Dismissal and resignation of directors are crucial aspects of corporate governance that address changes in the directorial position. While both involve a change in leadership, there are distinct differences in terms of reasons, procedures, and legal consequences.
I. Dismissal of the Board of Directors
The dismissal or termination of a director refers to the process by which the general meeting of shareholders (“GMS“) decides to end a director’s term before its scheduled expiration. The dismissal of directors is governed by Articles 105 and 106 of Law No. 40 of 2007 concerning Limited Liability Companies (“Company Law“). The process of dismissing a director includes the following steps:
a. Dismissal of Directors through GMS
According to Article 105 paragraph (1) of Company Law, a director may be dismissed through a decision made at the GMS. The reason for dismissal must be explicitly stated, and the director must be given the opportunity to defend themselves before the decision is made. If the director does not object to the dismissal, the opportunity to defend themselves may be waived. The dismissal takes effect once the GMS is closed, unless the decision specifies a different date, either within the GMS or outside it.
b. Dismissal of Directors Without GMS
In certain cases, a director may be dismissed without the need for a GMS. However, the process must adhere to the specific conditions outlined in the Company Law. According to Article 91 of Company Law, the decision to dismiss a director outside the GMS must involve written agreement from all shareholders with voting rights, known as circular resolution.
c. Temporary Dismissal of Directors
A director may be temporarily dismissed by the Board of Commissioners, provided that specific reasons are given. As outlined in Article 106 paragraph (1) of Company Law, the temporary dismissal must be communicated in writing to the director. During the period of temporary dismissal, the director loses the authority to perform their duties.
Within a maximum of 30 days, the GMS must convene to decide whether to uphold or revoke the temporary dismissal. If the GMS supports the temporary dismissal, it becomes permanent. If the GMS fails to meet within the designated time or cannot make a decision, the temporary dismissal is deemed invalid.
II. Resignation of Directors
A director’s resignation is a voluntary act by which a director steps down from their position, either for personal reasons, health concerns, or a misalignment with the company’s vision or goals. According to Article 107 of Company Law, the procedure for resignation, the process of filling vacant positions, and the management of the company in the event that all directors are absent or temporarily dismissed are governed by the company’s articles of association.
The dismissal and resignation of directors are significant mechanisms in corporate governance, regulated by Law No. 40 of 2007 concerning Limited Liability Companies (UU PT). These mechanisms ensure that changes in the directorial position occur in a fair and transparent manner, while maintaining the continuity and stability of corporate management.
If you require further clarification on the topic discussed, Schinder Law Firm is a leading corporate law firm in Indonesia, with extensive experience in handling similar matters. Our team of skilled and professional corporate and civil lawyers is ready to assist you. For consultations, please contact us at info@schinderlawfirm.com.
Author:
Dewi Susanti