Can expatriates be appointed as a Director in a PMA Company? Learn more regarding the eligibility of the Director position and the applicable limitations for foreign expatriates.
“A Foreigner can be a Director of Foreign Direct Investment Company as long as he is not the Director in charge of Human Resources.”
FOREIGN DIRECTORSHIP IN PMA COMPANY
The terms and conditions of a directorship in a PMA Company is stipulated under Law No. 40 of 2007 concerning Limited Liability Company (“Company Law”). Article 1 point 5 defines the Board of Directors as the company organs with the authority and full responsibility of the management of the Company for the interests of the Company, pursuant to the Company purposes and objectives. The Board of Directors also represents the Company, whether in front of judicial courts or outside the judicial courts, pursuant to its Articles of Association.
Article 10 Paragraph (2) Law of the Republic of Indonesia Number 25 of 2007 regarding Capital Investment (“Investment Law”) also stated that Foreign Direct Investment Company (“PMA Company” or PT PMA) is allowed to hire foreigner for certain position and expertise pursuant to the applicable laws and regulations.
There are no explicit limitation in both the Company Law and Investment Law which states that an expatriate are not allowed to be appointed and act as a Director of a PMA Company. Therefore, as long as there are no prevailing regulations which applies for the PMA Company business sector, expatriates can be appointed to sit in the Board of Directors.
POSITIONS PROHIBITED FOR EXPATRIATES IN A PMA COMPANY
One of the regulations which does not allow specific positions to be managed by Expatriates is Ministry of Manpower Decree Number 40 of 2012 (“MOM Decree 40/2012”) regarding specific postions that are prohibited for Foreigner, which is this regulation, does not allow the Foreigner to have position in the Human Resources division, such as Personnel Director, Industrial Relation Manager, Human Resource Manager, and subordinate positions such as Human Resources Supervisor, Advisor, Specialist, Mediator, Interviewer, Administrator, and even Analyst.
Even though it is not explicitly stated, this prohibition ensures that there must be at least 1 (one) Indonesian Employee in the management of the Company who handles the Human Resources division, be it as a Human Resources Director, Manager, Supervisor, or Staff.
Therefore, if a PMA Company has a full foreign Board of Directors, it must have 1 (one) Indonesian Human Resources Manager or Supervisor, who will manage the Human Resources Division. Or, it can appoint 1 (one) Indonesian Director in the Board of Directors who manages Human Resources.
HOW CAN SMART CONSULTING HELP YOU?
To ensure a smooth investment and business operation from the legal perspective, but also still focus on establishing your business in Indonesia and reach your revenue target, it is advised for you to find capable and trusted lawyers or legal consultants for advice and assistance in ensuring your legal compliance with employment laws and regulations.
SMART Consulting is an Indonesian Corporate Legal Services firm. We assist investors in establishing their business in Indonesia through various forms of investment, including setting up Perseroan Terbatas (PT), both local PT and PT PMA. Our services also includes assisting our Clients in restructuring the Board of Directors, including matters related to appointment and/or removal of Foreign Directors in a PT PMA.
Contact Us Now to get your legal solution for your business goals, and still comply with the prevailing laws and regulations.