Board Structure in Indonesia: Directors and Commissioners

An Indonesian company does not have one board. It has two. The Board of Directors (Direksi) runs the company and is personally liable for it; the Board of Commissioners (Dewan Komisaris) supervises the directors and cannot manage. Investors arriving from a unitary-board system put the wrong people in the wrong organ, appoint a foreign director who then cannot lawfully work, or assume the board answers to whoever owns the shares. It answers to the general meeting, on the terms written in the articles. Board structure is where control is either secured or quietly given away.

The short answer

A PT (limited liability company), including a foreign-owned PT PMA, must have at least one director and at least one commissioner, and they cannot be the same person. The directors manage the company, represent it in dealings with third parties, and owe it a fiduciary duty enforced by personal liability. The commissioners supervise and advise the directors; they do not run the business. Both organs are appointed and removed by the general meeting of shareholders (GMS), which is where a shareholder’s ownership converts into control.

For a foreign owner, three things then matter. Whether any foreign director can lawfully work in Indonesia, which is an immigration question before it is a governance one. Whether the person carrying the company’s liability understands the duty they hold. And whether control has been protected in the articles and any shareholders’ agreement, rather than assumed from the shareholding.

The two-tier board, and why it trips people up

Under the Company Law (Law No. 40 of 2007) management and supervision sit in two separate organs. This is not a UK or US unitary board with executive and non-executive members around one table. The Direksi holds executive power and the legal capacity to act for the company. The Dewan Komisaris is a distinct body that oversees the directors and advises them, and it is barred from stepping into management except in narrow, temporary circumstances set out in the articles.

The practical error is to treat the commissioner seat as the senior one because it sounds supervisory, and to park the foreign investor’s most trusted person there. That person then discovers they cannot sign, cannot bind the company, and cannot direct operations. The authority the investor wanted sits with the directors. The seat that looks like oversight is not the seat that holds the pen.

The directors: authority and the liability that comes with it

The directors manage the company for its purpose, represent it inside and outside court, and are collectively responsible for that management. Where there is more than one, they form a board with a president director (Direktur Utama), and the articles set out how authority is divided and how the company is validly bound, whether by any director alone or by two acting jointly.

The liability is real and personal. A director who acts in bad faith, beyond authority, or negligently can be held jointly and severally liable for the resulting loss, and in insolvency that exposure reaches personal assets where fault contributed to the failure. The defence is the Indonesian analogue of the business judgment rule: a director who acted in good faith, for a proper purpose, without a conflict, and with reasonable care is protected even if the decision turned out badly. The point for an investor is that a directorship is not an honorary title to be handed to whoever is available. It is a office that carries the company’s legal risk.

Who must be a director, and how many

One director is the statutory minimum. Companies that raise or manage public funds, issue debt instruments, or are public companies must have at least two. A director needs an Indonesian tax identification number (NPWP), and a foreign director needs the work and stay permits described below. Certain functions, notably human-resources management, are reserved for Indonesian nationals under manpower rules, so the split of portfolios across the board is itself a compliance question.

The commissioners: supervision, not management

The Dewan Komisaris supervises the management policy and the general conduct of the company, and advises the directors. Where there is more than one commissioner they act as a board under a president commissioner (Komisaris Utama). Commissioners are not passive. They can be held liable for a failure to supervise that contributes to a loss, on the same fault-based logic that governs directors, so the seat carries duty as well as status.

For most private PMA companies a single commissioner is sufficient and is often the seat the foreign shareholder uses to keep sight of the business without taking on executive liability. Public companies and certain financial-sector entities face a higher bar set by the Financial Services Authority (OJK), including independent commissioners, but that regime does not reach the ordinary foreign-owned operating company.

Foreign directors and the immigration chain

A foreign national can sit on the board, but a foreign national who will actually work in Indonesia must clear an immigration sequence first, and the order is not negotiable. The company obtains approval of its foreign manpower plan (RPTKA), and only then can the individual obtain the work and stay permits (the limited-stay permit, KITAS) that make employment lawful. A monthly compensation levy is payable for each foreign worker.

The recurring mistake is a foreign director named in the deed who intends to run the company on business visits, signing and directing without the permits. That is not a governance shortcut, it is an immigration exposure attached to the company that appointed them. A non-executive commissioner who genuinely does not work in Indonesia sits differently, but a working director does not. Where the foreign investor wants day-one operational control through a resident director, the permit timeline belongs in the incorporation plan, alongside the other first-year obligations set out in our guide to what a PMA must do in year one.

Control is written down, not assumed

Because both organs are appointed and removed by the GMS, control ultimately follows the votes at that meeting. A shareholder with a majority appoints the board it wants. A shareholder without one does not, and this is exactly where a foreign minority in a joint venture loses the company it thought it half-owned.

The protections are contractual and constitutional, not assumed. The articles of association and any shareholders’ agreement should fix board nomination rights (who names how many directors and commissioners), the reserved matters that require a supermajority or the foreign party’s consent, quorum and deadlock mechanics, and the majorities needed to appoint or dismiss directors. These are the instruments that make a board hold, and they are the same discipline that separates a genuine partnership from a nominee arrangement, which is void under Indonesian law and confers no enforceable control at all. A board seat without the voting rights behind it is decoration.

The nominee director trap

A separate temptation is the nominee director: a local individual appointed to satisfy a residency preference or to hold a reserved portfolio, expected to sign whatever the foreign shareholder sends. Unlike a nominee shareholder, a nominee director is not automatically unlawful. The problem is liability. That director owes duties to the company and can be personally liable for acts taken in bad faith or beyond authority, which means the arrangement either exposes a cooperative individual to risks they do not understand, or relies on a person the investor does not actually control. A director who signs on instruction is not a control mechanism. It is a liability with a signature.

Getting the board right at incorporation

The board is fixed in the deed of establishment and changed only by a shareholders’ resolution and a notarial amendment, so it is cheaper to design once than to correct later. The decisions that belong at the start are who holds executive authority as director, who supervises as commissioner, how the company is validly bound, which foreign appointees will work in Indonesia and therefore need permits, and how control is protected in the articles. This sits inside the wider entity design covered in our PT PMA establishment guide and, for the ongoing governance that keeps it credible to a future buyer, our work on building an investor-grade governance framework from day one.

Best practices

• Put executive authority where it belongs. The person who must sign and direct is a director, not a commissioner.
• Match the board to the immigration reality. Confirm the RPTKA and KITAS timeline before naming a working foreign director.
• Write the signing rules explicitly. State in the articles whether one director binds the company or two must act jointly.
• Protect control in the articles and the shareholders’ agreement, not in the shareholding percentage alone.
• Brief every director on the duty and liability the seat carries. An uninformed nominee is a risk, not a solution.

Common mistakes

• Parking the key person as commissioner. The seat that supervises cannot manage or sign.
• Appointing a working foreign director without the permits. The order is RPTKA, then KITAS, then the role.
• Assuming ownership equals control. The board is elected at the GMS, on the terms in the articles.
• Using a nominee director as a control tool. The liability is personal and the control is illusory.
• Ignoring reserved portfolios. Some director functions must be held by Indonesian nationals.

Advisory note

Board design is treated as a formality precisely because it looks like one. The deed lists names against two headings, the notary files it, and the structure is considered done. The cost of getting it wrong surfaces later and rarely as a single event: a director who cannot legally sign a lease, a commissioner who assumed they ran the company, a foreign appointee whose permit was never obtained, a minority partner who cannot block a decision they were promised a veto over.

Where a board is already mis-structured, the repair is a shareholders’ resolution and a notarial amendment, which is inexpensive relative to the exposure it removes. The harder repair is a control gap in a joint venture that was never written into the articles, because fixing it requires the counterparty’s agreement, and that agreement is easiest to obtain while the relationship is still good.

What this means for foreign capital

The two-tier board is not a quirk to be worked around. It is the operating system of an Indonesian company, and it rewards an investor who reads it correctly: put authority and liability with the directors, use the commissioner seat for genuine oversight, clear the immigration chain before a foreign director starts work, and write control into the articles rather than trusting it to the share register.

Our team and partners have advised on cross-border transactions exceeding USD 50M in aggregate across Indonesia, spanning PMA establishment, governance and ownership structuring. See our selected mandates, or read how we build the governance and compliance framework that keeps a foreign-owned company defensible after incorporation. The boards that fail are rarely badly intentioned. They are usually badly assigned.

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