Page 1 of 11

Advances in Social Sciences Research Journal – Vol. 10, No. 2

Publication Date: February 25, 2023

DOI:10.14738/assrj.102.14024.

Suhardiman, D., & Pramono, N. (2023). Limited Liability Company: Resolving Demission State of Directors and Board of

Commissioners Issue Through Company Law. Advances in Social Sciences Research Journal, 10(2). 331-341.

Services for Science and Education – United Kingdom

Limited Liability Company: Resolving Demission State of

Directors and Board of Commissioners Issue Through Company

Law

Daniel Suhardiman

Universitas Pelita Harapan, MH Thamrin Boulevard 1100, Tangerang

Nindyo Pramono

Universitas Gadjah Mada, Bulaksumur, Daerah Istimewa Yogyakarta

Abstract

The Directors and Board of Commissioners are the two main organs that carry out

the management and supervisory functions of the company. Based on Law No. 40 of

2007 concerning Limited Liability Companies ("Law No. 40/2007"), the two organs

of the company have a term of office for a certain period of time as stipulated in

Article 94 paragraph (3) and Article 111 paragraph (3) of Law No. 40/2007.

However, Law No. 40/2007 does not definitively determine the length of term of

office that can be held by the Directors and Board of Commissioners. Therefore, in

practice the term of office for the Board of Directors and Board of Commissioners

varies according to the articles of association of each company. Obstacles that may

occur in the practice of running a company are obstacles in reappointing or

replacing Directors and Commissioners whose term of office has ended. This is due

to the absence of preventive arrangements in terms of the reappointment or

replacement of theDirectors and the Board of Commissioners whose term of office

has ended due to a deadlock in holding the General Meeting of Shareholders

("GMS"). The Directors and Board of Commissioners will be in a state of demission

and will no longer be able to act for and on behalf of the Company. This study aims

to discuss and analyze the company's legal stance in dealing with the issues of the

Board of Directors and Board of Commissioners who are in a state of demission.

Keywords: Limited Liability Company, Company Organs, Demission State.

INTRODUCTION

Limited Liability Companies have organs that carry out management and supervisory

functions, namely the Directors and the Board of Commissioners. Law No. 40 of 2007 on Limited

Liability Companies (“Law No 40/2007”) stipulates that the two organs are appointed for a

certain period of time and can be re-appointed through a General Meeting of Shareholders

(“GMS”) decision. Furthermore, Law No. 40/ 2007 also mention that when the term of office of

the Directors and the Board of Commissioners has ended, the Directors and Board of

Commissioners are no longer entitled to act for and on behalf of a Limited Liability Company.

In such case, then all actions taken outside of their position will become personal responsibility.

In connection with the term of office of the Directors and the Board of Commissioners, it is

found that there is a legal vacuum which contained risks to the management of the company.

Page 2 of 11

332

Advances in Social Sciences Research Journal (ASSRJ) Vol. 10, Issue 2, February-2023

Services for Science and Education – United Kingdom

The legal vacuum concerns the issue in the event when the Directors and Board of

Commissioners are on state of demission. In simple terms, demission state is a condition where

the term of office of the Directors and Board of Commissioners has ended, however both

company organs have not been re-appointed or replaced with new management and are still

running the management of the company. The demission state of all members of the Directors

and Board of Commissioners may occur mainly due to the failure to convene the GMS. The GMS

may fail to be held due to the negligence of the shareholders or disharmony between the

shareholders which results in deadlocks in every decision-making.

Technically, the aforementioned issue can be even more complicated if the Limited Liability

Company has 50-50 share ownership. Moreover, it becomes even more difficult since there are

no provisions governing the demission state in Law No. 40/2007. As a result, there will be a

vacuum in the company's management and the company's activities will be paralyzed. Such

conditions have not been anticipated by the legislators of Law No. 40/2007 and thus creates

uncertainty in the management of the Company. Nonetheless, as the main guideline governing

company law, Law No. 40/2007 has a set of instruments to resolve problems that arise in the

practice of running the company, including the issues of demission state of Directors and Board

of Commissioners.

METHODS

This research is normative legal research supported by interviews with informants. The nature

of this research is descriptive. The approach used in this research is descriptive analysis and

statutory approach. The primary data in this study were obtained through interviews with

informants, while the secondary data from this study were obtained through a literature study

which was analyzed using qualitative methods.

RESULTS AND DISCUSSION

Limited Liability Company’s Management Board Absence due to Demission State of

Directors and Board of Commissioners

Directors and Board of Commissioners are the two organs of a Limited Liability Company which

hold essential functions in the course of the company's business activities. Directors hold the

management function which includes legal actions which are explicitly included in the aims and

objectives and business activities of the company as stipulated in the articles of association

(“AoA”). In addition to that, legal actions that according to custom, fairness and decency can

support the company's business activities. These actions include the appointment and

dismissal of workers or in the case of buying a plot of land for the purposes of a place of

business. The function of the Board of Commissioners in a Limited Liability Company is to

supervise and provide advice to the Board of Directors. The supervisory and advisory functions

are carried out so that the company in carrying out its business activities does not commit

unlawful acts that may harm the company or its shareholders.

1

The implementation of management and supervisory functions by the Directors and Board of

Commissioners as organs of a Limited Liability Company is the main key for a company to carry

out its business activities. All actions carried out by the company as a legal entity are basically

1Ridwan Khairandy, 2014, Hukum Perseroan Terbatas, FH UII Press, Yogyakarta, pp. 242-243. See also ibid, Article

108 paragraph (1) andparagraph (2).