GMS In General
General Meeting of Shareholders (GMS) holds unparalleled authority within the corporate structure. It is one of the corporate organs endowed with powers not granted to the board of directors or the boards of commissioners within the limits specified in Law Number 40 of 2007 concerning Limited Liability Company (Company Law) and/or the articles of association. In this regard, the GMS holds the highest control within the company, although each corporate organs (GMS, Board of Directors, and Board of Commissioners) possesses authority commensurate with their respective functions and responsibilities.
Regarding the authority of the GMS not delegated to the board of directors or the board of commissioners, it includes:
- Approving a petition for the company’s bankruptcy declaration;
- Amending the articles of association;
- Appointing and dismissing members of the board of directors of the board of commissioners;
- Approving an extension of the limited liability company’s existence;
- Approving mergers, consolidations, acquisitions, or separations; and
- Dissolving the company.
The GMS itself is categorized into two types: Annual General Meeting (AGM) and Extraordinary General Meeting (EGM). The AGM must be held once a year before the end of June, while an EGM can be convened at any time by the Board of Directors through written request. The purpose of conducting these meetings is to review all activities within the company, such as business operations, financial reports, and details of issues arising during the fiscal year that affect the company’s operations.
Conducting GMS
GMS is held at the registered office where the company conducts its business activities according to the Article of Association. However, Article 77 paragraph (1) of the Company Law regulates that besides being conventionally held at the company’s registered office, GMS can also be conducted through teleconferencing or video conferencing. The provision of Article 77 paragraph (1) allows flexibility for meeting participants to participate in GMS without necessity of being physically present in the same location (face-to-face).
Furthermore, the outcomes of these GMS proceedings are documented in meeting minutes that are approved and signed by all GMS participants, as stipulated in Article 77 paragraph (4) of the Company Law. Therefore, GMS conducted via video conference can bring participants together as if they were in the same location, even though they are physically distant. They can still hear and see other participants directly (live) similar to conventional GMS proceedings.
On the other hand, concerning the organization of General Meetings of Shareholders (GMS) based on changes to the Articles of Association, as stipulated in Article 21 paragraph (4) of the Company Law, the GMS minutes must be declared in a notarial deed written in the Indonesian language. This means that if the outcome of a GMS decision pertains to changes in the articles of association, even if conducted via video conference, a notarial deed must be prepared.
It’s important to emphasize the differences between conducting GMS via video conference and conventional methods. In conventional GMS, participants physically gather at the same time and place where the meeting is held. However, in a GMS conducted via video conference, some participants may not be present at the same location but can still follow the proceedings from start to finish at the same time.
The Authenticity of Minutes of the GMS
As explained above, when the topic of a GMS concerns amendments to the Articles of Association, the outcome must be documented in the form of a deed. A deed can be considered authentic if it meets the following criteria:
- The form of the deed must comply with the provisions of Article 38 of Law Number 2 of 2014 concerning Amendments to Law Number 30 of 2004 concerning Notary Office (Notary Law).
- An authentic deed is made in the presence of a public official appointed by the Minister, namely a Notary.
- An authentic deed is made by an authorized public official. A notary who is on leave or temporarily suspended is not authorized to create an authentic deed. Similarly, a notary who has not taken an oath cannot create an authentic deed (the deed becomes a private deed).
According to Article 1 number 1 and Article 15 paragraph (1) of the Notary Law, it is stated that a Notary has the authority to create an authentic deed. Therefore, it is clear that a Notary is a public official authorized to create authentic deeds regarding actions, agreements, and determinations. Since a GMS can be considered an agreement or approval among the GMS participants regarding the company, the deed reflecting the decisions of the GMS made by a Notary can be considered authentic.
Furthermore, according to Article 16 paragraph (1) letter m, it states that a Notary is obliged to be present in person to read the deed in front of the parties, attended by 2 witnesses, and specifically for inheritance deeds, it must be attended by 4 witnesses. This means that the procedure for preparing the minutes of the GMS must also be attended in person by the Notary, the parties, and 2 witnesses. If this procedure is not carried out by the Notary, meaning the Notary does not read and physically face (interact directly) with the parties and witnesses, the consequence is that the deed becomes a private deed.
In this case, the issue arises regarding the authenticity of minutes of the GMS conducted via video conference because such GMS does not require the physical presence of the parties in the same location. This is contrary to the provisions of Article 16 paragraph (1) letter m of the Notary Law, so if the reference basis is Article 16 paragraph (1) letter m, the GMS minutes conducted via video conference may be considered as private deeds.
This creates a conflict between the Company Law and the Notary Law, especially concerning the mechanism of conducting GMS. The Company Law allows for the conduct of GMS via video conference, where participants may join remotely but still observe and hear the proceedings, thus the Notary does not directly face the participants. Meanwhile, the Notary Law requires the Notary to be physically present and face the parties and witnesses directly. This conflict can be resolved using the principle of preference of specific law over general law, known as “lex specialis derogat legi generali.”
The principle of “lex specialis derogat legi generali” refers to the preference of one law over another when two laws of equal hierarchical standing conflict, and the legal act is commanded by law. In this case, the general law is determined by Article 16 paragraph (1) letter m of the Notary Law, while the specific law is determined by Article 77 paragraph (1) jo. with the Explanation of Article 77 paragraph (4) of the Company Law.
In the implementation of Article 77 paragraph (1) jo. the Explanation of Article 77 paragraph (4) Company Law, attention should also be paid to the form of the deed related to Article 38 of the Notary Law. In the preparation of a regular or conventional deed, especially in the closing section, it is evident that the parties, witnesses, and Notary are present at the same place and time. This differs from GMS conducted via video conference, where the different locations of GMS participants must be explicitly stated to avoid the deed being considered as a private deed.
Based on the description above, the legal status of the minutes of the GMS conducted via electronic media, especially video conference, can be referred to as an authentic deed if we apply the legal principle of “lex specialis derogat legi generali,” where the general law is Article 16 paragraph (1) letter m, and the specific law is Article 77 paragraph (1) jo. the Explanation of Article 77 paragraph (4) of the Company Law. Following this legal construction, the penalty stated in Article 16 paragraph (9) of the Notary Law, namely the deed being considered as a private deed, does not apply. Moreover, the provision in Article 16 paragraph (1) letter m, which states that the parties, witnesses, and Notary must physically face each other at the same time and place, only applies to deeds other than GMS deeds as mentioned in Article 77 paragraph (1) jo. the Explanation of Article 77 paragraph (4) of the Company Law.
For further legal assistant please contact:
Fanny
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Bella
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