions on the Management of State-Owned Enterprises

ADCO Law

Pengaturan Baru Pengelolaan BUMN

The Government of Indonesia has enacted Government Regulation Number 23 of 2022 on Amendments to Government Regulation Number 45 of 2005 on the Establishment, Management, Supervision, and Dissolution of State-Owned Enterprises (“GR 23/2022”), which regulates a number of points related to the management of State Ownership-Enterprises (“SOE”), and the responsibilities and prohibitions of the Board of Directors and Board of Commissioners. 

 

A. Prohibition on Holding Concurrent Positions

 

In the hope to avoid conflicts of interest in SOEs, under Article 22 paragraph (1) and Article 55 paragraph (1) of GR 23/2022, members of the Board of Directors and Commissioners are prohibited from holding concurrent positions i.e., other positions as a political party administrator, candidate or member of the legislative, and candidate or regional head, as follows: 

 

Prohibition Scope
Candidate / Member of the Legislative House of Representative, Regional House of Representative, Regional Representative
Candidate / Regional Heads Governor, Mayor, and Head of Regent

 

Furthermore, members of the Board of Directors must always be loyal and fully obedient to Pancasila, the 1945 Constitution of the Republic of Indonesia, the Unitary State of the Republic of Indonesia, and the Government in accordance with Article 17A. In addition, based on Article 14, the Government of Indonesia includes three new paragraphs i.e., Article 14 paragraph (1a), paragraph (1b), and paragraph (1c) of GR 23/2022, which stipulate that the Minister of SOE must establish a list and track record when appointing directors. The list and track record include the list and track record of current directors and prospective directors. When establishing the list and track record, the minister of SOE may request input from the relevant government institutions/agencies.

 

B. Accountability for SOE loss

 

Article 59 paragraph (2) of GR 23/2022 stipulates provisions amending the previous regulation that now the Commissioner and the Supervisory Board are fully and personally liable for any losses suffered by the SOE if the person concerned is guilty or negligent in carrying out their duties. On the other hand, the Commissioners and the Supervisory Board are released from liability for losses if they are proven to have good intentions and a good sense of responsibility in carrying out their duties for the SEO’s business and interests.

 

Furthermore, GR 23/2022 stipulates in detail that members of the Board of Directors and Commisioners cannot be held responsible for losses suffered by the SOE if they can prove that:

  1. members of the Board of Directors and Commisioners have indeed caused a loss, but the loss is not due to their fault or negligence;

  2. members of the Board of Directors and Commisioners have carried out the Management in good faith and prudence for the benefit and in accordance with the aims and objectives of the SOE;

  3. members of the Board of Directors and Commisioners do not have any conflict of interest, either directly or indirectly, over management actions that result in losses; and

  4. members of the Board of Directors and Commisioners have taken the necessary actions to prevent the occurrence or continuation of the loss.

State Ownership Enterprises

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C. Dismissal of SOE Management

 

Article 23 of GR 23/2022 stipulates that members of the Board of Directors may be dismissed if:

 

  1. members of the Board of Directors are unable to fulfill their obligations as agreed upon in the management contract;

  2. members of the Board of Directors are unable to carry out their duties properly;

  3. members of the Board of Directors do not implement the provisions of the legislation and/or the provisions of the articles of association.

  4. members of the Board of Directors are involved in actions that are detrimental to the SOE and/or state finances;

  5. members of the Board of Directors take actions that violate ethics and/or propriety; and

  6. members of the Board of Directors are found guilty as determined by a court decision that has permanent legal force.

 

In addition to the reasons for the dismissal of the Board of Directors as referred to above, members of the Board of Directors may also be dismissed for other reasons deemed appropriate by the General Meeting of Shareholders (“GMS”) or the Minister of SOE for the interests and objectives of the SOE. However, the members of the Board of Directors are also given the opportunity to defend themselves if they have objections and if the dismissal plan is still in process, then the relevant member of the Board of Directors must carry out his duties properly.

 

D. Further Implementation

 

The Special Staff of the Minister of SOE has stated that the Ministry of SOE is currently reviewing GR 23/2022 and has ensured that there will be derivative technical regulations without ruling out the possibility to continue using the previous regulation in case the amendments are not much different from the previous regulation. Furthermore, the Ministry of SOE will conduct a study regarding the regulation, and will decide whether the implementing regulation for GR 23/2022 will be in the form of a Regulation of the Minister of SOE.

 

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