“Bu Lita, our PMA Company plans to hold its Extraordinary and Annual General Meeting of Shareholders (GMS) on 27 June. However, our foreign shareholders cannot attend and intend to issue a Power of Attorney (PoA) authorizing a director of the PMA Company to represent them. Could you advise on how to ensure the PoA will be valid and acceptable in Indonesia?”

A Power of Attorney (PoA) is a legal document through which one party, referred to as the grantor, authorizes another individual, known as the proxy or attorney-in-fact, to act on their behalf. This is an important legal tool commonly used in various corporate and personal transactions, particularly where direct personal attendance or involvement is not feasible. In the context of corporate governance, especially in shareholder meetings, a PoA allows shareholders who cannot attend the meeting in person to delegate their voting rights or representation to another party.

In Indonesia, the legal framework governing PoAs primarily falls under Articles 1792 and 1795 of the Indonesian Civil Code. These provisions recognize a PoA as a form of agreement between the grantor and the proxy. While the Civil Code itself does not impose a strict formal format for a PoA, certain laws and regulations pertaining to corporate governance and company law impose specific requirements and restrictions on the use of PoAs, particularly in the context of General Meetings of Shareholders (GMS).

Legal Restrictions under Indonesian Company Law

Under Law No. 40 of 2007 concerning Limited Liability Companies (the “Company Law”), specific rules apply to the use of PoAs during a GMS. For example, Article 85 paragraph (4) explicitly states:

In the voting process, members of the Board of Directors, members of the Board of Commissioners, and employees of the Company concerned are prohibited from acting as proxies for shareholders as referred to in paragraph (1).

Furthermore, the elucidation of this article provides the following explanation:

‘In determining the quorum of the GMS (General Meeting of Shareholders), shares owned by shareholders represented by members of the Board of Directors, members of the Board of Commissioners, and employees of the Company acting as proxies shall be counted. However, in the voting process, such proxies are not entitled to cast votes on behalf of the shareholders.’

As per my understanding, this regulation aims to maintain the integrity and impartiality of the decision-making process within the company. It prevents potential conflicts of interest where company management or employees might unduly influence shareholder votes through proxies. Therefore, shareholders intending to appoint a director, commissioner, or employee as their proxy should be aware that such PoAs only allow the proxy to be physically present at the meeting but not to exercise voting rights or make decisions on the shareholder’s behalf.

If shareholders wish to appoint someone with voting powers, that person must be independent of the company’s management and staff, such as a third-party professional or an external legal representative.

Validation of Foreign-Issued PoAs in Indonesia

When a PoA is issued outside Indonesia, additional legal steps are required to ensure its validity and enforceability in the country. This is because documents issued abroad are subject to international and domestic rules on authentication and legalization to prevent forgery and ensure trustworthiness.

The key determinant in the validation process is whether the issuing country is a member of the Hague Apostille Convention (1961), to which Indonesia is a party following Presidential Regulation No. 2 of 2021.

• If the PoA is from a Hague Apostille Convention member country, it must be apostilled by the designated competent authority in that country. The apostille is a form of certification that authenticates the document for international use, simplifying the legalization process. Once the document bears an apostille, it is recognized as valid in Indonesia without further legalization or notarization. Generally, obtaining an apostille takes about 1 to 5 business days depending on the issuing country’s procedures.

• If the PoA originates from a non-member country, the process is more complex and involves a two-stage legalization procedure:

  1. The PoA must first be legalized by a public notary, the Ministry of Foreign Affairs, or the equivalent competent authority in the issuing country.

  2. Subsequently, it must be legalized by the Indonesian Embassy or Consulate in that country.

  This process may take approximately 5 to 15 business days, depending on local administrative procedures and workload.

These steps are crucial for the PoA to be accepted by Indonesian authorities, especially when used in official corporate actions, such as attendance and voting in the GMS.

Language Requirements and Translation

Another critical requirement concerns the language of the PoA. Since Indonesian is the official language of Indonesia, any foreign document, including a PoA, must be translated into Bahasa Indonesia for official use.

Some Indonesian notaries and authorities require that translations be done by a sworn translator (penerjemah tersumpah) to ensure accuracy and legal reliability. This sworn translation process can add both time and cost to the preparation of the PoA.

To mitigate delays and additional expenses, it is highly advisable for foreign shareholders to prepare the PoA in a bilingual format, combining the original language and its Bahasa Indonesia translation in a single document. This practice facilitates faster verification and processing during the GMS.

Summary and Best Practices

In conclusion, to ensure that a foreign-issued Power of Attorney (PoA) is valid and acceptable for use at a General Meeting of Shareholders (GMS) in Indonesia, the following key points must be considered:

• The identity of the proxy is critical. Directors, commissioners, or employees of the company may attend but are generally not authorized to vote on behalf of shareholders.

• The PoA must comply with the formal legal requirements under Indonesian Company Law and Civil Code.

• If issued abroad, the PoA must be properly legalized or apostilled, depending on whether the issuing country is a Hague Apostille Convention member.

• The document must be in Bahasa Indonesia or accompanied by an official translation, ideally prepared in bilingual format to avoid delays.

• Finally, it is essential to review the company’s Articles of Association (AoA), as it may contain additional provisions or restrictions related to shareholder representation.

• To ensure compliance and avoid any challenges during the GMS, it is always prudent to seek advice from local legal counsel experienced in Indonesian corporate law and cross-border document validation.

By following these steps and ensuring due diligence, foreign shareholders can confidently use PoAs to participate in Indonesian company meetings, maintaining proper governance and legal compliance.

If you need assistance drafting or validating a PoA for your upcoming GMS, consulting with legal professionals in Indonesia will provide tailored advice aligned with the latest regulations and procedural requirements.

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