The Board of Commissioners is a corporate organ entrusted with the duty to conduct general and/or specific supervision in accordance with the Articles of Association and to provide advice to the Board of Directors. Based on the Elucidation of Article 108 of Law Number 40 of 2007 on Limited Liability Companies (“Company Law”), where the Board of Commissioners consists of more than one member, it shall function as a collegial body. Consequently, each member of the Board of Commissioners may not act individually, but must act on the basis of a resolution of the Board of Commissioners. This provision differs from that governing the Board of Directors, whose members are each authorized to act individually in carrying out management duties and in representing the Company, both inside and outside the court.

Furthermore, Article 108 paragraphs (1) and (2) of the Company Law stipulate that the duties of the Board of Commissioners include supervision of management policies and the overall course of the Company’s management, whether relating to the Company itself or its business activities, as well as the provision of advice to the Board of Directors for the interest of the Company and in accordance with the Company’s purposes and objectives. In addition to these powers, Article 117 of the Company Law allows further regulation by granting the Company the right to stipulate in its Articles of Association the authority of the Board of Commissioners to grant approval or assistance to the Board of Directors in carrying out certain legal acts (bijzondere rechtshandeling / special legal acts).

Yahya Harahap, in Law of Limited Liability Companies, explains that the authority of the Board of Commissioners to grant approval or assistance to the Board of Directors in relation to certain legal acts constitutes a power that is distinct and separate from the supervisory and advisory functions. The functions of supervision and advice are primary powers that are directly and inherently conferred upon the Board of Commissioners by the Company Law, as regulated under Article 114 thereof. Conversely, the authority to grant approval or assistance as referred to in Article 117 of the Company Law does not automatically vest in the Board of Commissioners, but only exists and is legally valid if expressly provided for in the Company’s Articles of Association. Accordingly, where the Articles of Association do not regulate such authority, the Board of Commissioners is not empowered to grant approval or assistance to the Board of Directors, and its authority remains limited to the performance of supervisory and advisory functions.

Furthermore, according to M. Yahya Harahap, the regulation of both the scope and substance of the authority of the Board of Commissioners to grant approval to the Board of Directors for certain legal acts in the Articles of Association must first take into account the manner and purpose of granting such approval as intended by the Company Law. In this regard, the approval of the Board of Commissioners must be given in written form, apply only to specific legal acts and not be of a general nature, and must not be intended as part of the exercise of supervisory or advisory functions. In addition, as stipulated under Article 117 paragraph (2) of the Company Law, where the Articles of Association grant authority to the Board of Commissioners to approve acts of the Board of Directors, it is advisable that the requirements and procedures for granting such approval are also determined.

With respect to the legal consequences arising where the Articles of Association require the approval of the Board of Commissioners for certain legal acts performed by the Board of Directors, such provisions must refer to and be subject to Article 117 paragraph (2) of the Company Law. This article provides that where the Articles of Association require approval or assistance from the Board of Commissioners but such approval or assistance is not obtained, the legal act carried out by the Board of Directors shall nevertheless bind the Company, provided that the other party to the legal act acts in good faith.

References:

• Law Number 40 of 2007 on Limited Liability Companies;
• Law Number 6 of 2023 on the Enactment of Government Regulation in Lieu of Law Number 2 of 2022 on Job Creation into Law; and
• M. Yahya Harahap, Law of Limited Liability Companies, Jakarta: Sinar Grafika, 2016.