Material Rights over Shares

Business meeting with graphs on screenShare

Share is an evidence of deposit of capital in a company. It is reflected on the definition of Limited Liability Company on Article 1 number 1 Law of Republic of Indonesia Number 40 of 2007 on the Limited Liability Company (Company Law”) that states “Limited Liability Company (hereinafter called a Company) means a legal entity which constitutes an alliance of capital established pursuant to a contract in order to carry on business activities with an authorised capital all of which is divided into shares and which fulfils the requirements stipulated in this Act and its implementing regulations.”

Commonly, the capital is stored in the form of money. However, it is possible that the payment of shares can be made in other form, such as tangible goods or intangible goods, that can be valued by money and is actually received by the company. Other form of shares payment shall be accompanied with details of value or price, type, status, place or domicile, and other information which are deemed necessary to clarify the deposit of capital.

Material Righs over Shares

According to DR. Sentosa Sembiring, SH., M.H., on his book titled “Company Law regarding Limited Liability Company.”, shares is a movable property that give materials right to its holder. The material rights give the following rights to shareholder:

  • Pre-emptive right

All of the shares issued by the company to increase the capital shall initially be offered to each shareholders according to their shares for the same clasification of shares (Article 43 Company Law);

  • Rights to file aclaim to the court

Each shareholders has right to file a claim to the District Court if the shareholder was damaged because of the company’s action that is considered to be unfair and unreasonable as a result of General Meeting of Shareholders (“GMS”),  Board of Directors, and/or Board of Commisioners (Article 61 Company Law);

  • Rights of shares to be purchased with reasonable price

Each shareholder has right to ask the Company to purchase their shares in reasonable price if the shareholder does not agree with the company’s actions that damages shareholders or company, such as:

-          The amandement of Articles of Association;

-          The transfer or guarantee of company assets that have value more than 50% from the net assets of the company;

-          Merger, consolidation, acquisition, or cemerger (Article 62 Company Law).

  • Rights to request to the District Court to conveneGMS

If the Board of Director or Board of Commisioner does not notify the shareholders for GMS within the stipulated period, the shareholders can request the Head of District Court, whose jurisdiction covers the domicile of the company to give the permit to convene the GMS themselves (Article 80 Company Law);

  • Rights to attend GMS

Each shareholders, either individually or represented under the Power of Attorney has right to attend GMS and use his/her voting rights in accordance with the number of shares they own/hold. (Article 85 paragraph (1) Company Law).

Besides all of the rights that have already mentioned above, another material rights that can be enjoyed by shareholders is right to pledge. Under Article 50 paragraph (1) letter d, shares can be pledged or charged with fiducia security. Every pledgehas to be registered in Shareholders Register, so that the name and address of the security holder is clear.

Sony El Mars

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