The General Meeting of Shareholders (“GMS”) is a pivotal within a company, holding exclusive authority distinct from the Board of Directors or Board of Commissioners, as defined by the Law No. 40 of 2007 concerning Limited Liability Company (the “Company Law”) and its amendments, alongside the company’s articles of association.

Article 78 of the Company Law divides the GMS into two categories: the annual GMS and other GMS. For the annual GMS, two key points merit attention: firstly, it must be held within a maximum period no later than 6 (six) months after the financial year ends. Secondly, within the annual GMS, some documents are mandatory to be submitted in the annual report to be verified during the annual GMS.

Per Article 66 paragraph (2) of the Company Law, the annual report must include:

1. Financial reports that are audited consisting of:
   1. The final balance sheet for the previous financial year in comparison with the previous financial year;
   2. Profit and loss statement from the relevant financial year;
   3. Cash flow statement and statement of changes in equity; and
   4. Notes to these financial statements;
2. Reports regarding the Company’s activities;
3. Report on the implementation of Social and Environmental Responsibility;
4. Details of problems that arose during the financial year that affected the Company’s business activities;
5. Reports regarding the supervisory duties carried out by the Board of Commissioners during the previous financial year;
6. Names of members of the Board of Directors and members of the Board of Commissioners;
7. Salaries and allowances for members of the Board of Directors and salaries or honorarium and allowances for members of the Company’s Board of Commissioners for the previous year.

These documents, prepared in accordance with financial accounting standards and endorsed by all relevant board members, must be made available for inspection by shareholders in the company’s office from the issuance of the GMS summons. Essentially, the annual report provides transparency regarding the composition of the company’s leadership, including details of the members of the Board of Directors and the Board of Commissioners, along with their respective remunerations for the previous year. This means that through the reports provided, the company can foster trust and accountability among its shareholders.

Prior to the annual GMS, an invitation must be extended, with procedures and venue specified in the company’s articles of association. Directors hold the responsibility, as per Article 79 paragraph (5) of the Company Law, to convene a GMS within fifteen days from the receipt of a request for its convocation.

While there are no explicit penalties for failing to convene an annual GMS within the stipulated time frame, directors remain obligated to ensure its occurrence by furnishing the company’s annual report. The annual GMS serves as a cornerstone in safeguarding and asserting the rights of shareholders within the company, as well as fulfilling the requirements of Good Corporate Governance.

If you, a prospective client, have further inquiries about the topic discussed above, Schinder Law Firm is one of many corporate law firms in Indonesia that has handled numerous similar matters, with many experienced and professional corporate and civil lawyers in its arsenal, making it one of the top consulting firms in Indonesia. Feel free to contact us at info@schinderlawfirm.com for further consultation.