Quorum Requirements for General Meetings of Shareholders in Private Limited Companies

This article is simply a summary and restatement of positive law on limited liability companies, so no intellectual property of any kind attaches to it. The quorum for a General Meeting of Shareholders may also be governed by each company’s Articles of Association. The purpose of this article is to help shareholders understand how to determine the quorum before opening a General Meeting of Shareholders ("GMS").

This article is based on the following references:

1. 1Law Number 40 of 2007 (the “Company Law” or “UUPT”);

2. Law Number 6 of 2023 (the “Job Creation Law”);

3. Regulation of the Minister of Law and Human Rights Number 21 of 2021 (“Permenkumham 21/2021”).

Quorum

According to the Great Dictionary of the Indonesian Language (KBBI), a quorum is the minimum number of members who must be present at a meeting, assembly or the like (usually more than half of the members) in order to pass a resolution. In the context of a General Meeting of Shareholders, the quorum is the minimum number of shareholders who must be present at the meeting in order to pass a resolution.

The General Meeting of Shareholders (GMS) is the corporate organ holding the powers not granted to the Board of Directors or the Board of Commissioners, within the limits set by law and/or the Articles of Association. Any agenda item on amendments to the Articles of Association must be clearly stated in the notice of the GMS.

A GMS is held at the company’s domicile or where it conducts its principal business, as set out in the Articles of Association. If all shareholders are present and/or represented and all of them agree to hold the GMS with a particular agenda, the GMS may be held anywhere within the territory of the Republic of Indonesia.

Types of GMS

There are two types of GMS: the Annual GMS and Other GMSs. The Annual GMS must be held no later than 6 (six) months after the end of the financial year. Other GMSs may be held at any time as needed in the company’s interest. A GMS may resolve on amendments to the Articles of Association and changes to company data.

Amendments to the Articles of Association include:

1. the company’s name and/or domicile;

2. the company’s purposes and objectives and business activities;

3. the company’s term of establishment;

4. the amount of authorised capital;

5. a reduction of issued and paid-up capital; and

6. a change of status from a private company to a public company, or vice versa.

Changes to company data include:

1. changes to the composition of shareholders due to a transfer of shares and/or a change in the number of shares held;

2. changes to the names and positions of members of the Board of Directors and/or the Board of Commissioners;

3. mergers, acquisitions and spin-offs not accompanied by an amendment to the Articles of Association;

4. dissolution of the company;

5. termination of the company’s legal entity status;

6. a change of a shareholder’s name because the shareholder has changed their name; and

7. a change to the company’s full address.

Convening a GMS

A GMS may be convened at the request of:

1. 1 (one) or more shareholders jointly representing 1/10 (one tenth) or more of all shares with voting rights, unless the Articles of Association specify a smaller proportion; or

2. the Board of Commissioners.

The request is submitted to the Board of Directors by registered letter stating the reasons. A copy of a registered letter sent by shareholders must be sent to the Board of Commissioners. The Board of Directors must issue the notice of the GMS no later than 15 (fifteen) days from the date the request is received.

The Board of Directors sends notice to shareholders before holding the GMS. Notice must be given no later than 14 (fourteen) days before the date of the GMS, excluding the date of the notice and the date of the meeting. The notice must state the date, time, venue and agenda of the meeting, together with a statement that the materials to be discussed are available at the company’s office from the date of the notice until the date of the GMS.

A GMS may proceed if more than 1/2 (one half) of all shares with voting rights are present or represented, unless the law and/or the Articles of Association require a higher quorum. If this quorum is not reached, a second GMS may be called. The notice of the second GMS must state that the first GMS was held and did not reach a quorum. The second GMS is valid and entitled to pass resolutions if at least 1/3 (one third) of all shares with voting rights are present or represented, unless the Articles of Association require a higher quorum. If the quorum for the second GMS is not reached, the company may apply to the chief judge of the district court with jurisdiction over the company’s domicile to set the quorum for a third GMS. The notice of the third GMS must state that the second GMS was held and did not reach a quorum, and that the third GMS will be held with the quorum set by the chief judge of the district court. Notice of the second and third GMS must be given no later than 7 (seven) days before the meeting.

GMS resolutions are adopted by deliberation to reach consensus (musyawarah untuk mufakat). If consensus cannot be reached, a resolution is valid if approved by more than 1/2 (one half) of the votes cast, unless the law and/or the Articles of Association require a larger majority. GMS resolutions are valid if made in accordance with the provisions on notice, quorum and voting for amendments to the Articles of Association set out in the law and/or the Articles of Association.

GMS to Amend the Articles of Association

A GMS to amend the Articles of Association may proceed if at least 2/3 (two thirds) of all shares with voting rights are present or represented, and resolutions are valid if approved by at least 2/3 (two thirds) of the votes cast, unless the Articles of Association set a higher attendance quorum and/or voting threshold. If the attendance quorum is not reached, a second GMS may be held. The second GMS is valid and entitled to pass resolutions if at least 3/5 (three fifths) of all shares with voting rights are present or represented, and resolutions are valid if approved by at least 2/3 (two thirds) of the votes cast, unless the Articles of Association set a higher attendance quorum and/or voting threshold.

If the quorum for the second GMS is not reached, the company may apply to the chief judge of the district court with jurisdiction over the company’s domicile to set the quorum for a third GMS. The notice of the third GMS must state that the second GMS was held and did not reach a quorum, and that the third GMS will be held with the quorum set by the chief judge of the district court.

GMS to Approve a Merger, Consolidation, Acquisition or Spin-Off, a Bankruptcy Petition, an Extension of the Company’s Term or Dissolution

A GMS to approve a merger, consolidation, acquisition or spin-off, the filing of a petition to declare the company bankrupt, an extension of the company’s term of establishment or the dissolution of the company may proceed if at least 3/4 (three quarters) of all shares with voting rights are present or represented, and resolutions are valid if approved by at least 3/4 (three quarters) of the votes cast, unless the Articles of Association set a higher attendance quorum and/or voting requirement. If the attendance quorum is not reached, a second GMS may be held. The second GMS is valid and entitled to pass resolutions if at least 2/3 (two thirds) of all shares with voting rights are present or represented, and resolutions are valid if approved by at least 3/4 (three quarters) of the votes cast, unless the Articles of Association set a higher attendance quorum and/or voting requirement.

If the quorum for the second GMS is not reached, the company may apply to the chief judge of the district court with jurisdiction over the company’s domicile to set the quorum for a third GMS. The notice of the third GMS must state that the second GMS was held and did not reach a quorum, and that the third GMS will be held with the quorum set by the chief judge of the district court.

GMS to Reduce Capital

A GMS resolution to reduce the company’s capital is valid if it meets the quorum and voting requirements for amendments to the Articles of Association under the law and/or the Articles of Association.

GMS to Increase Authorised Capital

An increase in authorised capital is valid if it meets the quorum and voting requirements for amendments to the Articles of Association under the law and/or the Articles of Association. A GMS resolution to increase issued and paid-up capital within the limits of the authorised capital is valid if made with an attendance quorum of more than 1/2 (one half) of all shares with voting rights and approved by more than 1/2 (one half) of all votes cast, unless the Articles of Association require a higher threshold (Article 42 of the Company Law).

Illustration: Gemini AI