Challenges to the Proposed Electronic General Meeting of Shareholders Platform for Indonesian Listed Companies: a Quest to Facilitate Shareholder Democracy and Greater Shareholder Participation Putri Bening Larasati Anr: 458146 Snr: 2019239 Supervisor: Paul A. Obmina Second Reader: dr. Jing Li Thesis Defense: 26 June 2020 Tilburg Law School International Business Law 2019-2020
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Challenges to the Proposed Electronic General Meeting of
Shareholders Platform for Indonesian Listed Companies: a
Quest to Facilitate Shareholder Democracy and Greater
Shareholder Participation
Putri Bening Larasati
Anr: 458146
Snr: 2019239
Supervisor: Paul A. Obmina
Second Reader: dr. Jing Li
Thesis Defense: 26 June 2020
Tilburg Law School
International Business Law
2019-2020
1
Table of Contents
CHAPTER I .......................................................................................................................................... 4
I.1. Background ................................................................................................................................... 4
I.1.1 Listed Company ..................................................................................................................... 5
I.1.2. Statistic of GMS Performance .............................................................................................. 5
I.1.3. Proposed e-Platform ........................................................................................................... 14
I.1.4. Minority Protection Under Electronic General Meeting of Shareholders Platform ........ 16
I.1.5. Potential Challenges to The Implementation of e-Platform for Indonesian Listed
Company ...................................................................................................................................... 16
I.1.5.1. Barrier in Indonesian Company Law & Notary Law ................................................. 16
I.1.5.2. Validity and Availability of E-Proxy ........................................................................... 17
I.2. Research Questions ..................................................................................................................... 18
I.3. Research Methodology ................................................................................................................ 18
CHAPTER II ....................................................................................................................................... 20
II.1. Legal Status of Shareholders’ Rights .......................................................................................... 20
II.1.1. Shareholder Primacy and Shareholder Democracy in the U.S. ....................................... 20
II.1.1.1. Shareholder Primacy .................................................................................................. 20
II.1.1.1.1. Shareholders Approach ....................................................................................... 21
II.1.1.1.2. Dissenting Voices to the Shareholder Primacy ................................................... 22
II.1.1.1.3. Shareholder Primacy as Norm ............................................................................ 22
II.1.1.1.4. Stakeholder Model defeats the Shareholder Primacy ......................................... 24
II.1.1.1.1. Conclusion ............................................................................................................ 25
II.1.1.2. Shareholder Democracy ............................................................................................. 25
II.1.1.2.1. Debate against Shareholder Democracy ............................................................. 27
II.1.1.2.1. Conclusion ............................................................................................................ 29
II.1.2. Shareholder Rights............................................................................................................ 29
II.1.2.1. The Right to Vote ....................................................................................................... 29
II.1.2.2. Proxy Rules ................................................................................................................. 30
II.2. Shareholders Rights Principle under Indonesian Company Law .................................................. 31
II.2.1. The protection to the rights of minority shareholders under Indonesian Law ............... 34
II.2.2. Conclusion ......................................................................................................................... 35
CHAPTER III ..................................................................................................................................... 36
III.1. Listed Company’s GMS in the U.S. .......................................................................................... 38
III.1.1. History and Objectives of e-Platform.............................................................................. 38
III.1.1.1. The Introduction of e-Proxy ..................................................................................... 38
2
III.1.1.2. The Introduction of e-Voting and e-Meeting ........................................................... 40
III.1.2. The Mechanism and Application of e-Platform .............................................................. 41
III.1.2.1. e-Proxy Mechanism................................................................................................... 41
III.1.2.1.1. Shareholders Proposal ....................................................................................... 43
III.1.2.2. e-Voting and e-Meeting Mechanism ......................................................................... 44
III.1.2.3. The Application of e-Platform in the U.S. Companies ............................................. 44
III.1.2.3.1. Method of Meetings ............................................................................................ 44
III.1.2.3.2. Notice of Meetings .............................................................................................. 46
III.1.2.3.3. Attendances of Meetings .................................................................................... 46
III.1.2.3.4. GMS’ Record ...................................................................................................... 47
III.1.2.3.5. e-Platform Provider ........................................................................................... 47
III.1.3. Conclusion........................................................................................................................ 48
III.2. Listed Company’s GMS in Indonesia ........................................................................................ 48
III.2.1. Current Rules of Listed Company’s GMS in Indonesia ................................................. 48
III.2.1.1. Conclusion ................................................................................................................. 57
III.2.2. Proposed e-Platform ........................................................................................................ 57
III.2.2.1. Proposed e-Proxy Procedure based on Proposed e-Proxy Regulation and e-
Platform eASY.KSEI Guidelines ............................................................................................. 59
III.2.2.1.1. GMS’ Announcement, Shareholders Proposal on GMS’ agenda and GMS’
Invitation .............................................................................................................................. 59
III.2.2.1.2. e-Proxy Provision ............................................................................................... 60
III.2.2.1.3. Access to eASY.KSEI, Attendance Confirmation, and e-Proxy and Voting
Instruction through eASY.KSEI.......................................................................................... 63
III.2.2.1.4. Attendance .......................................................................................................... 64
III.2.2.1.5. Shareholders’ Right to Deliver Opinion or Question on e-Meeting .................. 64
III.2.2.1.6. e-Voting .............................................................................................................. 65
III.2.2.1.7. GMS' Minutes and Summary of GMS’ Minutes ............................................... 65
III.2.2.2 The e-Platform Provider: Why KSEI? ...................................................................... 66
III.2.2.3. Conclusion ................................................................................................................. 68
CHAPTER IV ...................................................................................................................................... 70
IV.1. The U.S. Minority Shareholders’ Response to the Electronic General Meeting Shareholders
Platform ............................................................................................................................................ 70
IV.1.1. Attendance Engagement through the GMS e-Platform Implementation in the U.S. ..... 71
IV.1.2. The U.S. Minority Shareholders’ Response to the Implementation of GMS’ e-Platform
...................................................................................................................................................... 72
IV.2. The Role of Ownership Structure .............................................................................................. 74
3
IV.2.1. Cost Benefit Analysis ....................................................................................................... 77
IV.3. Conclusion................................................................................................................................ 78
CHAPTER V ....................................................................................................................................... 79
V.1. The Barrier in Indonesian Law ................................................................................................... 79
V.1.1. Indonesian Company Law: “enable all GMS participants to see and hear each other
directly” ....................................................................................................................................... 79
V.1.1.1. Provision under eASY.KSEI Guidelines .................................................................... 80
V.1.2. Indonesian Company Law and Notary Law: Minutes of Meeting for Electronic GMS &
Notary Physical Attendance ........................................................................................................ 81
V.1.2.1. General Rule of the GMS’ Minutes for Electronic GMS .......................................... 81
V.1.2.2. Exemption to the Signature Requirement of GMS’ Minutes .................................... 83
V.1.2.3. Listed Company’s Electronic GMS Minutes ............................................................. 84
V.1.2.4. Practical View on GMS’ Minutes for Electronic GMS.............................................. 85
V.1.2.5. Provision under eASY.KSEI Guidelines .................................................................... 88
V.1.3. Indonesian Electronic Information and Transaction Law: Exclusion of e-Proxy and e-
Signature for Foreign Shareholders ............................................................................................ 88
V.1.3.1. The Validation Scheme of e-Proxy Conferment ........................................................ 88
V.1.3.2. Implication to the Unavailability of E-Proxy for Foreign Shareholders ................... 89
V.2. Conclusion ................................................................................................................................. 90
CHAPTER VI ...................................................................................................................................... 94
VI.1. Conclusion................................................................................................................................ 94
VI.2. Recommendation ...................................................................................................................... 96
BIBLIOGRAPHY AND REFERENCE .............................................................................................. 98
ANNEX I – Quorum of Attendances and Voting Decision Under Indonesian Company Law and
POJK 32/2014 ................................................................................................................ 114
ANNEX II – Comparison and Notes to the Electronic GMS Implementation for Listed Companies
in the U.S. and Indonesia ............................................................................................... 118
4
CHAPTER I
INTRODUCTION
I.1. Background
The management function of a corporation is carried out by, or under, the direction of the board
of directors. This is within the nature of a corporation as a legal entity. Due to this, shareholder
rights remain as an important component of corporate governance. However, these rights of
shareholders can and should be limited accordingly.1 Efforts to increase shareholders’ power
within the corporation appears to have come of age through a concept of ‘shareholders democracy’,
both in the United States (U.S.) and abroad. In the past few years, the U.S. shareholders have
worked to strengthen their voice within the corporation by seeking to remove perceived
impediments to their voting authority.2 Yet, do such efforts also apply in another jurisdiction?
Furthermore, do the laws in place adequately secure the rights of shareholders?
Under Indonesian law, the general meeting of shareholders (“GMS”) has significant role in
determining the main direction of a company.3 GMS is the company’s organ that holds the power
and authority in a company, some of which may not be delegated to the board of directors (“BOD”)
or the board of commissioners (“BOC”). In a GMS, shareholders may participate in making a
decision regarding matters that may affect the existence of the company by casting votes. The
GMS also has the authority to, among others: (i) appoint and dismiss the BOD and BOC of the
company; (ii) amend the provisions under the Articles of Association of the company; and (iii)
approve the acquisition, merger, consolidation and dissolution of the company.
Indonesia being the world’s largest archipelagic country, bears obstacles for investors and
companies, whereby, the vast area of the country may bring a hindrance if several GMS of
companies are held simultaneously in different locations or regions. Particularly, there was a total
of 40 GMS held on the same day in Indonesia during the course of 2018. However, there has been
1 Julian Velasco, Taking Shareholder Rights Seriously, Available at
https://heinonline.org/HOL/Page?handle=hein.journals/davlr41&collection=journals&id=609&startid=609&endid=686. Accessed on 14 March 2020 2 Fairfax, Lisa M., Shareholder Democracy on Trial: International Perspective on the Effectiveness of Increased
Shareholder Power. Available at: https://ssrn.com/abstract=1353164. Accessed on 16 March 2020 3 Adrian Sutedi, Buku Pintar Hukum Perseroan (Corporate Law Smart Book), (Jakarta: Raih Asa Sukses, 2015),
Page 151
5
no such data publicly available for 2019. 4 The situation of simultaneous GMS leads to several
drawbacks, that being: the lack of shareholders’ participation, the difficulty to meet the quorum
requirements, resulting then to the hampering of corporate actions. Additionally, this means that
there is no effective room for the execution of shareholders rights and as a consequence, the
shareholders rights is not adequately implemented. As demonstrated, this hindrance should be
remedied.
I.1.1 Listed Company
For the ease of discussion, this thesis will focus on the GMS for Listed Companies. In Indonesia,
there are some terms used in the Indonesia capital market, e.g. Publicly-Held Company and Listed
Company.
In brief, a private company changes its status to become a Publicly-Held Company by way of
public offering (thus, “Publicly-Held Company”) which refers to an offering to more than one
hundred persons, or an offering resulting in sales to more than fifty persons. Although, there is no
obligation for these Publicly-Held Companies to list its stocks in Indonesia Stock Exchange
(“IDX”; however, in practice, a Publicly-Held Company list its stocks in the IDX (becoming a
“Listed Company”).5 To avoid confusion, the word Publicly-Held Company from here onwards
shall refer to a Listed Company.
I.1.2. Statistic of GMS Performance
Based on data provided by the Indonesian Central Securities Depository’s (“KSEI”), in 2016 32%
of investors (167,150 out of 519,163 investors, including any individual person or entity investor)
hold shares in more than one Listed Company, in which there were 48% trading days (97 out of
204 Indonesia stock exchange trading days) where more than one GMS were held on the same
day.6
4 Kanalsatu, KSEI Terapkan Platform e-Proxy dan e-Voting: Permidah Partisipasi Investor Dalam RUPS. Available
at: https://kanalsatu.com/id/post/53114/ksei-terapkan-platform-e-proxy-dan-e-voting. Accessed on 9 March 2020 5 Irwan Abdalloh, Pasar Modal Syariah (Sharia Capital Market Book), (Jakarta: Gramedia, 2019), Page 11-12 6 PT eCEOS Indonesia, Legal and Business Assessment Report for PT Kustodian Sentral Efek Indonesia in relation
to the Implementation of Electronic Voting and Electronic Proxy Platform in the Indonesian Capital Market, 2017,
Page 31-32.
6
Further, in 2017, Indonesia’s Publicly-Held Companies have reached 500 Listed Companies that
led to the possibility of more than one GMS to be held on the same day of the year; while the
percentage of investors that hold stocks in more than one Listed Company were also slightly
increased from the previous year, amounting to more than 35% of investors. 7
In 2018, KSEI recorded that there was a total of 40 GMS held on the same day of the year, where
most of the GMS were held in the city of Jakarta. The number of issuers have once again increased
totaling 600 Listed Companies in 2018. Out of this 600 Listed Companies, 35 were domiciled in
East Java province, and 52% of investors in East Java hold stocks outside East Java8. Imagine that
if those 52% of East Java investors have to attend the GMS in Jakarta while the distance between
Jakarta and East Java is 711 km (or 441.8 miles). This distance requires the travel time of
approximately 9 to 14 hours by land or 1.5 hours by plane; this would rise a difficulty for
shareholders to attend the GMS that held on different locations on the same day.
Source: KSEI’s Performance Report 2016-10199
7 KSEI, Berita Pers: KSEI Tunjuk CSD Turki untuk Mengembangkan e-Proxy dan e-Voting Platform (Press Release:
KSEI Appointed CSD Turkey to Develop e-Proxy and e-Voting Platform). Available at:
https://www.ksei.co.id/files/uploads/press_releases/press_file/en-
us/140_press_release_ksei_appointed_turkey_s_csd_to_develop_e_proxy_and_e_voting_platforms_20171004171428.pdf. Accessed on 18 December 2019. 8 Kanalsatu, KSEI Terapkan Platform e-Proxy dan e-Voting: Permidah Partisipasi Investor Dalam RUPS. Available
at: https://kanalsatu.com/id/post/53114/ksei-terapkan-platform-e-proxy-dan-e-voting. Accessed on 9 March 2020 9 KSEI, KSEI Performance Report 2016 – 2019. Available at: https://www.ksei.co.id/files/Laporan_Kinerja_2016-
2019_Final.pdf. Accessed on 2 March 2020
7
Moreover, based on interview with Dian Kurniasare, the Head of Research and Business
Development Division of KSEI, although there has not yet been an official statistic report, it is
noted that the failure to meet the GMS attendance is most likely to come from a Publicly-Held
Companies, which has dispersed shareholders’ composition10.
The table below shows 3 Publicly-Held Companies that failed to perform its GMS. It refers to
publicly available resources of data provided by the IDX website on said Listed Companies. It
should be noted that the dispersed shareholders’ composition contributed to the failure of GMS
performance, in fact in all three cases the public owned more than 56% of the capital stock of the
company (even reaching 94.88% for PT Bakrieland Development). This shows that a dispersed
ownership structure combined with the geographical breadth of Indonesia creates real problems in
GMS occurrence.
Table 1 – Sample of GMS Performance
No. Year Company Shareholders
Composition
Voting Items Attendance
(%)
Remarks
1. 2017 PT
Bakrieland
Developme
nt Tbk.
(ELTY)11
- Inventures
Capital Pte.,
Ltd. 5.12%
- Public
94.88%
- Director’s
Annual
Work Report
- Financial
Year Report
- Appointment
of Public
Accountant
- Articles of
Association’
s
Amendment
on the
1st GMS:
30.29% of the
total shares
2nd GMS:
41.5% of the
total shares
Notes: The 1st
GMS needs
more than 50%
of the total
The company,
through its
corporate
secretary,
confirmed that
from one year
to another year,
the failure to
meet the
attendance
quorum is
because the
company has
10 Dian Kurniasare, telephone call, March 6, 2020 11 PT Bakrieland Development Tbk., Ringkasan Risalah Rapat Kedua atas Rapat Umum Pemegang Saham Tahunan
(Minutes of Annual General Meeting of Shareholders). Available at:
https://bakrieland.com/en_investorrelations/gms. Accessed on 1 March 2020
8
company’s
subject and
purposes
amount of
shares.
The quorum
for 2nd GMS
shall at least
one-third of the
total amount of
shares. By this,
the company
could held the
2nd GMS.
around 27,000
investors, and
they were
difficult to be
approached.12
2. 2018
(Extra
ordina
ry
GMS)
13
PT Bakrie
Sumatera
Plantations
Tbk.
(UNSP)
- Indo Alam
Resources
Pte. Ltd.
17.46%
- PT Mateo
Sahraha
Altantis
8.94%
- Ms. Ernawati
Ali 9.34%
- Mr. Lie
Leonard
Djajali 7.78%
- Buy back of
company’s
share
- increase
company’s
paid-up
capital
- increase
company’s
capital using
the issuance
of new shares
series B
1st GMS:
17.51% of the
total shares
2nd GMS:
16.62% of the
total shares
3rd GMS:
22.49% of the
total shares
According to
the publicly
available news,
the company’s
loan has
reached 96% of
company’s
assets.14 In
order to
restructure the
loan, the
company
planned to
12 Tito Bosnia, Tak Kuorum, RUPS Bakrie Development Batal Digelar (Not Quorum, Bakrie Development GMS
Cancelled). Available at: https://www.cnbcindonesia.com/market/20180628121147-17-20861/tak-kuorum-rups-
bakrie-development-batal-digelar. Accessed on 1 March 2020 13 PT Bakrieland Sumatera Plantations Tbk., 2018 General Meeting of Shareholders. Available at
https://www.bakriesumatera.com/index.php/en/investor-relation/public-information/279-shareholders-
meeting/2018/391-2018. Accessed on 11 May 2020 14 Riska Rahman, Restrukturisasi Utang, Bakrie Sumatera akan private placement (Loan Restructuring, Bakrie
Sumatera will do a private placement). Available at https://investasi.kontan.co.id/news/restrukturisasi-utang-bakrie-
sumatera-akan-private-placement. Accessed on 12 May 2020
9
- Public
56.48%
without pre-
emptive
rights
- change of
BOD and
BOC
composition
Notes: The 1st
GMS needs
more than 50%
of the total
amount of
shares.
The quorum
for 2nd GMS
shall at least
one-third of the
total amount of
shares.
The 3rd GMS
quorum was
stipulated by
OJK which
shall be 20% of
the total
amount of
shares.
By this, the
company could
held the 3rd
GMS.
convert such
loan into
shares.
The GMS
approval for
the increase of
company’s
paid-up capital
through the
issuance of
shares is
needed. Such
paid-up capital
issuance will
be followed up
by private
placement and
conversion of
the company’s
loan into
shares.15
Based on
UNSP’s
President
Director
statement, the
15 Shela, Analisis Market (07/6/2018): IHSG Bergerak Mixed Cenderung Menurun Hari ini (Market Analysis
(07/6/2018): IHSG Tends to Decreasingly Mixed Move Today). Available at
https://pasardana.id/news/2018/6/7/analis-market-0762018-ihsg-bergerak-mixed-cenderung-menurun-hari-ini/.
Accessed on 12 May 2020.
10
loan
restructuring
was an effort to
make the
financial
burden of
Bakrie Group
not be getting
bigger and
make the
company’s
financial
conditions
healthier.
However, the
planned had
been
suspended until
the third
GMS.16 The 1st
GMS held on 8
March while
the 3rd GMS
held on 6th
June. By this,
the corporate
action was
16 Riska Rahman, Restrukturisasi Utang, Bakrie Sumatera akan private placement (Loan Restructuring, Bakrie
Sumatera will do a private placement). Available at https://investasi.kontan.co.id/news/restrukturisasi-utang-bakrie-
sumatera-akan-private-placement. Accessed on 12 May 2020
11
hampered until
3 months.
2018
(Annu
al
GMS)
17
- Financial
Year Report
- Appointment
of Public
Accountant
1st GMS:
22.74% of the
total shares
2nd GMS:
56.52% of the
total shares
Notes: The 1st
GMS needs
more than 50%
of the total
amount of
shares.
The quorum
for 2nd GMS
shall at least
one-third of the
total amount of
shares. By this,
the company
could held the
2nd GMS.
The Director &
Investor
Relations of
UNSP, Andi
W. Setianto,
confirmed that
the dispersed
shareholders’
composition
was the reason
behind the
quorum
failure.18
17 PT Bakrieland Sumatera Plantations Tbk., Pengumuman Ringkasan Risalah Rapat Umum Pemegang Saham Tahunan (Announcement of Minutes of Second Annual General Meeting of Shareholders). Available at:
https://www.idx.co.id/StaticData/NewsAndAnnouncement/ANNOUNCEMENTSTOCK/From_EREP/201807/7c1b
5cd8ab_2aa3cbf2da.pdf. Accessed on 29 February 2020 18 Intan Nirmala Sari, Belum Kuorum, UNSP jadwalkan ulang RUPS (Not yet quorum, UNSP scheduled a re-GMS).
Available at: https://investasi.kontan.co.id/news/giliran-bakrie-sumatera-plantations-yang-gagal-mencapai-kuorum-
rupst. Accessed on 29 February 2020
12
3. 2019 PT Tiga
Pilar
Sejahtera
Food Tbk.
(“AISA”)19
- Trophy
Investors I
Ltd. 9.33%
- Trophy 2014
Investor
Limited
9.09%
- BBH
Luxembourg
S/A Fidelity
FD Sica V,
FD FDS PAC
FD 7.98%
- Spruce
Investors
Limited
6.77%
- Primanex
Limited
5.38%
- Public
61.45%
Articles of
Association’s
Amendment
on:
- the
company’s
subject and
purposes
- the increase
of authorized
capital
- transfer of
shares
1st GMS:
52.33% of the
total shares
2nd GMS:
43.66% of the
total shares
3rd GMS:
48.14% of the
total shares
Notes: The 1st
GMS needs at
least two-third
of the total
amount of
shares.
The quorum
for 2nd GMS
shall at least
three-five of
the total
amount of
shares.
The corporate
secretary of the
company
confirmed that
the failure of
GMS
performance
usually
happened
because most
of the shares
hold by the
public.21
19 PT Tiga Pilar Sejahtera Food Tbk., Pengumuman Ringkasan Risalah Rapat Umum Pemegang Saham Luar Biasa Kedua (Announcement of Minutes of Second Annual General Meeting of Shareholders). Available at:
https://tpsfood.id/wps/wp-content/uploads/2019/09/Risalah-RUPSLB-Kedua-TPSF.pdf. Accessed on 1 March 2020 21 Azizah Nur Alfi, Tak Capai Kuorum, Tiga Pilar sejahtera Food Jadwal Ulang RUPSLB (Fail to meet the
quorum, Tiga Pilar Sejahtera rescheduled the GMS). Available at:
https://market.bisnis.com/read/20190828/192/1141873/tak-capai-kuorum-tiga-pilar-sejahtera-food-aisa-jadwal-
ulang-rupslb. Accessed on 1 March 2020
13
The 3rd GMS
was held by the
quorum
determined by
OJK.20
However, there
is no available
information on
the exact
quorum
stipulated by
OJK.
Pursuant to Law No. 8 of 1995 on Capital Markets, share ownership as well as any transfer of
shares less than 5% in an Indonesian publicly-held company is not be obligated to be reported to
the Indonesian Financial Services Authority (“OJK”), and shall be considered as “public shares”.
This means that investment of less than 5% is easily traded at any time. Consequently, there is no
exact data on the number of shareholders holding public shares.
As seen in the Table 1, the three companies have large number of public shares, while based on
articles of association of the above companies, the company respectively issues shares with voting
rights. Therefore, all shareholders, including the public shareholders, has the right to attend the
GMS, and their attendances is crucial in determining whether the GMS can be validly held or not.
Based on Article 26 of OJK Regulation No. 32/POJK.04/2014 as amended by OJK Regulation
No.10/POJK.04/2017 on General Meetings of Shareholders of Publicly-Held Companies (“POJK
32/2014”), a GMS can be held if more than one-half of total shareholders with voting rights attend
or are represented at the meeting. If such quorum cannot be reached, then a second meeting with
20 PT Tiga Pilar Sejahtera Food Tbk., Pengumuman Ringkasan Risalah RUPS Luar Biasa Ketiga (Announcement to
the 3rd Extraordinary GMS Summary). Available at https://tpsfood.id/wps/wp-
content/uploads/2019/10/PENGUMUMAN-RINGKASAN-RISALAH-RAPAT-UMUM-PEMEGANG-SAHAM-
LUAR-BIASA-KETIGA-PT-TIGA-PILAR-SEJAHTERA-FOOD-TBK-191018.pdf. Accessed on 12 May 2020
14
a quorum of one-third of shareholders shall be held. If the quorum for the second GMS still cannot
be attained, a third GMS can be held with a quorum as stipulated by the OJK at the request of the
publicly-held company. Nonetheless, the second and third GMS can be held 10 days at the earliest
and 21 days at the latest after the preceding GMS has taken place.
As mentioned in Table 1 regarding UNSP, the failure to GMS quorum hampered the company’s
action to restructure its credit. Due to this, we see that the GMS attendances is very important to
the company. To that end, since the quorum is difficult to meet, the shareholders’ rights to cast a
vote through the GMS will be vulnerable since the GMS will reach a resolution with much
difficultly. The company shall also wait for certain period of time to lapse in order to hold the
second or third GMS, thus delaying important corporate actions.
I.1.3. Proposed e-Platform
To overcome this issue, on September 2017, Indonesia through one of its Self-Regulatory
Organization (SRO), KSEI, officially appointed Turkey Central Securities Depository to be the
developer an of e-proxy and e-voting platform (both, “e-Platform”). This platform is an
application that can accommodate stockholders to participate in a GMS without being physically
present at a meeting. Recently, KSEI has launched the e-Platform, called eASY.KSEI. As a further
response, OJK is currently deliberating on a new regulation regarding e-proxy for the GMS of
Publicly-Held Companies (“Proposed e-proxy Regulation”)22. Even without the regulation being
issued by OJK, the eASY.KSEI is already open and running by KSEI. However, the platform has
not yet been used until OJK issue the relevant regulation. The discussion about how the proposed
e-Platform will be applied and the propriety assignment of e-Platform development to KSEI will
be elaborated in Chapter III herein.
The proposed e-Platform is certainly not a new innovation in the capital market world.23 In the
state of Delaware, the Delaware General Corporation Law adopted e-voting rules since 2000,24
22 Qolbi, N., OJK Akan Rampungkan Aturan E-Proxy Tahun ini (OJK will finish E-Proxy Regulation this year).
Available at: https://insight.kontan.co.id/news/ojk-akan-rampungkan-aturan-e-proxy-tahun-ini?page=all. Accessed
on 21 December 2019 23 Elizabeth Boros, The Online Corporation: Electronic Corporate Communications. Available at:
https://law.unimelb.edu.au/__data/assets/pdf_file/0005/1710257/146-online1.pdf. Accessed on 4 January 2020 24 Elizabeth Mozley and Janice Amey, Online Shareholder Participation in Annual Meetings. Available at:
https://corpgov.law.harvard.edu/2012/07/19/online-shareholder-participation-in-annual-meetings/. Accessed on 4
January 2020
15
and the U.S. Securities and Exchange Commission (SEC) adopted e-proxy rules in 2007 and
effectively implemented to all companies starting from 2009.25 While Indonesia will adopt
Turkey’s Electronic General Assembly Meeting (e-Gem) system, which was first launched in
201226.
Even though the e-Platform may not be considered as a new tool from a global point of view, it is
nevertheless important to discuss and award much attention to it in order to promote best practices
in corporate governance. Looking back to the concept of ‘Shareholder Primacy’ or ‘Shareholder
Democracy’ in the core concept of the U.S. corporate law, this generally means that corporations
exists to serve the interest of shareholders. Shareholders benefit from the maximization of residual
income because they are not paid until all other claimants (e.g. employees, suppliers, customers,
and creditors which are captured rigidly set contractual entitlements) receive their entitlements.27
For this reason, the right to vote is granted solely to shareholders since shareholders’ residual
interest gives them the best incentives to make decisions for the corporation28. From that, the U.S.
introduced the proxy rules and electronic meeting which will be further discussed in Chapter II
and III herein.
While there is no specific reference of shareholder primacy or shareholder democracy theories in
Indonesia, Indonesia has already established the Indonesian Code of Good Corporate Governance
guidelines (“CG Code”), that mandates that company shall provide an equitable opportunity to all
shareholders which allow them to give input and opinions in the interest of a company.
To that effect, we see that the shareholders rights to vote and participate in the corporation through
the GMS has been recognized both in the U.S. and Indonesia. We will then learn from the e-
Platform implementation in the U.S. discussed in Chapter III and IV herein.
25 John Olson et.al., Proxy Rules Take Effect for All Public Companies. Available at:
https://corpgov.law.harvard.edu/2009/01/03/e-proxy-rules-take-effect-for-all-public-companies/. Accessed on 4
January 2020 26 Muchammad Resya Firmansyah, Mengenal e-Gem, Aplikasi Absensi RUPS Online yang Diadopsi Turki (Getting
to Know the e-Gem, Online GMS Attendance Application Adopted by Turkey). Available at:
https://kumparan.com/dewi-rachmat-k/mengenal-e-gem-aplikasi-absensi-rups-online-yang-diadopsi-turki. Accessed
on 23 December 2019 27 Grant Hayden and Matthew T. Bodie, Shareholder Democracy and The Curious Turn Toward Board Primacy.
Available at: https://scholarlycommons.law.hofstra.edu/faculty_scholarship/561. Accessed on 12 February 2019 28 Robert B. Thompson and Paul H. Edelman, Corporate Voting. Available at:
https://heinonline.org/HOL/Page?handle=hein.journals/vanlr62&collection=journals&id=129&startid=129&endid=
178. Accessed on 5 March 2020
16
I.1.4. Minority Protection Under Electronic General Meeting of Shareholders Platform
Apart from whether the proposed implementation of e-Platform could increase the shareholders’
participation at the GMS, based on a survey by Pricewaterhouse Coopers, 95% of businesses in
Indonesia is owned and controlled by families.29 Data provided by the International Finance
Corporation (“IFC”)30 also reflects that many Indonesian public companies are controlled by a
single majority or a group of shareholder who are well informed about the affairs of the company
and are able to closely monitor the company’s management. Meanwhile, the remaining ownership
is often widely dispersed and many of these, often minority shareholders, lack knowledge and
resources to effectively monitor management and defend themselves against the potential abuses
of majority shareholders. Therefore, another question that must be addressed is, could the proposed
e-Platform also upsurge minority participation on the GMS, and thus protect the minority
shareholder from the tyranny of the majority shareholders?
I.1.5. Potential Challenges to The Implementation of e-Platform for Indonesian Listed
Company
While the proposed e-Platform may provide the opportunity to increase shareholder participation
in an efficient and effective manner towards GMS performance, there are also several issues to
consider. Such issues will be discussed in Chapter V herein.
I.1.5.1. Barrier in Indonesian Company Law & Notary Law
Indonesian Company Law already allows a GMS to be solely conducted electronically, Article 77
of the Indonesian Company Law provides that a GMS may also be conducted via teleconference,
video conference or other electronic means that enable all participants of GMS “to see and hear
each other in person” and participate in the meeting. Through this, the development of the
proposed e-Platform exhibits a strong legal foundation. In this thesis, we will discuss whether the
eASY.KSEI will accommodate the GMS participant in seeing and hearing each other at the
meeting in a sufficient manner.
29 Pricewaterhouse Coopers, Survey Bisnis Keluarga 2014 (Family Business Survey 2014). Page 5 30 International Finance Corporation, The Indonesia Corporate Governance Manual: First Edition. Available at
https://www.ojk.go.id/Files/box/THE-INDONESIA-CORPORATE-GOVERNANCE-MANUAL-First-Edition.pdf.
Accessed on 27 March 2020
17
Further, Article 77 of the Indonesian Company Law provides that in electronic GMS, all GMS’
participants shall approve of and sign the GMS’ minutes, physically or electronically. On the other
hand, the law provides an exemption for minutes of meeting signatories for a physical GMS under
Article 90 (2). Pursuant to Article 90 (2) of the Indonesian Company Law, the GMS’ minutes
signature shall not be required if the GMS’ minutes is drawn up by a notarial deed. This thesis will
discuss whether such exemption is also applicable for electronic GMS, while one can see that a
specific requirement on Article 77 shall be satisfied for electronic GMS.
In the event that such exemption is applied for electronic GMS, according to Indonesia Notary
Law, in drawing up a notarial deed, the notary should physically attend and sign the deed before
the participants and witnesses.31 In practice there is an uncertainty among notaries on whether their
attendance via electronic media at the GMS would satisfy the requirements under Indonesia Notary
Law.
I.1.5.2. Validity and Availability of E-Proxy
Another challenge is regarding the validity of e-proxy. Based on the Proposed e-proxy Regulation
and the user guidelines of eASY.KSEI, the proxy can be granted through the e-proxy platform
without the requirement of a grantor’s signature. Thus, would it mean that the e-proxy is valid
without any signature – whether physical or electronic? Or does the rule only pertain to physical
signatures and the platform will still require electronic signatures as a form of authentication?
Considering that under the Indonesian Electronic Information and Transaction Law, there are
certain criteria that must be fulfilled for an electronic signature to be considered valid and has legal
power. Hence, it must be analyzed whether such requirements are met before e-proxy platform can
be implemented. Additionally, in practice, the availability of electronic signature is limited to
Indonesian citizens. Therefore, we will discuss the implication to such exclusion and whether the
eASY.KSEI can be a solution to the current practical issue.
31 Article 16 (1) (m) of Notary Law
18
I.2. Research Questions
Against the backdrop above, the research of this thesis will be based on the main research question.
The main research question of this thesis is whether the e-Platform can accommodate equitable
opportunity principle of shareholders’ right as mandated under Indonesia CG Code. In order to
establish an answer to the main research question, the following sub-questions are necessary to be
assessed:
1. How can the e-Platform promote Shareholder Democracy in the U.S. or equitable
shareholders opportunity as mandated in Indonesia CG Code?
2. What lessons can be learned from the implementation of the platform in Delaware, U.S.?
3. What are the pro’s and con’s of the proposed e-Platform implementation? Furthermore, how
will the implementation of e-Platform affect the prevailing laws in Indonesia with the
consideration of the readiness of the prevailing Indonesia Company Law, Notary Law and
Electronic Information and Transaction Law as the current legal framework for Indonesian
business practice?
I.3. Research Methodology
This thesis aims to address the legal theoretical framework behind the legal status of shareholders’
rights as well as the evaluation of risks and benefits that entails the implementation of the proposed
e-Platform from a business point of view. By conducting a literature review, comparing the
corporate governance theory in the U.S. and Indonesia, this thesis will assess the nature of
shareholders’ rights. This is done to see the significance of the proposed e-Platform. To support
the accuracy of this thesis, a qualitative research will also be included. The research retains
information from several sources such as:
(1) Primary Data
Laws and regulations issued by the government of the Republic of Indonesia, and any other
governing body, including OJK and KSEI, as well as the Proposed e-proxy Regulation. As for the
business process of e-Platform, this thesis will also review the relevant laws and regulations of
GMS under Delaware law.
19
(2) Secondary Data
Books, legal journals, and legal articles.
To best conduct this research, this thesis will be divided into five other chapters:
Chapter II – this chapter will present the corporate governance theory showing the history and
rationales of the legal status of shareholders’ rights in the corporate world.
Chapter III – this chapter will dive into the legal as well as the business part of the e-Platform
application of e-Platform in the U.S. Then, this chapter shall discuss regarding the existing GMS
performance in Indonesia along with the potential issues that may arise from Indonesian Company
Law. Moreover, this chapter will also review the forthcoming draft of the new regulation on e-
proxy for the GMS of Indonesian Publicly-Held Companies.
Chapter IV – this chapter will examine whether the e-Platform can protect minority shareholder
rights.
Chapter V – this chapter will also examine other potential issues that might arise due to the
implementation of the proposed e-Platform.
Chapter VI – finally, this chapter will sum up the analyses and deliver recommendations based on
the research.
20
CHAPTER II
SHAREHOLDER RIGHTS TO VOTE
AND ITS LEGAL RATIONALE
The movement to increase shareholders’ rights are not uncommon to the United States. Section
II.1 begins with a literature review on shareholders effort groundwork in the United States, and
Section II.2 will provide an analysis of how the principle of shareholders’ rights is governed under
Indonesian law.
II.1. Legal Status of Shareholders’ Rights
According to Govilkar, “meetings are fundamental to people living together in society”. Meetings
are used by the people as means to discuss particular matter where the resolution may affect the
society member, by which, the decision will be made in the meeting by vote of majority. Thus, no
modern society can function well without a ‘meeting’. Moreover, Govilkar uses this motive behind
a meeting as the backbone of democracy.32
This principle also applies to a corporation. A company can be considered as a small society, where
the shareholders perform the business through said company. Every decision of a company is
decided in a meeting, and shareholders’ meeting represents an assembly of shareholders on using
their voting rights to express their argument.33 Through this, one can see that the right to vote is
possessed alone by the shareholders and not the others company’s organ (e.g., BOD and BOC);
this research will discuss below on the rational history and arguments that support this notion.
II.1.1. Shareholder Primacy and Shareholder Democracy in the U.S.
II.1.1.1. Shareholder Primacy
The traditional view that dominates corporate practice is that corporations are to be managed for
the exclusive benefit of shareholders, known as ‘shareholder primacy’. As mentioned in the
previous chapter, the concept of shareholder primacy is the core concept of the U.S. corporate
32 V.D. Govilkar, Law of Meetings (Commercial, Political & Social), 2009. 33 Nor Hayati Abdul Samat, A Legal Perspective of Shareholders’ Meeting in the Globalised and Interconnected
Business Environment, Procedia - Social and Behavioral Sciences 172 (2015), page 762-769. Available at
https://ac.els-cdn.com/S187704281500467X/1-s2.0-S187704281500467X-main.pdf?_tid=1bf20598-72f6-4abd-
af08-606f64b1bc89&acdnat=1522810629_19104d14476fe8e11c3007efafa5aea2. Accessed on 25 February 2020
21
law.34 The theory of shareholder primacy focuses on making the most of shareholders’ value,
prioritizing their value relative to all other corporate stakeholders (e.g. employees, suppliers,
customers, and creditors). For a long time, many scholars have debated on the two approaches
namely, shareholder approach and stakeholder approach.35 The debated issues involve the idea of
who actually owns the corporation.
II.1.1.1.1. Shareholders Approach
Adam Smith’s principle for shareholder primacy rose from the concept of the nature and cause of
wealth. This demonstrates that individuals who own and manage their enterprise would be solely
entitled to all the profits of their property. By virtue of this, Smith believed that shareholders must
become the owner of an enterprise, but this runs in conflict against the self-interest of corporate
managers which drives the latter to seek benefit for themselves and not the shareholders’. Hence,
corporate managers must, by law or otherwise, become obliged to serve shareholder interest as
primary.36
Running in a similar fashion, Hayden argues that shareholders are the owner of a corporation since
they purchase a set of rights from a corporation (e.g. right to vote for directors). Nonetheless, the
bundle of rights in share ownership can be disentangled even resulting to shareholders not holding
all the rights under the bundle.37 Subsequently, Hayden’s argument was modified. He deduced that
shareholders could merely be labeled as a ‘voters’ rather than an ‘owner’. A further argument is
that a shareholder is the “sole residual claimants”38, which means that the shareholders are not paid
until the other stakeholders have received their contractual entitlements. Due to this, shareholders
alone should be entitled to the residual (and thus, the vote).
34 Stephen Mark Bainbridge, In Defense of the Shareholder Wealth Maximization Norm. Washington & Lee Law
Review, Vol. 50, 1993. Available at http://ssrn.com/abstract=303780. Accessed on 29 March 2020 35 Hayden, page2091. 36 Judd F. Sneirson, The History of Shareholder Primacy, from Adam Smith through the Rise of Financialism.
Available at https://www.cambridge.org/core/books/cambridge-handbook-of-corporate-law-corporate-governance-and-sustainability/history-of-shareholder-primacy-from-adam-smith-through-the-rise-of-
financialism/97FA2556A88737D99C6C1F760BFF1DC2. Accessed on 20 March 2020 37 Grant M. Hayden and Matthew T. Bodie, The False Promise of One Share, One Vote. Available at
https://ssrn.com/abstract=1103160. Accessed on 31 March 2020 38 Hayden, page 2083.
22
According to Milton Friedman, stock ownership is one of the types of a private property species –
meaning that corporations are things and can thus be owned. Through the subscription of stock in
a corporation, shareholders become the owner, and directors are the stewards of shareholders’
interest.
II.1.1.1.2. Dissenting Voices to the Shareholder Primacy
Criticism to the shareholder primacy comes from academic commentators which named the theory
as board primacy. Under this theory, they believe that the board can make the best decision
independently without pressure from shareholders. According to Bainbridge, “the board has the
utmost power over the corporation due to the fact that they are the ones who have the authority
over engagements made by the corporation (i.e. assigning responsibilities, divvying up profits, and
mediating disputes)”.39 Similarly, Blair and Stout also argue that board is hired by stakeholders to
serve the corporation. Although managers can be said to act in representation of the stakeholders,
it is argued that they perform their functions more as a trustee rather than an agent.
Discussing on whether the shareholder is the owner of corporation, Bainbridge explains that a
corporation is not an object thing, but rather it is seen as simply a legal fiction representing a
complex contractual relationship between inputs where shareholders provide equity capital,
creditors provide debt capital, and employee provide labor, while the management board monitors
the performance of employees and coordinates the activities of all the firm’s inputs. Thus,
shareholders are not the owner of the property since it is one of the inputs that bounds together
stakeholders.
II.1.1.1.3. Shareholder Primacy as Norm
Even though numerous normative debates have persisted over generations among scholars,
factually, the current corporate world is in a shareholder-centric era.40 According to Sneirson,
shareholder primacy is more referred to as a norm rather than a legal obligation.41 Looking into
the definition, norm is defined as the “informal social regularities that individuals feel obligated to
39 Hayden, page 2091 40 Riberth J. Rhee, A Legal Theory of Shareholder Primacy. Available at
https://corpgov.law.harvard.edu/2017/04/11/a-legal-theory-of-shareholder-primacy/. Accessed on 28 March 2020 41 Sneirson, page 76
23
follow because of an internalized sense of duty, because of a fear of external non-legal
sanctions”.42 Sneirson also argues that no statue in Delaware, or elsewhere, requires directors to
maximize shareholder profits. There was only one notable decision in the US, the Dodge v. Ford
Motor Company case, that asserts that the main purpose of a corporation is to make profits for its
shareholders. However, none of the subsequent courts view the Dodge v. Ford decision as a
mandate to implement the maximization of shareholder profit.
After Dodge v. Ford, the grandfather of modern shareholder primacy, Adolf A. Berle, wrote that
in the early twentieth century there were no behavioral restraints on the corporate manager; thus,
they abused their position and authority. Berle then proposed a fiduciary obligation for corporate
managers to act for the benefit of shareholders which was expected to constrain the misconducts
of managers.
Though shareholder primacy is treated as a norm, in reality it dominates corporate practice in
1980s.43 Historically, shareholder primacy made a jump from academia to the business world
through the shareholder-value movement. Under this view, “the success of a corporation is
measured from the stock price, and the means by which corporations allocate resources and define
priorities”.44 The assessment of the stock price of a corporation became of importance since board
compensation will be paid in the event that stock prices rise. By virtue of this, the board will
maintain the company’s value in order to keep their job as well as to get the incentives. The effort
of the board to maintain company’s value further drives by the fact that the stock ownership
become increasingly widespread throughout the years. In 1960s, only 10% of Americans owned
stocks but then the number exponentially grew to more than 50% by 2007. Companies must be
managed by the directors in the best interest of shareholders, thus the view on maximizing
shareholder value is being repeated in corporate practice. By the year 2000, commentators
concluded that shareholder primacy had won, and the debate was over.45
42 R. H. MacAdams, The Origin, Development, and Regulation of Norms. Available at
https://chicagounbound.uchicago.edu/cgi/viewcontent.cgi?httpsredir=1&article=2654&context=journal_articles.
Accessed on 28 March 2020 43 Sneirson, page 76 44 Sneirson, page 83 45 Sneirson, page 84
24
II.1.1.1.4. Stakeholder Model defeats the Shareholder Primacy
When the global financial crisis happened in 2008, corporate business shifted its view from
shareholder primacy towards the balancing the shareholder-profit objective with longer-term,
sustainable, and socially responsible business practice.46 The advocate of shareholder-value
movement, Jack Welch, has also rejected shareholder primacy as a goal, and suggested that the
current corporate practice is best described by the involvement of corporate stakeholders in
generating companies’ value.47 This is also supported by BlackRock, as the largest institutional
investor in the world, which stated that companies should also serve society rather than merely
pursue making a profit.
Based on academic literature on sustainability and corporate performance reviewed by Oxford
University, from 200 studies, 90% conclude that environmental, social, and governance (“ESG”)
factors lower the cost of capital, 88% increase the company’s performance, and 80% show that
good sustainability practices is highly correlated with stock price.48 Also according to EY’s 2015
Global Institutional Investor Survey, 59.1% of 200 institutional investors view nonfinancial
disclosures as essential to investment decision, and 62.4% of investors are concerned about
stranded assets risk (i.e. assets that lose value due to environmental or social factors) and over one-
third of respondents cut their holding on a company due to this risk.49
In addition, the commitment to improve companies’ positive impact to the society recognizes in
the U.S. legislation, namely benefit corporation legislation.50 Under the legislation, benefit
corporation is a corporation that commit to public benefit and sustainable value (i.e. accountability,
transparency, and purpose) in addition to generating profit.51 Sneirson stated that two third of US
states have amended their laws allowing companies to become benefit corporations for firms
46 L. M. Fairfax, The Rhetoric of Corporate Law: The Impact of Stakeholder Rhetoric on Corporate Norms, 2006 47 Sneirson, page 84 48 Tensie Whelan and Carly Fink, The Comprehensive Business Case for Sustainability. Available at
https://hbr.org/2016/10/the-comprehensive-business-case-for-sustainability. Accessed on 2 April 2020 49 Ernst & Young Global Limited Liability Partnership, Tomorrows Investment Rules 2.0. Available at
https://www.eycom.ch/en/Publications/20151022-Tomorrows-Investment-Rules-2.0/download. Accessed on 2 April
2020 50 Michelle Cho, Benefit Corporations in the United States and Community Interest Companies in the United
Kingdom: Does Social Enterprise Actually Work?. Available on
https://scholarlycommons.law.northwestern.edu/cgi/viewcontent.cgi?article=1808&context=njilb. Accessed on 20
June 2020 51 Benefit Lab, Benefit Corporation 101. Available at
https://benefitcorp.net/sites/default/files/Benefit%20Corporation%20101.pdf. Accessed on 20 June 2020
25
looking to make a difference, not just shareholder profits.52 Based on three samples of certificates
of incorporation templates from Delaware, New York and Washington District of Columbia, the
benefit corporation law shall “allow the company to consider profit as well as society and the
environment which allow a business to balance fiduciary duty between its shareholders and
stakeholders”.53
II.1.1.1.1. Conclusion
In order to recapitulate, it is clear that in today’s doing business, a firm should be balanced in
pursuing company profit and generating societal benefit. It is no longer about the debate on who
is owning the firm and who has more power towards the corporation, but it is evident that
corporations operate a sustainable business that creates a value for all stakeholders including their
employees, shareholders, civil society and the environment.
II.1.1.2. Shareholder Democracy
After discussing the shareholder primacy and stakeholder model concept, it is noted that in today’s
business practices, corporations shall balance between company’s profit and societal benefits. In
line with this notion, there is another shareholders campaign, namely ‘shareholder democracy’.
The proponents of shareholder democracy believe that this concept will improve firm performance,
decrease corporate misconduct, enhance shareholders participation in relation to the social
responsibility issues of the corporation and increase financial returns.54
The shareholder democracy is a method in decreasing the amount of fraud and corporate
misconduct by the directors and officers, and to that end will increase the efficiency and financial
returns of the corporations. According to Professor Bebchuk, the purpose of increasing
shareholders’ power is not to displace the authority of the board, but to ensure greater dialogue
between shareholders and the board while ensuring that shareholders can exercise their voice under
critical circumstances.
52 Sneirson, page 85 53 Benefit Lab, State By State Status of Legislation. Available at https://benefitcorp.net/policymakers/state-by-state-
status?state. Accessed on 2 April 2020 54 Lisa M. Fairfax, Shareholder Democracy on Trial: International Perspective on the Effectiveness of Increased
Shareholder Power. Available on http://ssrn.com/abstract=1353164. Accessed on 16 March 2020
26
There are three main trends that trigger the shareholder democracy campaign which show a
positive development for shareholders in search of a greater voice in the corporation, namely: (1)
tyranny of the plurality standard vote; (2) shareholder access to ballot; and (3) say on pay issue.55
Firstly, the default rule of U.S. public companies in electing board members is the plurality rule.
This means that “the nominees with the largest number of votes are elected as directors up to
maximum number of directors to be chosen at the election”, regardless of votes ‘withheld’,
‘against’ or not cast.56 Hence, by the application of this rule, a nominee technically could be elected
with as little as one vote. Due to this, even if shareholders cast 99% of their votes against a person,
such person will be remain elected since the nominee needs only one vote in his favour. This rule
made shareholders impossible to vote a director out of office. The effort yielded a positive move
when shareholders at Walt Disney Co. sought to oust directors at the company by majority system.
In a majority system, the director is elected if he/she received a majority vote at the meeting.57 The
effort to switch from the plurality standard as the default rule into a majority vote system was
followed by the other companies. 58 Delaware also amended its corporate code, which stipulated
that failure to receive a required percentage of reelection votes will force a director to submit an
irrevocable submission of resignation.59
Secondly, U.S. federal law prohibits shareholders from using the corporation’s proxy statement to
nominate their own board candidates. In the event that shareholders want to nominate a candidate,
they must provide their own proxy statement to other shareholders. Forming and distributing a
proxy statement is very expensive, for that reason it is rare for shareholders to nominate their own
candidates and contest the board’s candidates.60 After this issue, the U.S. Securities and Exchange
55 Fairfax, Shareholder Democracy on Trial: International Perspective on the Effectiveness of Increased
Shareholder Power, page 5-11 56 Claudia H. Allen, Study of Majority Voting in Director Elections. Available at https://ssrn.com/abstract=2475122.
Accessed on 4 April 2020 57 SEC, Spotlight on Proxy Matters: The Mechanics of Voting. Available at
https://www.sec.gov/spotlight/proxymatters/voting_mechanics.shtml. Accessed on 30 May 2020 58 Allen, page 2. In 2007, a form of majority voting has adopted by 66% of S&P companies and 57% Fortune 500
companies. 59 Fairfax, Shareholder Democracy on Trial: International Perspective on the Effectiveness of Increased
Shareholder Power, page 7 60 The Economist, Battling for Corporate America, Available on https://www.economist.com/special-
report/2006/03/09/battling-for-corporate-america. Accessed on 4 April 2020
27
Commission (“SEC”) raised an initiative to give access to shareholders through a company’s
proxy statement for the purpose of nominating limited number of director candidates.
Lastly on the say on pay issue, studies confirm that excessive compensation to the top corporate
executives is granted and salary levels have risen in recent years.61 The studies also concluded that
there is no clear link between compensation and performance, a good example of which was the
continuous rise of compensation of Home Depot’s CEO throughout his occupancy period even
when the company’s stock price declined.62 To this effect, the SEC modified the federal rules by
requiring a detailed disclosure of executive compensation; moreover under Dodd-Frank Act,
publicly traded companies are required to hold an advisory (non-binding) vote which provides
shareholders with the right to vote on company’s executive compensation program.63
For these reasons, shareholder activists have been exploring an alternative mechanism which could
make shareholders votes be casted in a more evocative manner. The effort of shareholder
democracy movement also occurs when another country pushes for a greater of shareholders’ role
in corporate affairs, which is triggered by a different history. In Japan, the effort is triggered by
the vast majority companies who hold their annual meetings on the same day, severely limiting
shareholders’ ability to participate in multiple shareholders meeting. In Germany and the United
Kingdom, shareholders historically showed a significantly low dialogue between shareholders and
management in corporate matters, hence these countries moved for higher shareholder
involvement. All of these backgrounds have given rise to the shareholder democracy effort.
II.1.1.2.1. Debate against Shareholder Democracy
Despite the successful effort, the campaign invites a number of skepticism on the merits of
shareholder democracy. One concern, proposed by Bainbridge, is that “the increase of power to
shareholders will give a greater ability to advance their personal interest at the expense of the
corporation as a whole”.64 To this regard, the response from the shareholder democracy advocates
61 Randall S. Thomas, Explaining the International CEO Pay Gap: Board Capture or Market Driven? Available at
https://ssrn.com/abstract=407600. Accessed on 4 April 2020 62 Thomas, page 38 63 David F. Larcker and Brian Tayan, Say on Pay Research Spotlight, Available at
https://www.gsb.stanford.edu/sites/gsb/files/publication-pdf/qg_sayonpay.pdf. Accessed on 4 April 2020 64 Stephen Mark Bainbridge, Director Primacy and Shareholder Disempowerment, Available at
https://ssrn.com/abstract=808584. Accessed on 4 April 2020
28
is that any proposals from shareholder shall need significant support from other shareholders
before obtaining any sort of attention from the corporate management; thus, any self-interest
proposal shall not likely get support from the other shareholders.65 Instead, the other shareholders
will gravitate towards issues that enhance the overall health of the corporation, hence, the
opponents believe that shareholder democracy will weed out shareholders’ ability to advance their
personal goals.66
According to Hayden and Bodie, shareholders do not have a single-minded interest, but rather they
have interest that is divergent.67 It is cited that the “divergent interest among shareholders may
point in a variety of different governance directions”. Shareholders may have a wide range of
preference towards the corporation and its decision in the corporation.
The available empirical evidence reveals that shareholders play an affirmative role in advancing
the interest of stakeholders through the shareholder proposal process.68 There are shareholders
(e.g. insurance companies or pension funds) that have interest in supporting policies which provide
benefit to stakeholders in order to promote the long-term health of the corporation. Other scholars
have also pointed that there are shareholders who own stock in a wide variety of corporations,
namely diversified shareholders. This kind of shareholder put their concern on the companies’
policy which may give a broader impact to the society, since such policy will affect the portfolio
share value that they hold. Given that there is a large number of diversified shareholders, this
suggests that there are many shareholders who are likely to put their concern on the company’s
policies, resulting in a wider impact to the all stakeholders.69 Fairfax also added that to that end,
stakeholders need to affirmatively assess whether such democracy campaign does not only
increase the rights of shareholders but also enhances the interest of all corporate constituents.70
65 Frank Partnoy and Thomas, Randall S., Gap Filling, Hedge Funds, and Financial Innovation, Available at
https://ssrn.com/abstract=931254. Accessed on 4 April 2020 66 Fairfax, Making the Corporation Safe for Shareholder Democracy, page 102 67 Grant M. Hayden and Matthew T. Bodie, ‘Shareholder Democracy and The Curious Turn Toward Board
Primacy’, page 2095 68 Lisa M. Fairfax, ‘Making the Corporation Safe for Shareholder Democracy’, Available at
https://heinonline.org/HOL/License. Accessed on 4 April 2020 69 Fairfax, Making the Corporation Safe for Shareholder Democracy, page 84 70 Fairfax, Making the Corporation Safe for Shareholder Democracy, page 80
29
II.1.1.2.1. Conclusion
To sum up, this research views that shareholder democracy shall be the enlightening campaign for
today’s corporate business since it supports the issue beyond maximizing profit or financial matters
because the campaign would not only enhance the voice of shareholders in the corporation but also
provide attention onwards stakeholders.
II.1.2. Shareholder Rights
After discussing the background of shareholder rights campaign, this research will now discuss
the legal rationale behind shareholders’ rights to vote in the corporation.
II.1.2.1. The Right to Vote
The purpose of voting is to let a group of people with differing opinions arrive at a decision
regarding a particular issue. Casting a vote gives the voter the satisfaction of having his voice
heard.71 The question on why voting rights is given only to the shareholders must begin with a
review of the basic nature of the corporate entity itself and its legal rationale.
Corporation is a legal entity created by documents that allocate rights and duties among the people
and assets that give life to the corporation. Despite the legal recognition of a corporate’s separate
existence, corporation still cannot act on its own. It is impossible not to depend on the stakeholders.
As a consequence, someone must be in charge: shareholders to contribute capital or assets into the
corporation, board of directors to represent company in its affairs and delegate the implementation
of the company’s activities to company officers.72 This hierarchy structure allows the shareholders
to elect and remove the board.73 This resonates earlier attempts on shareholder democracy, which
is to provide shareholders more meaningful voice in the selection and removal of directors.
However, arguments supporting the shareholders’ right to vote come not only from shareholder
primacy or shareholder democracy advocates but also from director democracy scholars.
According to shareholder primacy advocates, Frank Easterbrook and Daniel Fischel, the right to
vote is possessed by shareholders because “the shareholders receive most of the marginal gains
71 Thompson Robert B. and Paul H. Edelman, Corporate Voting, page 132-133 72 Grant M. Hayden and Matthew T. Bodie, The False Promise of One Share, One Vote. page 23 73 Bainbridge, Director Primacy and Shareholder Disempowerment, page 1749-1750
30
and incur most of the marginal costs. They therefore have the right incentives to exercise
discretion”.74 They also refer to a theory of contract; where if contracts are not complete,
something must fill in the details. To fill the gap, shareholders will delegate to the board of
directors which they will exercise authority at the sufferance of the shareholders.75
However, by this, directors may have a centralized power over all of the corporation. Bainbridge,
as director-centric advocate, acknowledge the risk that directors may fail to hold a monitoring role,
and he argues that since shareholders have a residual, unfixed, ex-post claim on corporate assets
and earning, only shareholders have a monitoring role. Monitoring role must be limited to a single
constituency, otherwise it would produce mixed signals and undermining the monitoring role.76
Additionally, Lynn A. Stout, who is generally skeptical of shareholder primacy, tries not to see the
shareholders’ voting rights from a residual issue. She observes that the best signal to identify board
error is the market price of the corporation’s stock. Since shareholders are uniquely sensitive to
stock price and having the incentive to monitor stock price signal, shareholders are the appropriate
group to monitor the board and correct errors of the board from its duty to the corporation.77 To
conclude, voting rights not merely linked to a residual matter but also a monitoring function in the
corporation.
II.1.2.2. Proxy Rules
For voting to be effective, shareholders must have the incentive to become informed.78
Historically, shareholders were recognized as apathetic especially for those who have a very small
investment. This minority shareholder may rely upon the directors in managing the business.79
They believed that they have minor capability to influence the company’s decision since their votes
were relatively insignificant, and found it inefficient to over-invest in monitoring behavior by
casting a vote.80 This behavior is logical, because if the majority shareholders cast a vote, the
74 Thompson Robert B. and Paul H. Edelman, Corporate Voting, page 146 75 Thompson Robert B. and Paul H. Edelman, Corporate Voting, page 146 76 Thompson Robert B. and Paul H. Edelman, Corporate Voting, page 147 77 Thompson Robert B. and Paul H. Edelman, Corporate Voting, page 149 78 John Pound, Proxy Voting and the SEC: Investor Protection versus market efficiency. Available at
https://doi.org/10.1016/0304-405X(91)90003-3. Accessed on 5 April 2020 79 Julian, Taking Shareholder Rights Seriously, page 623 80 Pound, page 243
31
minority shareholders see an efficient outcome in their favour. Thus, they are better to remain
uninformed on what to vote and free-ride on the collective action of the majority.
According to Berle and Means, the dispersion of share ownership results in the passivity of
shareholders; and additionally, there is an additional hurdle related to costs associated with
information, distribution, communication in participating in coordinated action.81 Therefore, there
shall be a tool to make it possible for many investors to communicate and organize the information
in a cost-effective manner such as: (i) proxy voting wherein the shareholder delegates its voting
decision to specified person; (ii) proxy contest where a large shareholder gathers information on
the managment’s shortcomings and distributes it to other shareholders in order to acquire control
of the company82; or (iii) proxy statement made by the company containing matters that will be
brought up at the shareholders meeting in order to aid shareholders in making informed decisions.
II.2. Shareholders Rights Principle under Indonesian Company Law
There is no specific reference to shareholder primacy or shareholder democracy campaign in
Indonesia.83 Although Indonesia does not formally recognize these theories and translate it into
law, Indonesia has addressed positive steps on setting corporate governance guidelines for
Indonesian companies, among which is the creation of the CG Code and the adoption of Indonesian
Company Law in 1995 which has amended in 2007.84
Indonesia adopts a two-tier board system which separating BOC as the supervisory board and BOD
as the corporate management.85 Additionally, Indonesian company has three organs: GMS, BOD
and BOC; 86 however, each organ does not possess a higher position than another. As of 2007,
81 Pound, page 243-244 82 Pound, page 244 83 Ira A. Eddymurthy, Shareholder Activism in Indonesia, Available at
https://uk.practicallaw.thomsonreuters.com/w-013-
0805?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1. Accessed on 7 April 2020 84 International Finance Corporation, The Indonesia Corporate Governance Manual: Second Edition. Available at
https://www.ifc.org/wps/wcm/connect/ff5019ba-a08d-4e19-8954-
0d00d853081f/Indonesia_CG_Manual_Feb2014.pdf?MOD=AJPERES&CVID=kfUHs70. Accessed on 8 April 2020 85 Leni Susanti and Sulaeman Rahman Nidar, Corporate Board and Firm Value: Perspective Two-Tier Board
System in Indonesia. Available at https://www.ijstr.org/final-print/may2016/Corporate-Board-And-Firm-Value-
Perspective-Two-tier-Board-System-In-Indonesia.pdf. Accessed on 21 June 2020 86 Article 1 (2) of the Indonesian Company Law
32
Indonesian Company Law adopted a distribution of power principle where the authority of a
company is distributed into these three organs.87 The previous Indonesia company law regime,
Law No. 1 of 1995 explicitly stipulated that GMS is the highest company’s organ,88 but this
position is no longer acknowledged under Indonesian Company Law No. 40 of 2007.
According to the CG Code, “Decisions taken in GMS must be based on the long-term interest of
a company. The GMS and/or shareholders cannot intervene in the exercise of the duty, function
and authority of the BOC and the BOD, without curtailing the authority of the GMS to carry out
its rights in accordance with the articles of association and laws and regulations, including the
replacement or termination of the members of the BOC and/or the BOD”.89 The CG Code also
states that a company shall provide an equitable opportunity to all shareholders which allow them
to give input and opinions in the interest of a company, and the company shall also establish access
to company’s information in accordance with the transparency principle. Further, the controlling90
shareholder shall consider the interest of the minority shareholders and other stakeholders in
accordance with laws and regulations.
Indonesian Company Law does not provide a definition of shareholders while the Black’s Law
Dictionary defines a shareholder as “one who owns or holds a share or shares in a company”.91
Indonesian Company Law stipulates that a proof of share ownership shall be issued to a
shareholder, and such share shall confer the following rights upon its owner:92
87 Munir Fuady, Hukum Bisnis Dalam Teori dan Praktek (Business Law in Theory and Practice). (Jakarta: PT Citra
Aditya Bakti, 2017), Page 21. Based on Article 1 of Indonesian Company Law, “(i) the BOD is the organ with the
sole authority and responsibility for the company’s management in the best interest of company, represent the
Company both within and outside the court of law under the articles of association, (ii) BOC is the organ with duties
to make a general and/or specific supervision under the articles of association, as well as to provide advice to the
BOD, (iii) GMS is an organ with the authority not vested in the BOD nor the BOC within the limits as provided for
in this law and/or the articles of association“ 88 Article 1 (3) of Law No. 1 of 1995 on Limited Liability Companies 89 National Committee on Governance, Indonesia’s Code of Good Corporate Governance, 2006. 90 Indonesian Company Law does not define ‘control’ or ‘controlling’, refer to Law No. 8 of 1995 on Capital Market
and Indonesia antitrust laws and regulations, ‘control’ is derived from either having (i) more than 50% shares ownership or (ii) factual control (with less than 50% shares ownership but having the ability to influence or direct
the company's policy and/or management) 91 Hasbullah F. Sjawie, Direksi Perseroan Terbatas Serta Pertanggungjawaban Pidana Korporasi (Limited
Liability’s Director and Corporate Criminal Liability). (Jakarta: Kencana, 2017), Page 83 92 Article 51 jo. Article 52 of Indonesian Company Law
33
1. To attend and cast a vote at the GMS, directly or indirectly through a proxy93
2. To receive dividend payments and remaining assets after liquidation94
3. To exercise other rights under Indonesian Company Law95:
a. To file a lawsuit against the Company to the court for any damage caused by the acts
of the company which is considered to be unfair and unreasonable resulting from any
decisions of GMS, BOD, and/or BOC96
b. To freely transfer and encumbrance his shares97
c. To exercise pre-emptive rights when there is an issuance of new shares in the company,
all shareholders within the same class have the same opportunity to subscribe such
shares98
d. To review shareholders list99
e. To request the company to buy his shares at a reasonable price, if such shareholder does
not approve the company’s act (e.g. merger, acquisition, transfer or encumbrance assets
of company worth more than 50% of the net assets) that harm the shareholder or
company100
f. To receive GMS materials immediately upon GMS notice, and have access to
information relevant to GMS’s agenda from BOD and/or BOC through a GMS
forum101
g. To summon a GMS102
h. To file a lawsuit on behalf of the company, against a member of BOD who due to
his/her fault or negligence has resulted damages to the company in losses103
93 Article 52 (1) (a) jo. Article 85 of Indonesian Company Law 94 Article 52 (1) (b) of Indonesian Company Law 95 Article 52 (1) (c) of Indonesian Company Law 96 Article 61 (1) of Indonesian Company Law 97 Article 60 of Indonesian Company Law 98 Article 43 of Indonesian Company Law 99 Article 75 (2) of Indonesian Company Law 100 Article 62 (1) of Indonesian Company Law 101 Article 75 (2) of Indonesian Company Law 102 Article 79 (2) of Indonesian Company Law 103 Article 97 (5) of Indonesian Company Law
34
i. To file a petition to a district court to investigate the company, if there is a suspicion
that the company, BOD, or BOC has committed in an unlawful act by which resulted
in losses to the company, the shareholders, or a third party 104
II.2.1. The protection to the rights of minority shareholders under Indonesian Law
Besides the rights listed in the previous section, the Indonesian Company Law and Capital Market
Law also provides for the following mechanisms to protect shareholders rights:
(i) Higher quorum governed on the articles of association
Article 87 of the Indonesian Company Law provides that a GMS resolution shall be adopted based
on the principles of deliberation to reach a consensus. If the consensus fails, the resolution shall
be valid if approved by more than one-half of the total amount of the votes cast (or a simple
majority vote), unless the articles of association determines that it must be adopted by a vote higher
than a simple majority vote. The protection of minority shareholders rights can be then stipulated
on the articles of association of a company by the requirement of quorum that is higher (e.g., 2/3,
3/4, 3/5) rather than a simple majority vote.
(ii) The rights of minority shareholders under Indonesia Capital Markets Law
The Indonesia Capital Markets Law contains one provision that specifically designed to protect
the rights of minority shareholders.105 This provision provides that: in the event of an issuance of
new shares that is convertible into the company’s shares, then OJK may require a Listed Company
“to obtain approval from independent shareholders with respect to transactions where the
economic interest of the company is in conflict with the private economic interests of directors,
commissioners, and/or substantial shareholders”. The elucidation to this provision explains that
‘independent shareholders’ are usually minority shareholders, and the intention of this article is to
protect the minority shareholders against transactions on unfair price.
In practice, this requirement can be applied to a transaction where the Listed Company is in a
financial distress and need to issue shares that is convertible (e.g. convertible loan into shares) into
104 Article 138 of Indonesian Company Law 105 Article 82(2) of Law No. 8 of 1995 on Capital Markets Law
35
company’s shares.106 This condition would inevitably dilute the existing of shareholders’ shares.107
Under normal conditions, or when a company is not in a distress financial condition, the Listed
Company must give a preemptive subscription rights to shareholders on a proportionate basis
whenever the company issue new shares convertible into shares.108 However, this mandatory
requirement to give a preemptive subscription rights can be excused in a Listed Company with
special condition (e.g. financial balance conditions) under the condition that prior approval from
independent shareholders be obtained first.109 As mentioned in Chapter I herein, this situation
actually happened to UNSP where they need to restructure the company’s loan within the issuance
of new shares without a preemptive subscription rights; then, they need to obtain prior GMS’
approval. Such GMS shall be attended by at least more than 50% of the total amount of shares
with valid voting rights owned by independent shareholders, and shall be valid in adopting a
resolution if approved by more than 50% of the total amount of shares with valid voting rights
owned by independent shareholders present or represented at the GMS.110
II.2.2. Conclusion
To conclude, we view that Indonesian Company Law gives shareholders (including minority
shareholders) with the right to vote and attend a GMS. It is necessary to mention that the Capital
Markets Law also stipulates special disclosure requirements to protect minority shareholders.111
This research will discuss further GMS’s detail in Chapter III, on the GMS quorum requirement,
GMS’s topics that can be voted for by the shareholders, and the ability of whether the shareholder
can make their propositions during meeting.
106 Iqbal Dharmawan and Indah Nurwitry, OJK Now Requires Independent and Unaffiliated Shareholders’ Approval
for Public Companies’ Non-Preemptive Rights Issuances. Available at
https://www.bakermckenzie.com/en/insight/publications/2019/05/ojk-requires-shareholders-approval. Accessed on
12 May 2020 107 Agus Riyanto, Penambahan Modal di pasar Modal: Dengan atau Tanpa Hak HMETD. Available at
https://business-law.binus.ac.id/2017/06/21/penambahan-modal-di-pasar-modal-dengan-atau-tanpa-hak-hmetd/.
Accessed on 12 May 2020 108 Article 82(1) of Law No. 8 of 1995 on Capital Markets Law 109 Article 3 of POJK No. 14/POJK.04/2019 on Amendment of POJK No. 32/POJK.04/2015 on Increase of Capital
of Public Companies with Preemptive Rights 110 Article 8A of POJK No. 14/POJK.04/2019 on Amendment of POJK No. 32/POJK.04/2015 on Increase of Capital
of Public Companies with Preemptive Rights 111 Article 82(2) of Law No. 8 of 1995 on Capital Markets Law
36
CHAPTER III
GENERAL MEETING OF SHAREHOLDERS
FOR LISTED COMPANY
As mentioned in Chapter II that shareholders’ meeting represents an assembly of shareholders on
using their voting rights to express their argument.112 Nowadays, a shareholders meeting is not
only a necessity but also being a mandatory requirement. Annual GMS along with annual proxy
materials and annual financial report has become a requirement by law both in the U.S.113 and
Indonesia114. Especially due to the spread of Covid-19 disease, physical meetings are currently not
an option, and Listed Companies are facing difficulties to meet their obligations.115
In response to this pandemic, the U.S. SEC released guidance to help Listed Companies meet their
obligations under the federal proxy rules.116 In brief, the guidance states that, with due observance
with state law and company’s governing documents, a company can change their GMS method
into a virtual or hybrid meeting.117 Following this new rule, Starbucks was the first company to
cancel their physical GMS and proceed with a virtual-only meeting.118 Many companies such as
Verizon, Target, AT&T, Walmart, Lowe’s Company, and The Kroger have also altered their GMS
meeting method.119
The Indonesian government through OJK and IDX has also issued new policies120 that essentially
(i) relaxed the obligation of Listed Companies to submit annual reports and annual financial
112 Samat, page 762-769 113 8 Del. C. §211 114 Article 78 (2) of Indonesian Company Law 115 Peter E. Devlin, SEC Guidance for Conducting Annual Meetings in Light of Covid-19 and Related
Considerations. Available at https://www.jonesday.com/en/insights/2020/03/sec-guidance-in-light-of-covid19.
Accessed on 1 June 2020 116 David P. Hooper, Conducting Virtual Shareholder Meetings: SEC Guidance, State Law Considerations.
Available at https://www.natlawreview.com/article/conducting-virtual-shareholder-meetings-sec-guidance-state-
law-considerations. Accessed on 31 May 2020 117 Hooper, page 3 118 Zsuzsanna Szabo, Issuers Explore Virtual Shareholder Meetings Amid Covid-19 Uncertainty. Available at
https://www.irmagazine.com/technology-social-media/issuers-explore-virtual-shareholder-meetings-amid-covid-19-
uncertainty. Accessed on 1 June 2020 119 Sheryl Estrada, Verizon, Target top Forbes list ranking Covid-19 response. Available at
https://www.hrdive.com/news/verizon-target-top-forbes-list-ranking-covid-19-response/578753/. Accessed on 1
June 2020 120 OJK Circular Letter No. S-92/D.04/2020 on Relaxation of the Obligation to Submit Reports and Conduct of
Shareholders Meetings and Decree of the Board of Directors of the IDX No. Kep-00027/BEI/03-2020 on Relaxation
of the Obligation to Submit Financial Statements and Annual Reports
37
statements, and (ii) allowed companies which previously must conduct the annual GMS six month
at the latest after the end of financial year to either (a) postpone their annual GMS until two months
(e.g. if the financial year ends on 31 December than the annual GMS can be held on 31 August at
the latest), or (b) proceed and use the e-proxy system.
The e-proxy can be done through a system provided by KSEI with due observance of POJK
32/2014 and Indonesian Company Law.121 However, as per March 2020 there are 14 Listed
Companies who opted to postpone their GMS instead of using the e-proxy system. 122 On April
2020, KSEI launched eASY.KSEI, a platform that provides the e-proxy and e-voting features, but
until now Listed Companies have not used this platform as they are still waiting for OJK to issue
e-proxy and e-voting regulations.123 The discussion on eASY.KSEI will be discussed in section
III.2.2.1 below.
Virtual GMS has been an available option in the U.S. and the trend has been picking up over the
past years, but still only a small percentage of public companies have actually utilized this meeting
method.124 However, we see that electronic platform can help Listed Companies in holding GMS
and meeting their obligations under the law. The adoption of electronic platform due to Covid-19
may offer considerable decision for companies to continue using e-Platform on their future GMS
meeting method.
In Chapter IV, we will further discuss whether electronic GMS is actually desirable to the
shareholders especially in the involvement of minority shareholders as manifested under
shareholders democracy or CCG Code. Now, we will need to understand the history and objectives
of the e-Platform.
121 OJK Circular Letter No. S-92/D.04/2020 on Relaxation of the Obligation to Submit Reports and Conduct of
Shareholders Meetings. Available at https://covid19.hukumonline.com/wp-
content/uploads/2020/04/surat_otoritas_jasa_keuangan_nomor_s_92_d_04_2020_tahun_2020-2.pdf. Accessed on 1
June 2020 122 M. Nurhadi Pratomo, Gara-Gara Corona, Ini Daftar Emiten Yang Tunda RUPS (This is the List of Issuers that
Postponing their GMS Due to Corona). Available at https://market.bisnis.com/read/20200329/192/1219230/gara-
gara-corona-ini-daftar-emiten-yang-tunda-rups. Accessed on 2 June 2020 123 KSEI, Frequently Asked Questions: Utilization of Electronic General Meeting System Application – eASY.KSEI.
Available at https://www.ksei.co.id/Download/FAQ_Penggunaan_Aplikasi_eASY.KSEI.pdf. Accessed on 12 June
2020 124 Robert A. Friedel, Lauren Judy Luptak, and Kai Xi Wang, Virtual Shareholder Meeting on The Rise Due to
Coronavirus (COVID-19). Available at https://www.pepperlaw.com/publications/virtual-shareholder-meetings-on-
the-rise-due-to-coronavirus-covid-19-2020-03-11/. Accessed on 1 June 2020
38
III.1. Listed Company’s GMS in the U.S.
III.1.1. History and Objectives of e-Platform
III.1.1.1. The Introduction of e-Proxy
Proxy voting rights became an essential element in corporate democracy in the U.S. public
companies.125 Historically, the number of shareholders was small and shareholders meeting was
based on personal attendance.126 The use of proxy voting was even prohibited to encourage
shareholders to take an active role in the company, and by 1865 the proxy voting was only used
by a company with widely dispersed shareholdings.127 Because of the changes in the late 19th
century where the number of shareholders increased,128 companies introduced proxy voting
provisions in their charters,129 and shareholders used proxies to appoint an agent to vote on their
behalf thereby in-person attendance in GMs declined.130
Throughout the years, the number of share ownership become dispersed and public companies
grew in size, 131 the broad geographic shareholder base of most public companies also hampered
the shareholder to attend and participate in the meeting in person; consequently, the need for proxy
voting mechanism increased. 132 By proxy voting, without physically attending the meeting,
125 Latham & Watkins LLP, Annual Meeting Handbook 2019 Edition. Available at
https://www.lw.com/thoughtLeadership/LW-annual-meeting-handbook. Accessed on 15 April 2020 126 Rob McQueen, A Social of Company Law. Available at
https://books.google.nl/books?id=PBzACwAAQBAJ&pg=PA196&lpg=PA196&dq=history+of+shareholder+proxy
+voting+before+19th+century&source=bl&ots=mOiiBWpTIr&sig=ACfU3U3yDdupO5EM_PL7wTOMhWGI4PG
P_Q&hl=en&sa=X&ved=2ahUKEwjJqJDOyOXoAhUpuaQKHb9WD8EQ6AEwCXoECAoQKQ#v=onepage&q=h
istory%20of%20shareholder%20proxy%20voting%20before%2019th%20century&f=false. Accessed on 13 April
2020. 127 McQueen, Page 114 128 Margaret Barr Bruemmer, Proxy Solicitations: The Need for Expanded Disclosure Requirements. Available at
https://pdfs.semanticscholar.org/3cfb/76b7f5f4fd2cbdf6693f1bb62af0e2435501.pdf. Accessed on 13 April 2020 129 Peter George, Emergence of Industrial America: Strategic Factors in American Economic Growth Since 1870.
Available at
https://books.google.nl/books?id=7g4q5THEuOEC&pg=PA79&lpg=PA79&dq=US+corporate+charter+adopt+prox
y+voting+history+19th+century&source=bl&ots=N4Pblm17O2&sig=ACfU3U3uRPasQXn2JMLyyNqSRYTv7LB9
lw&hl=en&sa=X&ved=2ahUKEwjZ4LyO-uXoAhXG-
aQKHcRBAn4Q6AEwAHoECAkQKQ#v=onepage&q=US%20corporate%20charter%20adopt%20proxy%20votin
g%20history%2019th%20century&f=false. Accessed on 13 April 2020 130 Tanya Mohn, Shareholder Meetings: Unearthing the history. Available at
https://www.directorsandboards.com/articles/singleshareholder-meetings-unearthing-history. Accessed on 13 April 2020 131 Dalia Tsuk Mitchell, Shareholders as Proxies: The Contours of Shareholder Democracy. Available at
https://heinonline.org/HOL/Page?handle=hein.journals/waslee63&collection=journals&id=1511&startid=1511&end
id=1586. Accessed on 19 March 2020 132 Latham & Watkins LLP, Page 19
39
shareholders can authorize its voting decision to another person. The ownership in the U.S. Listed
Company is relatively dispersed, and the vast majority of shareholders are not present at the
meeting; thus, the proxy system is the communication media to which shareholders can make a
dialogue with the company’s management on their views and opinions.133
The U.S. through the SEC first promulgated the proxy rules in 1935, by the issuance of Rule 14a.134
Rule 14a has been amended from time to time, which contained requirements for the company to,
among others, provide shareholders with annual basis materials (“proxy materials”, e.g. voting
procedure, the delivery of a proxy card, the ‘yes’ or ‘no’ voting) to be considered at the annual
meeting. In 1940, the company was also required to file the proxy materials with the SEC prior its
distribution.
In 2007, SEC adopted e-proxy rules where the company and other soliciting persons must provide
the proxy materials on the internet via a publicly accessible website, with a Notice of Internet
Availability of Proxy Materials (“Notice”), by way of the following distribution methods to
shareholders, either:135
(i) send the Notice regarding the availability materials on the internet only (the ‘notice-only’
option); or
(ii) deliver physically the Notice as well as a complete set of proxy materials (the ‘full set
delivery option’) to shareholders.
Statistics showed that shareholder’s response was significantly lower when the notice-only model
was utilized, and cited shareholder’s confusion concerning the notice-only process.136 In order to
improve communication between company and shareholders, SEC amended the rules in 2010. The
amendment is to clarify and provide additional flexibility regarding the format and content of the
133 Huasheng Gao, Jun Huang, and Tianshu Zhang, Can Online Annual General Meetings Increase Shareholders’
Participation in Corporate Governance?. Available at https://ssrn.com/abstract=2689618. Accessed on 19 March
2020 134SEC, Amendments to Exemptions from the Proxy Rules for Voting Advice. Available at
https://www.sec.gov/rules/final/2010/33-9108.pdf. Accessed on 14 April 2020 135 SEC, Shareholder Choice Regarding Proxy Materials. Available at http://www.sec.gov/rules/final/2007/34-
56135.pdf. Accessed on 14 April 2020 136SEC, Amendments to Rules Requiring internet Availability of Proxy Materials. Available at
https://www.sec.gov/rules/final/2010/33-9108.pdf. Accessed on 14 April 2020
40
Notice, and permit the company and other soliciting persons to communicate better with
shareholders.137
SEC further stated that the adoption of e-proxy rules is to improve proxy materials distribution.
By requiring internet availability of proxy materials, the SEC seeks to enhance the ability of
shareholders to make informed voting decisions and, at the same time, lower the costs of proxy
solicitations.138
III.1.1.2. The Introduction of e-Voting and e-Meeting
There is no explicit provision on the federal rules governing an electronic voting. However, the
implementation of e-proxy rules shall also allow the shareholders to cast a vote through telephone,
e-mail, or internet.139
Concurrently with the introduction of e-proxy, the SEC also adopted the facilitation of electronic
shareholders’ forums in 2008, by amending Rule 14a-2 and adopted a new Rule 14a-17.140 The
implementation of these rules is intended to facilitate shareholder’s rights on a better
communication through internet, as stated on SEC’s release:141
“By facilitating communications on the internet among shareholders, and between
shareholders and the companies in which they invest, we hope to tap the potential of
technology to better vindicate shareholders’ rights in ways that are potentially both more
effective and less expensive.”
However, the rules are silent on the term definition of ‘electronic shareholder forum’. Based on
the SEC release, the online forum would enable the participants to know the voting percentage that
represented in the discussion, the forum can also be used to discuss, deliver questions and answers
on a broad range or on a particular issue, and compile polling data from shareholders.
137 SEC, Amendments to Rules Requiring internet Availability of Proxy Materials. Page 6 138 SEC, Concept Release on The U.S. Proxy System. Available at https://www.sec.gov/rules/concept/2010/34-
62495.pdf. Accessed on 14 April 2020 139 Rule 14a-(16)(d)(8); 17 C.F.R. §240.14a-(16)(d)(8) 140 SEC, Electronic Shareholder Forums. Available at https://www.sec.gov/rules/final/2008/34-57172.pdf. Accessed
on 14 April 2020 141 SEC, Electronic Shareholder Forums. Page 3
41
Generally, the introduction of online information provision as well as online shareholder
participation were facilitated in to achieve the key aim of increasing participation in general
meetings, and eventually to achieve cost savings as a secondary aim.
III.1.2. The Mechanism and Application of e-Platform
III.1.2.1. e-Proxy Mechanism
Pursuant to Rule 14a-16, public companies must post its proxy materials identified in the Notice
on the company’s website and choose the proxy materials’ delivery options (e.g. the ‘notice-only
option’, the ‘full set delivery option’, or a ‘hybrid’ of these options142). The proxy materials shall
include proxy statement and other meeting’s materials (e.g. proxy card, annual report).143 The
information identified in the proxy materials offers shareholders insight on the company’s
management and agenda items for annual meetings of shareholders. Shareholders then use the
information contained in the proxy materials to make a decision.144 Therefore, instead of physically
delivering the meeting’s materials, shareholders can access the information regarding the meeting
agenda and give voting instructions electronically. However, there is still an option for
shareholders to request the proxy materials in paper145 and to give voting instruction
electronically.146
If the shareholders choose to vote by a proxy, the shareholders shall fill in a form of proxy provided
by the company. The SEC e-proxy rules are silent on the definition of form of proxy. In practice, a
form of proxy (or commonly called a ‘proxy card’) is a card that a shareholder signs and returns
to the company.147 The card will inform the name of the proxy person (an individual name) and
shareholder’s vote for each agenda (i.e. against, for, abstain).148 The card will also set the name of
142 Broadbridge, Notice and Access (SEC Rule 14a-16). Available at
https://materials.proxyvote.com/Approved/EPLST1/20100210/OTHER_52009/PDF/broadridge-cis2010_0049.pdf.
Accessed on 15 April 2020 143 SEC, Shareholder Choice Regarding Proxy Materials, Page 4 144 Evan Tarver, Proxy. Available at https://www.investopedia.com/terms/p/proxy.asp. Accessed on 16 April 2020 145 Rule 14a-16(d)(4); 17 C.F.R. §240.14a-16(d)(4) 146 Rule 14a-16(n)(4)(iii); 17 C.F.R. §240.14a-16(n)(4)(iii) 147 Southwest Gas Holdings, Inc., Proxy Statements. Available at
https://www.sec.gov/Archives/edgar/data/1692115/000169211519000023/definitiveproxy2019.htm. Accessed on 17
April 2020 148 Mercury Computer Systems, Inc., Notice of Special Meeting of Shareholders. Available at
https://www.sec.gov/Archives/edgar/data/1049521/000119312509077882/dex991.htm. Accessed on 17 April 2020
42
nominated directors, where a proxy materials relate to directors election.149 By this, the proxy will
vote the shareholder’s shares as directed by the shareholder. Nonetheless, there is no requirement
in the SEC e-proxy rules, to submit additional printed power of attorney that is signed by the
shareholders to appoint the proxy person.
Technically, the verification of shareholders vote through electronic proxy voting will depend on
each state. Based on Exchange Act Release No. 37,182 (1996, Example 28), the SEC assumed the
shareholders who received proxy materials electronically would print the proxy card, sign it, and
mail it to the company. 150 There is no clear provision specifying whether in returning the proxy
card the shareholders can sign the card electronically and what constitutes digital signature. 151
Federal Regulations allow companies offering options to the shareholders to vote their voices
through internet, email, and phone.152 In practice, according to many corporate lawyers’
interpretation, as long as there is evidence that the voting shareholders have consented to
electronical delivery of proxy materials and electronic communications that would be sufficient
for the company to make sure the authorized shareholders will be voted through electronic
means.153 Moreover, many states adopt digital signature acts,154 while others developed a system
which shareholders can vote by phone using a personal identification number.155 Delaware General
Corporation Law (“DGCL”) mandates that the corporation shall implement reasonable measures
to verify the shareholders or proxy vote through the electronic means of proxy voting.156
149 RR Donnelley, Annual Meeting Handbook 2012 Edition. Available at
https://www.lw.com/thoughtleadership/annual-meeting-handbook-2012. Accessed on 17 April 2020 150 Alan R. Palmiter, Examples & Explanations for Securities Regulation (Seventh Edition).(New York: Wolter
Kluwer, 2017), Page 329 151 Palmiter, Page 329 152 Rule 14a-16(d)(8); 17 C.F.R. §240.14a-16(d)(8) 153 Palmiter, Page 329 154 Palmiter, Page 330 155 John R. Hewit and James B. Carlson, Securities Practice and Electronic Technology. Available at
https://books.google.nl/books?id=nFx_DR9D3v4C&pg=SA3-PA13&lpg=SA3-
PA13&dq=how+to+make+sure+authorize+shareholder+proxy+electronic+voting&source=bl&ots=zUXxsTmS9o&
sig=ACfU3U3xr6U6zII0mKmPVydErymXIz-hSw&hl=en&sa=X&ved=2ahUKEwiW--LRu-HpAhVB-
aQKHZ_3AD8Q6AEwC3oECAgQAQ#v=onepage&q=how%20to%20make%20sure%20authorize%20shareholder
%20proxy%20electronic%20voting&f=false. Accessed on 1 June 2020 156 8 Del. C. §211(a)(2)(b)
43
The proxy card does not negate shareholders’ ability to present in person at the meeting,157 The
requirements on how to revoke the proxy shall be governed by each company. In practice, the
shareholder shall indicate that it revokes the proxy and will vote in person at the meeting.158
The SEC e-proxy rules set forth several specific requirements for the form of proxy, as follows:
a. “indicate in boldface type whether it is being solicited on behalf of the company’s BOD or
another soliciting party;159
b. provide a specifically designated blank space for the date it is signed by the shareholder;160
and
c. identify clearly and impartially each separate matter to be acted upon on at the meeting,
whether or not related to or conditioned on the approval of other matters, and whether
proposed by the corporation or security holders, except that no reference need to be made
to proposals as to which discretionary authority is conferred by shareholders to the proxy
holders.”161
III.1.2.1.1. Shareholders Proposal
Shareholders can propose recommendations or require that the company and/or BOD take action,
which are to be presented at the GMS.162 Such proposal shall be included in company’s proxy
statement and identified in the form of proxy,163 as well as submitted in electronic means.164 The
eligible shareholders who can submit the proposal are those who hold at least $2,000 in market
value, or 1% of company’s shares entitled to be voted at the GMS at least one year from the
submission date of the proposal. Such shareholders must continue to hold those shares through the
date of GMS.165
157 Schedule 14A Rule 14a-101; 17 C.F.R. §240.14a-101 158 Mercury Computer Systems, Inc., Page 3 159 Rule 14a-4(a)(1); 17 C.F.R. §240.14a-4(a)(1) 160 Rule 14a-4(a)(2); 17 C.F.R. §240.14a-4(a)(2) 161 Rule 14a-4(a)(3); 17 C.F.R. §240.14a-4(a)(3) 162 Rule 14a-8; 17 C.F.R. §240.14a-8 163 Rule 14a-8; 17 C.F.R. §240.14a-8 164 Question 5 Rule 14a-8; 17 C.F.R. §240.14a-8 165 Question 2 Rule 14a-8; 17 C.F.R. §240.14a-8
44
III.1.2.2. e-Voting and e-Meeting Mechanism
As mentioned on the introduction of e-voting section above, there is no explicit provision on the
electronic voting. Based on the sample of proxy card issued by the SEC, electronic voting
instructions shall be stated on the proxy card.166 If the company choose to offer voting over the
internet, the company shall inform the detail of the website address on the proxy card.
As for the electronic meeting, electronic meeting is governed under Rule 14a-17 which says that
an electronic shareholder forum, which comply with the federal securities laws, may be established
to facilitate interaction among company and shareholders. Further, Rule 14a-8 also mention that
the company can choose to hold a shareholder meeting partly or entirely via electronic media.
However, the rule does not prescribe specific format. In practice, (i) a website which facilitates an
exchange information, questions and answers discussion, and/or online polling, or (ii) electronic
media offers online chat room within specific or unrestricted topic, shall be an envisioned type of
e-meeting.167
III.1.2.3. The Application of e-Platform in the U.S. Companies
In the U.S., each state has its own legislative powers; thus, the corporate law rules differ from state
to state. Generally, nearly all of state corporate laws allow shareholders to vote at a meeting in
person or by proxy.168 The GMS rules and regulations are varied in each state’s corporation
statutes.169 The majority of U.S. public companies are incorporated under Delaware State laws.170
Therefore, this section will particularly examine Delaware’s GMS regulation.
III.1.2.3.1. Method of Meetings
There are two types of shareholder meetings under Delaware law – annual shareholder meeting
and special meeting.171 DGCL requires every corporation to hold an annual shareholder meeting
for the main purpose of electing directors. As for the special meetings, this may be called by the
166 SEC, Sample Proxy Card. Available at https://www.sec.gov/spotlight/proxymatters/proxy_sample.htm. Accessed
on 17 April 2020 167 Latham & Watkins LLP, Corporate Governance Commentary. Available at https://corpgov.law.harvard.edu/wp-
content/uploads/2008/02/january_2008.pdf. Accessed on 17 April 2020 168 Latham & Watkins LLP, Page 19 169 RR Donnelley, Page 6 170 Sabastian Niles, USA: Corporate Governance 2019. Available at https://iclg.com/practice-areas/corporate-
governance-laws-and-regulations/usa. Accessed on 15 April 2020 171 8 Del. C. §221
45
BOD or by any person authorized by company’s certificate of incorporation. The agenda for the
special meeting is not specified under DGCL, but in practice any matters that shall be taken before
or cannot wait until the next annual meeting (e.g. approval of a transaction) can be discussed under
special meeting.172 The replacement of BOD may also be conducted at the special meeting.173
Although this is not a compulsory method, the shareholders meeting in Delaware can be held either
by a ‘virtual-only’ where the GMS is conducted in a total electronic media, or a ‘hybrid’ meeting
where physical and online meeting are combined. 174 Based on §211 of DGCL, the decision to
choose the type of meeting depends solely on the board unless specifically determined in the
certificate of incorporation or bylaws.
Further, shareholders can participate, be deemed present in person, and vote at an annual
shareholders meeting by using the internet or another form of ‘remote communication’, if
the following three conditions are met by the company:
(i) reasonable verification measures are taken to ensure that the shareholder or the proxy
holder is authorized to attend and vote at the meeting;
(ii) facilitation of shareholders and proxy holder participation and voting at the meeting;
and
(iii) record of votes and other actions taken at the meeting are maintained.
Other states allow shareholders’ meeting through: (i) virtual-only meeting (e.g. Minnesota, Ohio,
and Pennsylvania), (ii) hybrid meeting (e.g. New Jersey, District of Columbia – where it permits
online participation and also requiring company to hold physical meeting), or (iii) physical meeting
only (e.g. Georgia, Idaho and New York).175 In order to be more transparent, and have the ability
to have more shareholder participation in the shareholders’ meeting, the number of virtual
172 The Activist Investor, Special Shareholder Meetings. Available at
http://www.theactivistinvestor.com/The_Activist_Investor/Special_Meetings.html. Accessed on 17 April 2020 173 Emiliano Catan, Marcel Kahan, Special Meetings and Written Consent. Available at
https://corpgov.law.harvard.edu/2019/05/31/the-never-ending-quest-for-shareholder-rights-special-meetings-and-
written-consent/. Accessed on 17 April 2020 174 Broadridge Financial Solutions Inc., Guidelines for Protecting and Enhancing Online Shareholder Participation
in Annual Meeting, Available at http://www.calstrs.com/sites/main/files/file-
attachments/shareholder_participation_annual_meetings.pdf. Accessed on 15 April 2020 175 Anne Sheehan, Darla Stuckey, Principles and Best Practices for Virtual Annual Shareowner Meetings. Available
at https://corpgov.law.harvard.edu/2018/05/31/principles-and-best-practices-for-virtual-annual-shareowner-
meetings/. Accessed on 15 April 2020
46
meetings (both virtual-only and hybrid) is increasing over time starting with four meetings in 2009,
134 meetings in 2015,176 and 326 meetings in 2019.177
III.1.2.3.2. Notice of Meetings
Under state corporate law, for shareholders to take action at the meeting, an adequate written notice
of shareholders meeting and a record date must generally be delivered to shareholders before
certain days of the meeting.178 Under DGCL the notice can be given to the shareholders in writing
or electronic transmission which contains certain information (e.g. date, time, place, and the means
of remote communications by which shareholders and its proxy may present and vote at the
meeting).179
The company shall deliver such notice to the shareholders not less than ten or more than 60 days
before the meeting. Further based on §213 of DGCL, for the company to determine the
shareholders who are entitled for a notice of any meeting, the board of directors shall fix a record
date. The same period of notification time shall also apply for the fixing of a record date.180
III.1.2.3.3. Attendances of Meetings
In Delaware, shareholders (attending in person or represented by proxies) who participate in an e-
meeting are also deemed to be counted as present during the meeting and shall be calculated to
decide a quorum of attendances and voting.181 Nevertheless, there is no specific rule on how to
verify if the person attending the e-meeting is the shareholder on record. As mentioned on the
method of meetings section above, the DGCL has left it to the discretion of the company to take
reasonable measures to verify that each person deemed present is an actual shareholder. According
176 Tom Braithwaite, US Companies Embrace Virtual Annual Meetings. Available at
https://www.ft.com/content/874879c0-e664-11e5-bc31-138df2ae9ee6. Accessed on 15 April 2020 177 Broadridge Financial Solutions Inc., Virtual Shareholder Meetings 2019 facts and figures. Available at
https://www.broadridge.com/_assets/pdf/broadridge-virtual-shareholder-meetings-2019-facts-and-figures.pdf.
Accessed on 15 April 2020 178 RR Donnelley, Page 6 179 8 Del. C. §222 180 8 Del. C. §213 181 8 Del. C. §216(1); §212
47
Broadridge’s system, their virtual GMS platform will verify the attendance of shareholder or proxy
person through the control identification number provided on the proxy materials.182
III.1.2.3.4. GMS’ Record
In Delaware, a record on the voting outcome shall be maintained by the corporation.183 Such record
may be kept on “any storage device, method, electronic networks or databases, provided that such
records can be converted into clearly legible paper form within a reasonable time”.184
III.1.2.3.5. e-Platform Provider
Federal regulation and DGCL do not specify details on who can organize the electronic platform
for proxy and meeting. The laws and regulations leave the power to organize the electronic
platform to the company as long they can comply with (i) technical requirements under §240.14a-
16 on internet availability of proxy materials, §240.14a-17 on electronic shareholder forums,
§240.14a-13(a) on obligation of registrants in communicating with beneficial owners 185 and
DGCL §221 on GMS; and (ii) principles186 of accuracy (e.g. perform an integrity process of data
identification, ensure the entitlement match between shares and record date, ensure the counted
votes are correct and record properly187), transparency (e.g. ensure a complete understanding to
shareholders in using the platform, processing the vote, and accessing the meeting result188) and
efficiency (e.g. provide an easy dashboard and guidelines for platform user189). In the U.S., there
182 Broadridge Financial Solutions Inc., Hold Your Annual Shareholder Meeting Online. Available at
https://www.broadridge.com/intl/financial-services/corporate-issuer/issuer/build-your-brand-and-engage-shareholders/virtual-shareholder-meeting. Accessed on 2 June 2020 183 8 Del. C. §221(a)(2)(b) 184 8 Del. C. §224 185 SEC, Concept Release on The U.S. Proxy System. Available at https://www.sec.gov/rules/concept/2010/34-
62495.pdf. Accessed on 2 June 2020 186 SEC, Concept Release on the U.S. Proxy System. Available at https://www.sec.gov/comments/s7-14-10/s71410-169.pdf. Accessed on 2 June 2020 187 Broadridge, Vote Integrity: The One Vote, One Share Dynamic. Available at
https://www.broadridge.com/article/vote-integrity-the-one-vote-one-share-dynamic. Accessed on 2 June 2020 188 Broadridge, Making Every Shareholder Vote Count. Available at
https://www.broadridge.com/_assets/pdf/broadridge-proxy-voting.pdf. Accessed on 2 June 2020 189 Broadridge, Five Must-Have Capabilities That Simplify Proxy Voting. Available at
https://www.broadridge.com/_assets/pdf/broadridge-ppi-ebook-2019.pdf. Accessed on 2 June 2020
48
are numbers of prominent technology-driven platform companies such as Broadridge Financial
Solutions, DHI Group, and Ash Capital.190
III.1.3. Conclusion
Shareholders are entitled to attend and vote at the GMS, either in person or through a proxy. Such
proxy can act on behalf of the shareholders at the GMS by electronic means without any separate
written power of attorney (other than the form of proxy) required. Shareholders also have a chance
to file an electronic proposal to be presented at the GMS. Companies especially in Delaware can
choose whether to hold the GMS through a virtual-only or hybrid meeting method.
Moreover, because the shareholder ownership composition in U.S. public companies are mostly
dispersed, the implementation of the e-Platform shall not only increase shareholders’ participation
at the GMS but also provide a greater chance for minority shareholders to have a voice at the GMS.
Therefore, e-Platform is strongly supportive of the effort of shareholder democracy campaign in
the U.S.
III.2. Listed Company’s GMS in Indonesia
III.2.1. Current Rules of Listed Company’s GMS in Indonesia
The main corporate law for Indonesian companies is Indonesian Company Law, while Indonesia
Listed Companies are also subject to the capital market laws and regulations issued by OJK.191
GMS for Listed Company shall be subject to Indonesian Company Law to the extent that the
capital market laws and regulations do not provide otherwise.192 In this regard, OJK has
specifically issued POJK 32/2014.193
Similar to GMS types in the U.S., there are ‘annual GMS’ and ‘other GMS’ for Indonesian Listed
Companies.194 The annual GMS must be held within six months at the latest after the fiscal year
190 Craft, Broadridge Financial Solutions Competitors. Available at https://craft.co/broadridge-financial-
solutions/competitors. Accessed on 20 April 2020 191 Article 24 Indonesian Company Law 192 Article 79 (10) of Indonesian Company Law 193 As mention in Chapter I, OJK Regulation No. 32/POJK.04/2014 which amended by OJK Regulation
No.10/POJK.04/2017 on General Meetings of Shareholders of Publicly-Held Companies 194 Article 2 of POJK 32/2014
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ends, while other GMS can be held at any time based on the need of the Listed Company.
Nevertheless, an annual GMS in Indonesian company is not primarily for the purpose of directors’
election since Indonesian Company Law lets the articles of association of a company regulate the
term of office of BOD.
POJK 32/2014 is silent on the agendas that shall be discussed on the annual GMS. Based on the
Indonesian Company Law, all annual report documents (i.e. at least (i) financial statement that
consist of at least a year-end balance sheet of the proceeding year with previous year comparison,
the profit and loss statement of the proceeding year, cash flow report, and (ii) company’s activities
report) of the company must be submitted by the BOD during the annual GMS.
Briefly, the GMS procedure for Indonesian Listed Company is as follows:
1) Preparation
For shareholders to exercise their rights on the GMS, there are two phases taken by the company
prior to GMS:
a. Announcement
The company must announce a planned of GMS to the shareholders fourteen days at the latest
before the invitation for GMS, excluding the date of the announcement and the date of invitation.195
The announcement must be made via one Indonesian language daily newspaper with national
circulation, the IDX’s website, and the Listed Company’s website in Indonesian and foreign
languages (at least English), which shall include at least (i) provisions on shareholders who are
eligible to attend GMS, (ii) provisions on shareholders who are eligible to propose the GMS
agenda, (iii) the date of GMS, and (iv) the date of GMS invitation.196
Shareholders Proposal on GMS agenda
Shareholders can propose a written agenda to the BOD no later than seven days before the GMS
invitation.197 The proposed GMS agenda shall only contain the agendas that require a GMS
decision.198 Shareholders who can propose an agenda item should represent (either alone or as a
group) one twentieth or more of all shares with voting rights, unless the articles of association of
195 Article 10 (1) of POJK 32/2014 196 Article 10 (2), (4) of POJK 32/2014 197 Article 12 (1) of POJK 32/2014 198 Article 12 (4) of POJK 32/2014
50
the company defines a smaller number.199 The proposed agenda from the shareholders shall be
incorporated on the GMS invitation.200
b. Invitation
An invitation must be delivered to shareholders no later than twenty-one days before the GMS,
excluding the invitation’s and meeting’s date.201 The invitation shall be made at least via one
Indonesian language daily newspaper with national circulation, IDX’s website, and Listed
Company' website Indonesian and foreign languages (at least English), which shall include at least
(i) the GMS’ date, time, venue, (ii) provisions on shareholders who are eligible for attending the
GMS, (ii) the GMS’ agenda including the description of each agenda, and (iii) information that
states that the materials of the agenda are available to shareholders since the date of GMS’s
invitation until the date of the convening of GMS.202
The materials of the agenda can be in the form of (i) hardcopy that are available and given in the
company’s office, if the shareholders request in writing, and/or (ii) softcopy that can be
downloaded in the website of the company.203 In the event that the GMS’ agenda is an appointment
of BOD and/or BOC, curriculum vitae of such BOD and/or BOC shall be available in the
company’s website from the date of the invitation until the convening of the GMS.204
2) Implementation
a. Location and Method
POJK 32/2014 is silent on the GMS’ location. Based on Indonesian Company Law, the GMS shall
be convened at the domicile of stock exchange where the company’s shares are listed, within the
territory of the Republic of Indonesia.205
Indonesian Company Law also provide a possibility that the GMS could be convened through
teleconference, video conference, or other electronic media which enables all of the GMS’
199 Article 12 (2) of POJK 32/2014 200 Article 12 (5) of POJK 32/2014 201 Article 13 (1) of POJK 21/2014 202 Article 13 (2), (4) of POJK 32/2014 203 Article 15 (4), (5), (6) of POJK 32/2014 204 Article 15 (7) of POJK 32/2014 205 Article 76 (2), (3) of Indonesian Company Law
51
participants to see, hear, and participate directly in the GMS.206 A GMS that is convened by this
method must be drawn up in a minute of meeting that is ‘approved and signed’ in physical or
electronically manner, by all GMS’ participants.207
b. Attendances
(i) Shareholders’ rights to attend the GMS
Shareholders whose names are listed in the company’s shareholders register, one working day
before the invitation of GMS are entitled to attend GMS.208 Those shareholders have the right to
be present and vote at the GMS, in person or represented by a proxy through a power of attorney.209
If a shareholder attends the GMS in person, such power of attorney shall no longer be valid on the
GMS.210
Based on Article 85 (4) of Indonesian Company Law, shareholders can also be represented by
member of BOD, BOC or company’s employee. However, the attendance of such proxy shall only
be counted for the attendances quorum, but they will not be entitled to cast a vote.211
Although a proxy is allowed through a grant of power of attorney, Indonesia Companies Law and
POJK 32/2014 are silent on the form of the power of attorney and how a power of attorney can be
granted by a shareholder to a proxy. Based on Indonesia Civil Code, a power of attorney can be in
the form of public deed, private deed, letter, or verbal.212 Commonly, in administrating a huge
number of shares ownership, a Listed Company will appoint a Security Administration Agency
who will record and maintain a shareholder register. Such register (which contains names of
shareholders that are entitled to participate in the GMS) will be issued by the Security
Administration Agency for the purpose of GMS.213 Therefore, in practice, the company will
explain on the GMS’ invitation that shareholders who choose to attend and vote at the GMS
206 Article 77 (1) of Indonesian Company Law 207 Article 77 (4) of Indonesian Company Law 208 Article 19 (2) of POJK 32/2014 209 Article 19 (1) of POJK 32/2014 210 Article 85 (5) of Indonesian Company Law 211 Article 85 (4) of Indonesian Company Law 212 Article 1793 (1) of Indonesian Civil Code 213 Article 47, 48, 49 of Law No. 8 of 1995 on Capital Market
52
through proxy shall submit a power of attorney signed by said shareholder. A template form of the
power of attorney can be obtained from the Security Administration Agency’s office and shall be
submitted to the company within certain days before the convening of the GMS.214 This procedure
shall also apply to a power of attorney given to BOD, BOC or company’s employee.215
Based on an interview with Indonesian Notary Association member that for the purpose of the
drawing up of the minutes of meeting, a notary has a duty under Law No. 30 of 2004 as amended
by Law No. 2 of 2014 on Notary Law (“Notary Law”) to ensure that the GMS participant is a
valid and an entitled shareholder.216 If a shareholder is represented by a proxy, such proxy shall
show a physical power of attorney, and such power of attorney shall be attached on the deed of
minutes of meeting.217 Therefore, a physical power of attorney is needed in Indonesian’s GMS
practice.
(ii) Quorum of Attendances
A GMS can be convened if one-half of shareholders holding shares with voting rights attend or
are represented at the meeting.218 If such quorum is not met, a second GMS can be held with a
lower quorum of one-third of shareholders holding shares with voting rights.219 If the quorum for
the second GMS still cannot be reached, a third GMS can be held with an even lower quorum as
stipulated by the OJK at the request of a listed company.220 For specific agenda items, the quorum
requirement may be higher, depending on the nature of the resolutions to be considered at the
meeting, as referred to the table on Annex I.
c. Voting
GMS resolution shall be adopted based on mutual consensus, which according to Indonesian
Company Law such consensus is a result of consensus that is approved by the shareholders who
214 PT Bank MNC International Tbk., Invitation of Annual and Extraordinary General Meeting of Shareholders.
Available at https://mncbank.co.id/assets/files/Fa-
MNC_Bank_Panggilan_3x250_8_Mei2017_KoranSINDO_final.pdf. Accessed on 19 April 2020 215 Humberg Lie, WhatsApp message, June 2, 2020 216 Article 47 (1) Notary Law 217 Article 47 (1) Notary Law 218 Article 26 (1) (a) POJK 32/2014 219 Article 26 (1) (b) POJK 32/2014 220 Article 26 (2) POJK 32/2014
53
are present in person or represented at the GMS.221 If such consensus cannot be made, the decision
shall be made through a voting mechanism.222 Such voting decision shall be done within a
consideration to quorum of attendance and quorum of decision.223
The quorum decision refers to a valid decision that is approved by more than 50% of the total
shareholders with voting rights attending the GMS, unless a higher quorum requirement is
provided for under the articles of association of the Listed Company.224 As mentioned in Section
II.2.1. of Chapter 2 herein, a higher quorum requirement, rather than a simple majority vote
determined on the articles of association of a company, is one of the mechanism to protect
shareholders; especially minority shareholders.
The shareholders protection mechanism has also been provided under the prevailing laws and
regulations. As general rule, the Indonesian Company Law225 and POJK 32/2014226 set minimum
thresholds for shareholders' meeting, as listed on Annex I. For instance, three-fourths attendance
and vote requirements are applicable to company’s assets transfer, acquisition, and declaration of
bankruptcy. The articles of association may determine a quorum higher than (but not less than) the
quorum provided by laws and regulations.227 By virtue of this, the minimum threshold under the
laws and regulations can be seen as a protection to the minority shareholders.228
221 Article 25 (1) POJK 32/2014 jo. elucidation of Article 87 (1) Indonesian Company Law 222 Article 25 (2) POJK 32/2014 223 Article 25 (3) POJK 32/2014 224 Article 26 (1) (c) POJK 32/2014 225 Article 89 (5) Indonesian Company Law. Minimum threshold under Indonesian Company Law shall also apply to
Listed Company to the extent not governed otherwise by capital markets laws and regulations. In this regard, POJK
32/2014 has also defined the details of quorum for attendances and voting decision for certain matters, as listed on
Annex I. 226 Article 27 and 28 POJK 32/2014 227 Article 86 (1) of Indonesian Company Law 228 Patricia Charlety, Marie-Cecile Fagart, and Said Souam, Quorum Rules and Shareholder Power. Available at
https://editorialexpress.com/cgi-bin/conference/download.cgi?db_name=EEAESEM2016&paper_id=2532.
Accessed on 21 June 2020
54
d. Minutes of Meeting
For every GMS, minutes of GMS must be drawn up and signed by the GMS’ chairperson and by
at least one appointed shareholder (from amongst and by the participants of the GMS).229
Nevertheless, signatures are not required if GMS’ minutes made in the form of a notarial deed.230
Aside from making a record and before discussing the technical procedure on preparing and
signing minutes of GMS, it is necessary to examine the importance of minutes of meeting. As
general rule, GMS minutes must be drawn but not all GMS resolutions, contained in the minutes
of meeting, need to be incorporated into a notarial deed. Subsequently, GMS resolution can be
served in two forms: (i) minutes of meeting and (ii) notarial deed.
A notarial deed is needed when there is any amendment to the company’s articles of association.231
Such amendment shall only be effective from the date of approval from, or notice to, the Ministry
of Laws and Human Rights of Republic of Indonesia. Whereas, the ministry shall only provide
such approval or consider a notice based on notarial deed of minutes of GMS submitted to the
ministry.232 Further discussion on the procedure of notarial deed will be discussed in Section
V.1.2.4 of Chapter V herein.
The Indonesian Company Law and POJK 32/2014 do not specify the implication of the
unavailability of minutes of GMS. Further, from publicly available information, there has not been
any Indonesian court precedence stating that the deficiency of minutes of GMS affects the validity
of GMS resolution. The elucidation of Article 90 of the Indonesian Company Law only provides
that the signatory to the minutes of GMS shall mean to guarantee the certainty and accuracy of the
content of the minutes of GMS. Given the lack of further explanation under the Indonesian
Company Law and lack of precedence, we need to extend our research to reliable literature.
229 Article 32 (1), (2) POJK 32/2014 230 Article 32 (3) POJK 32/2014 231 Article 23 of the Indonesian Company Law 232 Article 21 (4) of Indonesian Company Law
55
According to Yahya Harahap, a former justice of Indonesian Supreme Court,233 a requirement to
have minutes of GMS is imperative in nature. This means that minutes of GMS is mandatory, and
a GMS without minutes of meeting shall never be considered valid and be deemed as never existed.
Therefore, any resolution approved in such GMS cannot be implemented.234 Although there is no
certainty that an Indonesian court will uphold argument stated by Yahya Harahap, Indonesian court
only recognizes five types of evidence, and ‘document’ is one of them.235 Therefore, Harahap’s
argument may has certain merit.
(i) Preparing the GMS Minutes
According to interview with legal counsel of one of Listed Companies,236 in practice they usually
use notarial deed form of GMS minutes. However, if the company would like to prepare the GMS
minutes without a notary, the GMS’ chairperson shall be responsible in preparing the minutes.
Although in practice, the minutes can be technically type by a corporate secretary237 and signed by
the GMS’ chairperson.
The chairperson of the GMS is a BOC member appointed by the BOC.238 In case all members of
BOC are not present or unable to attend, a member of BOD who is appointed by BOD shall be the
chairperson.239 In case all members of BOC or BOD are not present or unable to attend, the GMS
shall be chaired by a shareholder attending the GMS and appointed from and by the participants
of the GMS.240 Nonetheless, POJK 32/2014 is silent on how to appoint one of shareholders to be
233 Anselmo Reyes, Recognition and Enforcement of Judgements in Civil and Commercial Matters. Available at
https://books.google.nl/books?id=u3euDwAAQBAJ&pg=PA251&lpg=PA251&dq=yahya+harahap+is+an+indonesi
an&source=bl&ots=bITSe9j2Bd&sig=ACfU3U2jX-
sfaU4W0EZkq5elqPb4q4rPXA&hl=en&sa=X&ved=2ahUKEwiCsfvc_JHqAhVO_aQKHVkhBsMQ6AEwCnoECA
sQAQ#v=onepage&q=yahya%20harahap%20is%20an%20indonesian&f=false. Accessed on 21 June 2020 234 M. Yahya Harahap, Hukum Perseroan Terbatas (Law of Limited Liability Company), (Jakarta: Sinar Grafika,
2019), Page 340 235 Article 164 of Het Herziene Indonesisch Reglement 236 Interview with legal counsel of one of Indonesian integrated automotive Listed Companies, June 3, 2020 237 POJK 35 /POJK.04/2014. Issuer or Public Companies must have a corporate secretary function. One of corporate
secretary’s duties is to assist BOD and BOC in managing the corporate governance of the company including the
implementation and documentation of GMS. 238 Article 22 (1) POJK 32/2014 239 Article 22 (2) POJK 32/2014 240 Article 22 (3) POJK 32/2014
56
the GMS’ chairperson, legally speaking it could be any shareholder; but in practice, it is likely to
be the majority shareholder.241
(ii) The Execution of GMS Minutes
As for the execution of the GMS minutes, Indonesian Company Law and POJK 32/2014 are silent
on the appointment procedure of one of shareholders as the signatory. According to interview with
legal counsel of a of Listed Company,242 in practice they usually use notarial deed form of GMS
minutes; thus, no signatures required. However, if there might be a condition where there is no
notary, there is no official procedure and it is assumed that the chairman will appoint the
shareholder signatory, and it is likely to be the majority shareholder.243
(iii) GMS Minutes in a Notarial Deed Form
Based on further discussion with Indonesian Notary Association and in line with the interview
with one of Listed Companies’ legal counsel above, although there is no mandatory rule, GMS for
Listed Companies will always involve notary attendances.244 Hence, no signatures of GMS
minutes required. By this, the notary attends the GMS and GMS Minutes in Notarial Deed will be
drawn-up directly by the notary during the GMS.
A summary of GMS’ minutes which at least contain the following information shall also be made,
which is typically prepared by an appointed notary registered in OJK:245
a. the date, venue, time and agenda of the GMS;
b. BOD’s and BOC’s member who attended the GMS;
c. number of shares with valid voting rights, and the total percentage of shares, present
at the GMS;
d. the opportunities granted to shareholders to raise questions and/or express opinions on
the GMS’ agenda;
e. number of shareholders who raised questions and/or expressed opinions;
241 Interview with legal counsel of one of Indonesian integrated automotive Listed Companies, June 3, 2020 242 Interview with legal counsel of one of Indonesian integrated automotive Listed Companies, June 3, 2020 243 Interview with legal counsel of one of Indonesian integrated automotive Listed Companies, June 3, 2020 244 Humberg Lie, WhatsApp message, May 25, 2020 245 Article 34 of POJK 32/2014 jo. Article 64 of Indonesian Capital Markets Law
57
f. GMS’ decision making mechanism;
g. voting outcome (i.e. the number of votes in favor of, against, and abstain (does not
vote) for each GMS’ agenda, if the GMS’ decision making is done by voting
mechanism;
h. GMS’ resolutions; and
i. cash dividend payments to shareholders, if there is any GMS’ resolution related to the
cash dividend distribution.
III.2.1.1. Conclusion
To recapitulate, shareholders’ rights to attend and vote at the GMS either in person or by a proxy
are allowed, and explicitly governed under Indonesian Company Law and POJK 32/2014. The
shareholders are also granted a chance to raise questions and/or express their opinions. The GMS
method can be performed through a physical meeting or an electronic meeting. In addition,
physical documents (i.e. power of attorney to a proxy, newspaper GMS’ announcement, and
newspaper GMS’ invitation, GMS’ minutes and summary of minutes) for GMS of Indonesia
Listed Company are still required. The deliberation to reach a consensus is the main principle for
the Indonesian GMS in approving agenda items.
III.2.2. Proposed e-Platform
In order to eliminate the geographical constraint and to accommodate shareholders to participate
in a GMS without being physically present at a meeting, Indonesia has been proposing an
electronic GMS media for Listed Companies. As also in line with the Covid-19 issue and physical
distancing policy in Indonesia, KSEI recently launched eASY.KSEI (a platform that will facilitate
e-proxy, e-voting, and e-meeting for Listed Companies’ GMS) and issued several user manual
guidelines (“eASY.KSEI Guidelines”).246 Even without the regulation being issued by OJK, the
eASY.KSEI is already operational. However, the platform has not yet been used by Listed
Companies because the OJK has yet to issue the relevant regulations for its use. The eASY.KSEI
would be applied in stages:
246 KSEI, Company Data and User Guide. Available at https://www.ksei.co.id/data/download-data-and-user-
guide?setLocale=en-US. Accessed on 12 June 2020
58
(i) e-proxy platform
By using e-proxy platform, investors may use electronic features for authorization of proxies to
third parties; accordingly, investors will no longer need to provide power of attorney physically to
represent themselves at the meetings, as it is currently applied. Nonetheless, the eASY.KSEI will
be used merely as a media to grant a proxy electronically.247 Hence, the proxy person shall still
need to physically attend the GMS.248
(ii) e-voting and e-meeting platform
If such e-proxy is successful, KSEI will then introduce e-voting and e-meeting platform, where
investors whose names are listed in company’s shareholders register, may conduct various online
activities related to the GMS, including registering for GMS without physical presence, learning
the GMS materials and cast their votes online.249 eASY.KSEI will also provide a feature, called
‘live meeting hall’, which will facilitate a live broadcasting meeting, but based on the guideline
this feature has not yet been launched.250
However, the eASY.KSEI is still waiting a legal basis to be issued by OJK; thus, the first stage of
e-proxy through the eASY.KSEI platform has not yet been implemented. As mentioned in Chapter
I, OJK has been formulating a Proposed e-proxy Regulation that will amend POJK 32/2014. As
for the second stage, KSEI has also issued manual user guidelines of e-voting and e-meeting but
there still no statement from KSEI on when will the eASY.KSEI be applicable for the second stage.
247 Hamalatul Qurani, Beda e-Proxy dengan RUPS Online dalam Hukum Perseroan (The Difference Between e-
Proxy with Online GMS in Company Law). Available at
https://www.hukumonline.com/berita/baca/lt5e8ebf697cf56/beda-e-proxy-dengan-rups-online-dalam-hukum-
perseroan. Accessed on 12 June 2020 248 KSEI, Frequently Asked Questions: Utilization of Electronic General Meeting System Application – eASY.KSEI..
Available at https://www.ksei.co.id/Download/FAQ_Penggunaan_Aplikasi_eASY.KSEI.pdf. Accessed on 12 June
2020 249 KSEI, Berita Pers: KSEI Tunjuk CSD Turki untuk Mengembangkan e-Proxy dan e-Voting Platform (Press
Release: KSEI Appointed CSD Turkey to Develop e-Proxy and e-Voting Platform). Available at:
https://www.ksei.co.id/files/uploads/press_releases/press_file/en-
us/140_press_release_ksei_appointed_turkey_s_csd_to_develop_e_proxy_and_e_voting_platforms_201710041714
28.pdf. Accessed on 18 December 2019 250 KSEI, Company Data and User Guide:E-Meeting Hall for Shareholders. Available at
https://www.ksei.co.id/data/download-data-and-user-guide?setLocale=en-US. Accessed on 12 June 2020. Page 4
59
III.2.2.1. Proposed e-Proxy Procedure based on Proposed e-Proxy Regulation and e-
Platform eASY.KSEI Guidelines
From the above discussion, it is noted that the Proposed e-proxy Regulation has not yet been
promulgated by OJK while eASY.KSEI Guidelines on e-proxy, e-voting and, e-meeting has
already been launched by KSEI. Further, it is also noted that the short-term implementation of
eASY.KSEI will be applicable for e-proxy for the first stage. However, in this section, we will
discuss how the proposed regulation and guidelines will be applied to Indonesian Listed
Companies.
III.2.2.1.1. GMS’ Announcement, Shareholders Proposal on GMS’ agenda and GMS’
Invitation
The plan of GMS is no longer required to be announced and published physically through national
daily newspaper, instead the announcement must be made via the IDX’s website, the Listed
Company’s website in Indonesian and foreign languages (at least English), and e-proxy
platform.251
According to eASY.KSEI Guidelines on e-meeting, a meeting that will be held electronically
through eASY.KSEI platform must publish the announcement and invitation of the GMS through
eASY.KSEI platform.252 The Listed Company shall make sure that the information published at
IDX’s and company’s website is the same with the platform.253 Once published through the
eASY.KSEI platform, each shareholder will automatically receive an invitation through email.254
The eASY.KSEI Guidelines on e-meeting is silent on whether there will be a feature that can
facilitate shareholders to propose GMS’ agenda.
251 Article 10 (4) jo. 13 (3) of Proposed e-proxy Regulation 252 KSEI, Company Data and User Guide:Panduan Penggunaan Aplikasi eASY.KSEI. (eASY.KSEI.Application User
Guideline). Available at https://www.ksei.co.id/data/download-data-and-user-guide?setLocale=en-US. Accessed on
12 June 2020. Page 7 253 KSEI, Company Data and User Guide:Panduan Penggunaan Aplikasi eASY.KSEI. (eASY.KSEI.Application User
Guideline). Available at https://www.ksei.co.id/data/download-data-and-user-guide?setLocale=en-US. Accessed on
12 June 2020. Page 8 254 KSEI, Question 10 of Frequently Asked Questions: Utilization of Electronic General Meeting System Application
– eASY.KSEI. Available at https://www.ksei.co.id/Download/FAQ_Penggunaan_Aplikasi_eASY.KSEI.pdf.
Accessed on 12 June 2020
60
III.2.2.1.2. e-Proxy Provision
According to the Proposed e-proxy Regulation, the Listed Company is obliged to facilitate an e-
proxy platform as an alternative to physical proxy conferment for shareholders who choose to
attend the GMS by proxy.255 The e-proxy platform is defined as an online platform that can be
used by the shareholders to grant their power of attorney to a proxy.256 In order to provide the e-
proxy platform to the shareholders, the Listed Company shall sign an e-proxy platform utilization
agreement with the e-proxy platform provider.257
Such proxy shall be granted to the proxy person at the latest before the opening of GMS and shall
contain the voting decisions of the shareholder on each GMS agenda item.258 Any amendment to
the proxy as well as the manner of voting can be made at the latest before the opening of GMS.259
The appointment, conferment, amendment, or revocation of a proxy through an e-proxy platform
shall not be granted through a physical power of attorney that is signed by the shareholder.260
A proxy shall be an independent party (e.g. not BOD member, BOC member, company’s audit
committee, nomination and remuneration committee of the company, and company’s employee)
and can be any person falling into the following categories:261
(i) a participant who administered securities sub account/ securities owned by shareholders;
(ii) a Security Administration Agency appointed by Listed Company;
(iii) any other party appointed by Listed Company; or
(iv) any other party appointed by shareholder.
Further, a proxy person shall also meet the following requirements:262
(i) have no conflict of interest in the GMS;
(ii) registered in e-proxy platform;
255 Article 19 (1) of Proposed e-proxy Regulation 256 Article 1 (5) of Proposed e-proxy Regulation 257 Article 35D of Proposed e-proxy Regulation 258 Article 35E (1), (2) of Proposed e-proxy Regulation 259 Article 35E (3) of Proposed e-proxy Regulation 260 Article 35G (1), (d) of Proposed e-proxy Regulation 261 Article 35G (1), (a), (b), (c) of Proposed e-proxy Regulation 262 Article 35F (2) of Proposed e-proxy Regulation
61
(iii) have a legal capacity;
(iv) not BOD member, BOC member, and company’s employee.
Moreover, eASY.KSEI Guidelines on e-proxy states that a proxy can be granted within or outside
the eASY.KSEI Platform.263 This is in line with the Proposed e-proxy Regulation mentioned above
that the e-proxy platform shall be an alternative way to the shareholders in granting a proxy.
Further, a proxy that is granted outside eASY.KSEI platform can be agreed between the parties
with due observance the prevailing laws and regulations.264
According to eASY.KSEI Guidelines on e-proxy, there will be three options of proxy party that
can receive a proxy from shareholders (i) Independent Representative Proxy, (ii) Intermediary, or
(iii) Individual Person.265 At the moment, the e-proxy on eASY.KSEI will only be applicable for
individual Indonesian shareholders which they have a direct access to log-in into the eASY.KSEI
while foreign individual shareholders and institutional shareholders can choose option (ii) and
instruct an intermediary to operate e-proxy feature on the eASY.KSEI and to declare through the
eASY.KSEI platform that their attendance will be represented by intermediary.266 In brief, the
shareholders can choose the following options:
(i) Independent Representative Proxy
Independent Representative Proxy is a party that has been registered by the Listed Company to the
eASY.KSEI system.267 This party shall not be the member of BOD, BOC, Listed Company’s
committee / employee, or foreign individual person268.
263 KSEI, Company Data and User Guide:Panduan Penggunaan Aplikasi eASY.KSEI (eASY.KSEI Application User
Guideline). Available at https://www.ksei.co.id/data/download-data-and-user-guide?setLocale=en-US. Accessed on
12 June 2020. Page 10 264 KSEI, Company Data and User Guide:Panduan Penggunaan Aplikasi eASY.KSEI (eASY.KSEI Application User
Guideline). Page 12 265 KSEI, Company Data and User Guide:Panduan Penggunaan Aplikasi eASY.KSEI (eASY.KSEI Application User
Guideline). Page 5 266 KSEI, Question 30 and 31 of Frequently Asked Questions: Utilization of Electronic General Meeting System
Application – eASY.KSEI. Available at
https://www.ksei.co.id/Download/FAQ_Penggunaan_Aplikasi_eASY.KSEI.pdf. Accessed on 12 June 2020 267 KSEI, Question 27 of Frequently Asked Questions: Utilization of Electronic General Meeting System Application
– eASY.KSEI. Available at https://www.ksei.co.id/Download/FAQ_Penggunaan_Aplikasi_eASY.KSEI.pdf.
Accessed on 12 June 2020 268 KSEI, Question 29 of Frequently Asked Questions: Utilization of Electronic General Meeting System Application
– eASY.KSEI. Available at https://www.ksei.co.id/Download/FAQ_Penggunaan_Aplikasi_eASY.KSEI.pdf.
Accessed on 12 June 2020
62
If the shares of the Listed Company are administered by the Security Administration Agency
(“SAE”), then the Listed Company must appoint the SAE to become the Independent
Representative Proxy party through eASY.KSEI.
In the event that the Listed Company does not administer its shares with SAE, Listed Company
must appoint a party that has a professional license registered under OJK (e.g. lawyer, public
accountant, notary).269
(ii) Intermediary
Intermediary is either Securities Company (i.e. Investment Manager, Underwriter or Broker) or
Custodian Bank where shareholders administered their shares.270
Since at the moment foreign individual shareholders and institutional shareholders do not have
access to eASY.KSEI, they can instruct Intermediary, outside the eASY.KSEI platform, to be their
proxy at the GMS.271 However, there is no further explanation on how foreign individuals or
institutional shareholders appoint or instruct intermediary outside the platform. There is also no
requirement for the intermediary to submit an evidence to the Listed Company through the
eASY.KSEI platform on their proxy appointment. As mentioned above, a proxy that is granted
outside eASY.KSEI platform can be agreed upon by the parties with due observance of the
prevailing laws and regulations.
After receiving instruction from shareholders, the intermediary may log-in into the eASY.KSEI
system, input shareholders’ data on ‘Attendance Procedure’ feature, and declare that they receive
the proxy from shareholders and will physically attend the GMS on behalf of shareholders.
(iii) Individual proxy person
The shareholders can input the proxy person’s data (i.e. name, identity card number or passport,
and email) in the eASY.KSEI platform.
269 KSEI, Question 27 of Frequently Asked Questions: Utilization of Electronic General Meeting System Application
– eASY.KSEI. Available at https://www.ksei.co.id/Download/FAQ_Penggunaan_Aplikasi_eASY.KSEI.pdf. Accessed on 12 June 2020 270 KSEI, Company Data and User Guide:Panduan Penggunaan Aplikasi eASY.KSEI. (eASY.KSEI. Application
User Guideline). Page 7 271 KSEI, Company Data and User Guide: Panduan Penggunaan Aplikasi eASY.KSEI. – Prosedur Kehadiran
(eASY.KSEI.Application User Guideline – Attendance Procedure). Available at
https://www.ksei.co.id/data/download-data-and-user-guide?setLocale=en-US. Accessed on 12 June 2020
63
III.2.2.1.3. Access to eASY.KSEI, Attendance Confirmation, and e-Proxy and Voting
Instruction through eASY.KSEI
eASY.KSEI can only be accessed by the Listed Company, Indonesian individual shareholders, and
proxy holders who are registered in the eASY.KSEI platform.272 There is no further e-proxy
validation required. The access to the eASY.KSEI obtained through registration shall be sufficient
verification measure that the person accessing eASY. KSEI is the proper authorized party.273
Technically, the shareholder shall perform the following actions through the eASY.KSEI platform:
(i) choose the intended GMS of a Listed Company provided in the platform.
(ii) choose the attendance type. There will be two options (a) attend by shareholder himself
electronically or (b) the authorized representative will attend at the GMS. Feature (a) will
only be applicable for second stage of eASY.KSEI of e-meeting while at the moment, feature
(b) shall mean that the proxy party will attend physically at the GMS.274 There is no
information whether the proxy person can attend the GMS electronically on the second stage
of e-Platform.
(iii) choose vote instruction type. In the event that shareholders choose option (i) Independent
Representative Proxy or (ii) Intermediary, the shareholders must specify their vote (i.e. in
favour of, against or abstain) for each agenda item and choose ‘special authority voting
instruction’ type feature in the eASY.KSEI platform. If the shareholders choose option (iii)
Individual proxy person, they can choose ‘general authority’ type feature in the eASY.KSEI
platform.
At the latest, the e-proxy through eASY.KSEI shall be open until 12pm Jakarta time the day before
the GMS. After such time, the Listed Company shall then issue a report containing the details of
272 KSEI, Company Data and User Guide:Panduan Penggunaan Aplikasi eASY.KSEI. (eASY.KSEI. Application
User Guideline). Page 5 - 6 273 KSEI, Question 3 of Frequently Asked Questions: Utilization of Electronic General Meeting System Application
– eASY.KSEI. Available at https://www.ksei.co.id/Download/FAQ_Penggunaan_Aplikasi_eASY.KSEI.pdf.
Accessed on 12 June 2020 274 KSEI, Company Data and User Guide:Panduan Penggunaan Aplikasi eASY.KSEI (eASY.KSEI Application User
Guideline: Operations for Shareholder). Available at https://www.ksei.co.id/data/download-data-and-user-
guide?setLocale=en-US. Accessed on 12 June 2020
64
the shareholders who granted a proxy through eASY.KSEI as well as the chosen attendance type
and voting instruction type.275
III.2.2.1.4. Attendance
On the day of the GMS, the proxy party shall only need to bring their identity document. At the
registration process the validation shall be based on the list of shareholders report issued by Listed
Company. The shareholder’s identity documentations are not required.276 The following parties
shall be obliged to physically attend the GMS:277
(i) BOD and BOC of Listed Company;
(ii) Corporate secretary of Listed Company;
(iii) SAE;
(iv) Proxy party. If shareholder attends the GMS in person, such e-proxy shall no longer be
valid on the GMS;278
(v) Shareholders who intends to attend in person;
(vi) Other invited parties (e.g. lawyer, public accountant, notary).
III.2.2.1.5. Shareholders’ Right to Deliver Opinion or Question on e-Meeting
There is no information on whether the shareholders will need to submit questions to the Listed
Company through the eASY.KSEI platform before the GMS, or it will be done in a live streaming
during the meeting.
275 KSEI, Emiten Memantau Pemegang Saham Yang Memberikan Kuasa (Company Observing Shareholders Who
Grant Proxy). Available at https://drive.google.com/drive/u/2/folders/1n3krUFTzk93pqOd81zluKen5bTyj-AWQ.
Accessed on 13 June 2020 276 KSEI, Question 33 of Frequently Asked Questions: Utilization of Electronic General Meeting System Application
– eASY.KSEI. Available at https://www.ksei.co.id/Download/FAQ_Penggunaan_Aplikasi_eASY.KSEI.pdf.
Accessed on 12 June 2020 277 KSEI, Question 7 of Frequently Asked Questions: Utilization of Electronic General Meeting System Application
– eASY.KSEI. Available at https://www.ksei.co.id/Download/FAQ_Penggunaan_Aplikasi_eASY.KSEI.pdf.
Accessed on 12 June 2020 278 KSEI, Question 35 of Frequently Asked Questions: Utilization of Electronic General Meeting System Application
– eASY.KSEI. Available at https://www.ksei.co.id/Download/FAQ_Penggunaan_Aplikasi_eASY.KSEI.pdf.
Accessed on 12 June 2020
65
At the moment there is ‘a live streaming electronic opinions’ feature on the platform.279 This
feature is expected to be one of other features on the second stage of e-Platform. Further, there will
also be a live streaming video screen280 and microphone features to the eASY.KSEI of e-meeting
feature.281
III.2.2.1.6. e-Voting
The shareholder will be able to vote electronically through a live streaming feature in eASY.KSEI
platform.282 In addition, the shareholder will also be able to input their vote through eASY.KSEI,
a day before the GMS started.283 The Listed Company shall manually input the physical voting
result to the eASY.KSEI. The platform will then calculate such result with the electronic voting
result and send the result to shareholders and proxy party through an email.284
III.2.2.1.7. GMS' Minutes and Summary of GMS’ Minutes
At the latest, the Listed Company shall upload the summary of GMS’ minutes at the end of the
GMS day.285 There is no information on whether there is any requirement on signing the electronic
GMS’ minutes on the eASY.KSEI Guidelines. Before the second stage of e-Platform implemented,
the GMS performance will still be subject under POJK 32/2014.286
279 KSEI, Question 41 of Frequently Asked Questions: Utilization of Electronic General Meeting System Application
– eASY.KSEI. Available at https://www.ksei.co.id/Download/FAQ_Penggunaan_Aplikasi_eASY.KSEI.pdf.
Accessed on 12 June 2020 280 KSEI, Company Data and User Guide:E-Meeting Hall for Issuers. Available at
https://www.ksei.co.id/data/download-data-and-user-guide?setLocale=en-US. Accessed on 12 June 2020. Page 3 281 KSEI, Company Data and User Guide:E-Meeting Hall for Shareholders. Available at
https://www.ksei.co.id/data/download-data-and-user-guide?setLocale=en-US. Accessed on 12 June 2020. Page 4 282 KSEI, Question 40 of Frequently Asked Questions: Utilization of Electronic General Meeting System Application
– eASY.KSEI. Available at https://www.ksei.co.id/Download/FAQ_Penggunaan_Aplikasi_eASY.KSEI.pdf.
Accessed on 12 June 2020 283 KSEI, Company Data and User Guide: Panduan Penggunaan Aplikasi eASY.KSEI (eASY.KSEI Application User
Guideline: Operations for Shareholder). Available at https://www.ksei.co.id/data/download-data-and-user-
guide?setLocale=en-US. Accessed on 12 June 2020. Page 12 284 KSEI, Question 38 of Frequently Asked Questions: Utilization of Electronic General Meeting System Application
– eASY.KSEI. Available at https://www.ksei.co.id/Download/FAQ_Penggunaan_Aplikasi_eASY.KSEI.pdf.
Accessed on 12 June 2020 285 KSEI, Question 39 of Frequently Asked Questions: Utilization of Electronic General Meeting System Application
– eASY.KSEI. Available at https://www.ksei.co.id/Download/FAQ_Penggunaan_Aplikasi_eASY.KSEI.pdf.
Accessed on 12 June 2020 286 KSEI, Question 16 of Frequently Asked Questions: Utilization of Electronic General Meeting System Application
– eASY.KSEI. Available at https://www.ksei.co.id/Download/FAQ_Penggunaan_Aplikasi_eASY.KSEI.pdf.
Accessed on 12 June 2020
66
III.2.2.2 The e-Platform Provider: Why KSEI?
The Proposed e-proxy Regulation states that the e-proxy platform shall only be provided by a
Central Securities Depository, which in Indonesia this function is held solely by KSEI.287 KSEI is
one of the Self-Regulatory Organizations (“SRO”, beside (1) IDX and (2) the Clearing &
Guarantee Institution (PT Kliring Penjaminan Efek Indonesia) that was established under
Indonesian Capital Market Law No. 8 of 1995.288 KSEI has two main functions (i) securities
depository services institution and (ii) securities transaction settlement services institution.289
Further, based on Indonesia capital market law, KSEI can also perform other services, among
others:290
(i) corporate action distribution291 (e.g. automatic system of share dividend distribution,
automatic conversion of KSEI’s account holder when issuers merge and consolidate shares);
(ii) provider of the single investor identification (SID) for the Indonesia capital market investor
(e.g. every shareholder in Listed Company has SID recorded by KSEI. Thus, every
investment of a shareholder will be recorded in KSEI system, 292 and shareholder has access
to monitor real-time position and movement of its shares electronically).293
Based on KSEI’s internal study on the implementation of proposed e-Patform, KSEI is designated
to be the e-Platform provider within the following considerations:294
287 Article 35A of Proposed e-proxy Regulation 288 KSEI, KSEI as by a Central Securities Depository. Available at https://www.ksei.co.id/about. Accessed on 20
April 2020 289 Article 14 (2) of Law No. 8 of 1995 on Capital Market 290 Article 14 (3) of Law No. 8 of 1995 on Capital Market 291 KSEI, Annual Report 2018. Available at https://www.ksei.co.id/files/uploads/annual_reports/report_file/id-
id/15_laporan_tahunan_2018_20191119114540.pdf. Accessed on 3 June 2020 292 KSEI, Surat Keputusan Direksi KSEI No. KEP-0029/DR/KSEI/0616 on Single Investor Identification. Available
at https://www.ksei.co.id/files/Peraturan_KSEI_No._I-E_tentang_Single_Investor_Identification_(SID).pdf.
Accessed on 3 June 2020 293 KSEI, AKSes Facility. Available at https://www.ksei.co.id/education/akses-facility?setLocale=en-US. Accessed
on 3 June 2020 294 PT eCEOS Indonesia, Legal and Business Assessment Report for PT Kustodian Sentral Efek Indonesia in
relation to the Implementation of Electronic Voting and Electronic Proxy Platform in the Indonesian Capital
Market, 2017
67
(i) In 2000, KSEI with the other SROs implemented scripless trading in Indonesia capital
market, and as such has been actively developing technologies for the market. To support
the growth of Indonesian capital market, each of SRO has already did and continuously does
the effort to increase the total number of investors and transaction settlements;295
(ii) At the implementation of Listed Company’s GMS, KSEI within the coordination with
Security Administration Agency will issue a Written Confirmation for GMS (Konfirmasi
Tertulis untuk Rapat or known as KTUR). Further, KSEI as the SID provider has the data of
all capital market shareholders’ investment. Hence, KSEI is confident that there will be no
issues on shareholder data confidentiality;
(iii) Rather than leaving the companies managing the platform themselves, KSEI as an SRO does
not have a conflict of interest to the convening process of GMS in Listed Company. In
developing the e-Platform, KSEI is confident that it has the capability to be the best liaison
institution between the capital market and OJK, and to make sure that the development of
the e-Platform will be developed for the interest of Indonesia capital market as a whole;
(iv) Subject to OJK’s approval, KSEI is entitled to issue rules and regulations on capital market
based on OJK regulation No. 48/POJK.04/2016 on the Construction of Regulation Procedure
Issued by Central Securities Depository; and
(v) KSEI has been initiating the discussion, proposal, and comprehensive study of the proposed
e-Platform since 2016 as their role of being an SRO in Indonesian capital market. Based on
KSEI’s internal study, that the global trend on the appointment of central securities
depository as an e-Platform provider evidenced as being the best practice in other countries
such as South Korea, Taiwan, the Netherlands, India, UK, Turkey, China, and Vietnam.296
Based on the Proposed e-proxy Regulation, KSEI must at least:297
(i) provide the rights to the e-proxy platform user to access the e-proxy platform;
295 KSEI, KSEI as by a Central Securities Depository. Available at https://www.ksei.co.id/about. Accessed on 20
April 2020 296 PT eCEOS Indonesia, Legal and Business Assessment Report for PT Kustodian Sentral Efek Indonesia in
relation to the Implementation of Electronic Voting and Electronic Proxy Platform in the Indonesian Capital
Market, 2017 297 Article 35B of Proposed e-proxy Regulation
68
(ii) own and regulate the mechanism or standard operational procedure for the e-proxy platform
implementation;298
(iii) make sure the operational and continuity of e-proxy platform;
(iv) make sure the security and reliability of the e-proxy platform;
(v) inform the e-proxy platform user if there are any changes, development, and addition to the
service and feature of the e-proxy platform;
(vi) provide an audit record to all e-proxy platform’s data processing;
(vii) have and locate the central replacement data and recovery facility within the territory of
Republic of Indonesia, in safely manner and separated from the central data storage; and
(viii) be liable upon the loss incurred due to errors or negligence in providing and managing the
e-proxy platform.
III.2.2.3. Conclusion
In sum, it is noted that the Proposed e-proxy Regulation has not yet been promulgated by OJK
while the eASY.KSEI platform and its guidelines on e-proxy, e-voting and, e-meeting have already
been launched by KSEI. Further, it is also noted that the short-term implementation of eASY.KSEI
will be only cover the e-proxy platform as its first stage.
The proposed e-proxy platform must be provided by the Listed Company to shareholders;
nevertheless, the use of the platform shall be an option for shareholders. The eASY.KSEI will be
used merely as a media to grant a proxy electronically (in the first stage of the platform
implementation), hence, the appointed proxy party shall still need to physically attend the GMS.
Shareholders still have an option to grant a proxy outside eASY.KSEI platform. The form of a
proxy that is granted outside eASY.KSEI platform can be agreed between the parties with due
observance the prevailing laws and regulations. Therefore, there is still a possibility for
shareholders to submit a physical power of attorney for GMS purposes to the Listed Company.
On the second stage of the e-platform implementation, an announcement and invitation of
electronic GMS must also be made through the eASY.KSEI, and the physical media will be
298 Article 35C of Proposed e-proxy Regulation
69
omitted. There will be a feature that will facilitate shareholders in delivering a live streaming
opinion or question during the e-meeting. At the end of the electronic GMS, the Listed Company
is responsible to upload the summary of GMS’ minutes at the eASY.KSEI platform. However,
there is no information on whether there is any requirement on signing the electronic GMS’
minutes.
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CHAPTER IV
MINORITY PROTECTION UNDER ELECTRONIC GENERAL MEETING
OF SHAREHOLDERS PLATFORM
After discussing both the U.S. and Indonesia’s principles of shareholders rights, the procedure of
GMS and the proposed e-Proxy platform, one needs to look back on whether an online platform is
in fact desirable for shareholders especially with the consideration of the involvement of minority
shareholders manifested under shareholders democracy or CG Code.
IV.1. The U.S. Minority Shareholders’ Response to the Electronic General Meeting
Shareholders Platform
This section will consider from a practical view whether the implementation of electronic GMS in
the U.S. is fully favorable for minority shareholders. As mentioned in Chapter II of this thesis, the
apathetic behavior of the shareholders that hold a small stake in the company also occurs in the
U.S. The share ownership dispersion results in passivity. The fundamental cause is related to costs
associated with the collection of company’s information before holding a physical GMS.299 In
response to this rational apathy issue, the U.S. public companies adopt an internet vote for annual
meetings to solve the apathy problem.300 According to Broadridge, public companies engage more
than 50% vote from minority investor during the application of internet proxy season, while the
company typically only got 28% vote from retail investors compared to the traditional physical
meeting.301 The company also received feedback from the minority on business strategies during
the online proxy vote.302
The existence of an online platform cuts the GMS’ physical attendance cost, enables the online
shareholders forum and online distribution of corporate documents.303 There are negative views
299 Pound, page 243 300 Solomon, The Voice: The Minority Shareholder’s Perspective. Page 754 301 Rich Daly, Unless you are Warren Buffett, Your Next Shareholder Meeting Should Be Online. Available at
https://www.forbes.com/sites/richdaly/2016/04/28/unless-youre-warren-buffett-your-next-shareholder-meeting-
should-be-online/#4381e2eb1a11. Accessed on 15 May 2020 302 Rich Daly, Small Investor are Bigger than You Think. Available at https://www.broadridge.com/article/small-
investors-are-bigger-than-you-think. Accessed on 16 May 2020 303 Solomon, The Voice: The Minority Shareholder’s Perspective. Page 754
71
towards using the online meeting method such as that the shareholder will miss the opportunity of
a real debate and ability to change their mind during the meeting. Nonetheless, the online platform
in the U.S. gives a significant benefit of voice to the shareholders and true vitality to the concept
of shareholder democracy.304 The benefits of online platforms outweigh its disadvantages,
therefore, encouraging an active shareholder’s behavior, increasing attendance engagement, and
improving the company’s decision making.
IV.1.1. Attendance Engagement through the GMS e-Platform Implementation in the U.S.
In general, by using the electronic proxy system in the GMS, the shareholder meeting participation
rate of U.S. corporations is far higher than in any other country — it exceeds 80% of outstanding
shares.305 Several factors such as: (i) a strong legal basis of proxy rules established years ago, (ii)
the need of a proxy system by the nature of the U.S. shareholders ownership dispersion, and (iii)
a strong unique culture of shareholder democracy efforts which have been campaigned years ago,
have played its role in the high rate of U.S. shareholders’ participation meeting.306
Further, based on Broadridge Financial Solutions Inc., the leading of virtual meeting service in the
U.S., the use of e-proxy and e-voting through the virtual meeting (both virtual-only and hybrid)
showed a positive result in 2019:307
(i) the average attendance rose to 85% and the average casting vote rose to 95%, voted through
the e-voting system, meaning that: (a) the shareholder participation is increasing compared
to physical meeting attendances; (b) as online participation increased, travel costs to the
physical meeting location would not be incurred;308
(ii) the need to distribute physical mail was eliminated by 79%, meaning that there is an
incentive of cost saving efficiencies for companies.
304 Solomon, The Voice: The Minority Shareholder’s Perspective. Page 753 305 John C. Wilcox, Shareholder Nominations of Corporate Directors: Unintended Consequences and the Case for
the Reform of the U.S. Proxy System. Available at http://www.law.harvard.edu/programs/corp_gov/proxy-access-
roundtable-09-materials/Wilcox,John_Shareholder%20Nominations%20of%20Corporate%20Directors.pdf. Accessed on 15 April 2020 306 Wilcox, Page 2 307 Broadridge Financial Solutions Inc., Virtual Shareholder Meetings 2019 facts and figures. Page 1 308 Broadridge Financial Solutions Inc., 2019 Proxy Season Key Statistics and Performance Rating. Available at
https://www.broadridge.com/_assets/pdf/broadridge-proxy-season-stats-final.pdf. Accessed on 21 June 2020
72
IV.1.2. The U.S. Minority Shareholders’ Response to the Implementation of GMS’ e-
Platform
As mentioned in Chapter III herein, shareholder meeting in the Delaware can be held either by a
‘virtual-only’ or by ‘hybrid’ means. To date, there is no study showing which type of virtual
meeting performed better than the other. There is no available statistic whether the U.S. states
using virtual-only meeting got a higher rate of attendees than the one using the hybrid meeting.
However, according to Broadridge’s data, 83% of companies in the U.S. holding a hybrid meeting
method, chose to forgo the physical meeting and solely conduct a virtual-only meeting, but
Broadridge offered no further explanation as to why those companies switched from hybrid to
virtual-only meeting.309
The trend of virtual-only meeting attracted criticism from shareholders.310 Scott Stringer, a New
York City Comptroller,311 declared that virtual-only meeting is great since it enables shareholder
to speak at company’s GMS regardless of whether the shareholder holds one or one million shares
at the company, which subsequently may increase the number of attendees.312 However, he viewed
the trend in virtual meetings to request shareholders to submit their questions prior the GMS, as a
move on the part of the company to gain more control over GMS process by potentially omitting
tough questions.313 California Public Employees’ Retirement System (“CalPERS”, the largest
U.S. public pension fund) and the Council of Institutional Investors (“CII”) also opposed virtual-
only meeting as there will be a tendency of filtering, rephrasing or disregarding questions from
shareholders.314
309 Broadridge, Virtual Shareholders Meetings: Recent Facts and Figures 2016. Available at
http://media.broadridge.com/documents/mkt-1956-17-vsm-article4.pdf. Accessed on 16 April 2020 310 Laura D Richman and Michael L. Hermsen, Proxy Season Legal Update. Available at
https://corpgov.law.harvard.edu/2017/10/16/proxy-season-legal-update/. Accessed on 19 May 2020 311 Retrieve from https://comptroller.nyc.gov/about/duties-of-the-comptroller/. Accessed on 21 May 2020. A
comptroller is an independently elected official responsible for, among others, auditing performance and financial
audits of city agencies, providing comprehensive view of city’s budget, promoting efficiency, integity and
performance for all citizen 312 Luc Olinga, More Annual Shareholder Meetings Go Virtual in U.S. Available at https://news.yahoo.com/more-
annual-shareholder-meetings-virtual-us-043802189.html. Accessed on 20 May 2020 313 Robert Richardson, Virtual-Only Shareholder Meetings: Streamlining Costs or Cutting Shareholders Out?.
Available at https://corpgov.law.harvard.edu/2017/11/30/virtual-only-shareholder-meetings-streamlining-costs-or-
cutting-shareholders-out/. Accessed on 21 May 2020 314 Lisa Fontenot and Linda Dang, Planning for Your Annual Shareholder Meeting: Selected Considerations for a
Virtual-Only Meeting. Available at https://www.gibsondunn.com/planning-for-your-annual-shareholder-meeting-
selected-considerations-for-a-virtual-only-meeting/. Accessed on 21 May 2020
73
The above statements are supported by Chip Wilson’s experience, Lululemon’s billionaire
founder, the biggest individual shareholder. Wilson expressed his concern that virtual-only
meeting has circumvented his ability to ask uncomfortable questions to the company’s
management. He also confirmed that the eight questions that he had at the GMS had was
deliberately ignored by the board.315 Further, John Chevedden, a shareholders’ proposals activist,
said that in-person meeting offers an easier way to communicate with the company, and it
motivates good performance of company’s management.316 In order to achieve the positive traits
that physical meetings bring again, Chevedden submitted shareholders proposal to various
companies requesting initiation to restore physical GMS on the company's governance policy.317
Chevedden also sent the proposal to the SEC but SEC responded on its ‘no-action’ letters stating
that the SEC will let companies determine the appropriate GMS method as relevant to each
company’s ordinary business operations.318
According to Institutional Shareholder Services (“ISS”, a proxy advisory firms) survey, 19% of
investors consider holding virtual-only meetings, 32% are comfortable with virtual-only meetings
if they get the same rights as a physical meeting, and 44% objected virtual-only meeting.319 From
this survey, Marc Goldstein, the head of the U.S. research at ISS, recommends that the combination
of online and physical in hybrid meeting shall be the most investor-friendly solution.320 In addition
to this statement, CalPERS and CII believe that a virtual-only meeting should only be supplemental
and not an absolute substitute to physical meetings.321
Even though we cannot escape from the fact that more companies will most likely shift to virtual-
only meeting method in the future, it seems that the virtual-only meeting method is not wanted by
315 Bloomberg News, Investors Lament Shift to Virtual Annual Meetings. Available at https://finance-
commerce.com/2019/06/investors-lament-shift-to-virtual-annual-meetings/. Accessed on 19 May 2020 316 Bloomberg News, Investors Lament Shift to Virtual Annual Meetings. Available at https://finance-
commerce.com/2019/06/investors-lament-shift-to-virtual-annual-meetings/. Accessed on 19 May 2020 317 Fontenot and Linda Dang, page 2 318 Available at https://www.sec.gov/divisions/corpfin/cf-noaction/14a-8/2017/niemanharrington012517-14a8.pdf.
Accessed on 21 May 2020 319 Richman and Michael L. Hermsen, page 6 320 Bloomberg News, Investors Lament Shift to Virtual Annual Meetings. Available at https://finance-
commerce.com/2019/06/investors-lament-shift-to-virtual-annual-meetings/. Accessed on 19 May 2020 321 Fontenot and Linda Dang, page 3
74
all shareholders. Through the discussion, we see that although it is acknowledged that the
implementation of virtual-only meeting increases the number of GMS attendees, but the online
platform does not facilitate a fully desirable position to the minority shareholders, unless there is
an option of hybrid meeting.
We see that hybrid meeting might be a better option compared to that of a virtual-only meeting for
the dialogue between minority shareholders and companies. However, by the fact that mostly
Indonesian public companies are controlled by certain parties, we doubt that a hybrid meeting shall
be the best solution for Indonesian minority shareholders.
IV.2. The Role of Ownership Structure
As mention in Section IV.1.1. above, the nature of the U.S. shareholders ownership dispersion
shall be one of the factors behind the successful of the GMS e-Platform implementation in
engaging a higher shareholders participation. A study by Gao, Huang, and Zhang confirmed that
when the ownership structure is dispersed, an online shareholders meeting could significantly
increase shareholders’ participation, especially minority shareholders.322
Looking back to Chapter 1 herein, it is noted that both the U.S. and Indonesia have geographic
dispersion issue. However, an ownership dispersion has not been the case in Indonesia. At this
point, we doubt whether the existence of the e-Platform would significantly increase shareholder
participation in Indonesia, as discovered by the above study.
Based on the study, we need to understand the rationale behind the purpose of ownership structure,
and its role in playing a significant role in causing the increase of GMS’ attendance through the
online platform.
Historically, the needs of proxy in the U.S. was triggered by the broad geographic location of
shareholders and along with the number of public companies that grew in size, resulted in share
322 Huasheng Gao, Jun Huang, and Tianshu Zhang, Can Online Annual General Meetings Increase Shareholders’
Participation in Corporate Governance?. Page 14
75
ownership becoming widespread.323 The shares ownership nature in the U.S. is dispersed, meaning
that U.S. public companies are owned by a lot of different individuals and entities who do not own
a majority or controlling stake in the company.324 In the event that there is a dispute between the
board and shareholders (or known as proxy contests325), votes submitted by minority shareholders
can certainly influence the GMS’ decision.
Nonetheless, with the geographical and shares ownership dispersion, it is impractical to expect
physical participation if the GMS of different Listed Companies are held simultaneously; thus, it
is difficult to meet the minimum quorum requirements.326 As a solution, proxy rules were
introduced in the U.S. to enable shareholders to vote without the need of physically attending the
meeting.327 Proxy rules then became the groundwork for the implementation of virtual votes in the
U.S. public companies.328 Further, the existence of e-Platform better curbs geographical
constraints and positively enables the minority shareholders in having a greater voice at the GMS.
Therefore, this is in line with the shareholder democracy principle that has been campaigned in
prior years in the U.S.329
Geographic dispersion also happens in Indonesia, but generally not with the nature of share
ownership dispersion. Geographical dispersion in Indonesia means that the shareholders of listed
companies are spread throughout the islands. When these shareholder hold shares in more than
one Listed Company, said shareholder then faces the geographical constraint of his own, especially
when the GMS of the Listed Companies he owns shares in are held on the same day. Therefore,
geographical distance affects a company by making it difficult to reach GMS quorum requirements
while shareholders are affected by the distance through limiting their participation in the GMS. As
323 Mitchell, page 1512 324 Robin Miller, Shareholder Advocacy in Corporate Elections: Case Studies in Proxy Voting Websites for Retail
Investors. Available at https://commons.clarku.edu/idce_masters_papers/52. Accessed on 13 April 2020 325 Bryan A. Garner, Black Law Dictionary: Ninth Edition. A proxy contest occurs when a group of dissident
shareholders mounts a battle against the corporation's managers. Also termed as proxy fight 326 Carol Goforth, Proxy Reform as a Means of Increasing Shareholder Participation in Corporate Governance: Too
Little, But Not Too Late. Available at https://heinonline.org/HOL/Print?collection=journals&handle=hein.journals/aulr43&id=389. Accessed on 19 May
2020 327 Goforth, page 386 328 Goforth, page 387 329 Goforth, page 385
76
mentioned in Table 1 of Chapter I herein, there are numbers of Indonesian public companies that
are held by a wide dispersion of shareholder ownership structure, hence these companies are faced
with a difficulty in satisfying the required minimum percentage of GMS attendance quorum,
similar with the U.S.
In contrast to the dispersion of share ownership nature in the U.S., based on IFC data mentioned
in Chapter I, the majority of Indonesian public companies are controlled by certain parties. Even
though there is no exact statistic percentage on such IFC’s data, Pricewaterhouse Coopers’s survey
shows that 95% business in Indonesia is owned and controlled by families.330 Therefore, although
shareholders face geographical constraint, especially when GMS of different Listed Companies
are held simultaneously, but because of the presence of majority shareholders, the GMS quorum
requirements are met and resolutions are successfully adopted even without the attendance of
minority shareholders.
Even if there is an active participation of minority shareholders, one can see that the role of
ownership structure takes an important part in the GMS decision process. One infamous case of
conflict between majority and minority shareholders in Indonesia is when the minority
shareholders (i.e. Deddy Hartawan Jamin holds 8.52% and Imany United Pte., Ltd. holds 5.62)
filed a civil claim against PT Sumalindo Lestari Jaya Tbk. (“SULI”) in the district court.331 The
case started when SULI’s 2009 financial statement reported that SULI was facing a financial loss
in 2008 where several corporate actions which the minority were not clearly informed of. In 2010
SULI announced its accumulated losses amounted to Rp 1.3 Trillion from the year 2002 until 2009.
In that same year, the minority shareholders through an extraordinary GMS: (i) proposed that SULI
appoint two independent members of BOD and two members of BOC but these proposals failed
since the majority shareholders voted to appoint one BOD member appointed by majority
shareholders; (ii) asked a clarification (both in writing and verbally) from the company regarding
some corporate actions and losses faced by SULI but there was no clear response; (iii) proposed
that SULI appoint forestry expert in examining the involvement of BOD member in illegal
330 Pricewaterhouse Coopers, Survey Bisnis Keluarga 2014 (Family Business Survey 2014). Page 5 331 Available at
https://putusan3.mahkamahagung.go.id/direktori/putusan/130cc3a7c30682a3dd2a1460c62d12a2.html. Accessed on
15 May 2020
77
logging; and (iv) proposed that SULI appoint independent auditor nominated by the shareholders
to assess the financial statement of SULI but rejected with no reasons.332 In 2011, the minority
shareholders won the case in the District Court, the Supreme Court affirmed in 2012.333 In 2007,
SULI’s share price was Rp 4,800 and plummeted into Rp 100 in 2012.334
Although shareholders are entitled to attend, vote, and access the company’s information at the
GMS under Indonesian Company Law,335 this phenomenon shows that the small stakes owned by
the minority shareholders place them in a delicate position in a company, while filing a lawsuit
often requires a long and difficult battle.
Here we can see that although the U.S. and Indonesia have geographical dispersion, but the
shareholders ownership structure is very different. One can see that though SULI’s minority
shareholders have actively participated at the GMS, they still obtained an insignificant result from
the meeting. While the online proxy rules work in the U.S., one doubts whether the existence of
the e-Platform would offer a significant voice for minority shareholders for most public companies
in Indonesia.
IV.2.1. Cost Benefit Analysis
From the discussion above, this research views that the role of ownership affects the ability of
shareholders, especially the minority, in delivering their voice to the company. The minority
shareholders generally choose to not participate in the GMS since they are aware that even if they
dedicate their time, resources and cost, their small ownership stake makes no significant voice and
332 Available at
https://putusan3.mahkamahagung.go.id/direktori/putusan/130cc3a7c30682a3dd2a1460c62d12a2.html. Accessed on
15 May 2020 333 Available at
https://putusan3.mahkamahagung.go.id/direktori/putusan/130cc3a7c30682a3dd2a1460c62d12a2.html. Accessed on
21 June 2020. The Supreme Court gave orders as filed by shareholders to (i) order an investigation to SULI & BOD member; and (ii) the examination shall be done by the forestry and financial expert nominated by the shareholders. 334 Syofia Gayatri, Sunaryo, Dianne Eka R., Perlindungan Hukum terhadap Pemegang Saham Minoritas Pada
Perusahaan Terbuka di Indonesia (Law Protection for Minority Shareholders in Indonesian Public Company). Available at https://jurnal.fh.unila.ac.id/index.php/plj/article/view/1164/pdf. Accessed on 14 May 2020 335 Article 52 (1) and 75 (2) of Indonesian Company Law
78
no influence on the decision-making process of the GMS.336 In order to exercise their voting rights,
shareholders must gather the company’s information, review the data, determine the opinion to be
voted, attend, participate and vote at the GMS which all require considerable costs.337 Therefore,
considering that the cost on preparing and participating at the GMS is greater than the personal
benefit gained by the minority shareholders, then it is reasonable that the minority shareholders
usually show an apathetic behavior towards the GMS.338
From SULI’s case, we see that the minority shareholders of SULI was far from apathetic, however
they still obtained an unfavorable response from the GMS. Even though the minority shareholders
in Indonesia are relatively passive,339 one doubts that the switch from the traditional GMS to the
proposed e-Platform would really solve the delicate position of minority shareholders at the GMS.
IV.3. Conclusion
Within the existence of proposed e-Platform, minority shareholders may expectedly obtain a
greater chance to be involved and participate at the GMS remotely. They will have a greater
opportunity to give input and opinions to the company which is in line with shareholders rights
principle provided under CG Code. The GMS method used in the U.S., both virtual-only and
hybrid meeting, should give a considerable choice for the implementation of e-Platform in
Indonesia. Nevertheless, since most Listed Company in Indonesia are controlled by a certain group
or party, the participation of minority shareholders may not provide a significant influence on the
GMS decision. Even if minority shareholders actively participated at the GMS through the e-
Platform, the company’s decision still presumably tend to represent the majority shareholders’
desires. This condition may impact the minority shareholders’ behavior towards the lack of care
to any GMS performance. Consequently, one doubts whether the proposed e-Platform could
completely protect the rights of minority shareholders in Indonesia.
336 Dov Solomon, The Voice: The Minority Shareholder’s Perspective. Available
at https://ssrn.com/abstract=2868725. Accessed on 13 May 2020 337 Solomon, The Voice: The Minority Shareholder’s Perspective. Page 748 338 Solomon, The Voice: The Minority Shareholder’s Perspective. Page 749 339 Ronald L Holzhacker, Rafael Wittek, and Johan Woltjer, Decentralization and Governance in Indonesia.
(Switzerland: Springer International Publishing Switzerland, 2016), Page 69
79
CHAPTER V
POTENTIAL CHALLENGES
IN THE IMPLEMENTATION OF E-PLATFORM
FOR INDONESIAN LISTED COMPANY
V.1. The Barrier in Indonesian Law
The spirit of the proposed e-Platform is in line with Article 77 of the Indonesian Company Law,
which allows a GMS to be conducted electronically via teleconference, video conference, or other
electronic means. Such electronic GMS performance shall: (i) enable all participants of GMS “to
see and hear each other directly” and participate in the meeting, and (ii) make “minutes of meetings
to be approved and signed by all GMS participants”, whether physically or electronically.340
The literal languages of Article 77 do not mention that the electronic means can be combined with
a physical GMS. Based on an interview with one of Indonesian senior notaries341 who was involved
in drafting the Indonesian Company Law, Article 77 was initially drafted to provide an option for
shareholders who cannot physically be present at the GMS, a method to attend through electronic
means. Hence, the initial purpose of Article 77 is not for a complete electronic GMS, but only to
provide an option to a hybrid meeting method.
Before determining the best meeting method, virtual-only or hybrid, Indonesia may consider
examining three potential issues that may arise from prevailing laws and business practices, issues
which will be discussed below.
V.1.1. Indonesian Company Law: “enable all GMS participants to see and hear each other
directly”
The existence of Article 77 of the Indonesian Company Law is seemingly quite promising and can
be a strong legal basis for the implementation of the proposed e-Platform. However, there is no
further explanation about Article 77. Additionally, in the academic transcript of the Indonesian
340 Article 77 (1), (4) of Indonesian Company Law 341 PT eCEOS Indonesia, Legal and Business Assessment Report for PT Kustodian Sentral Efek Indonesia in
relation to the Implementation of Electronic Voting and Electronic Proxy Platform in the Indonesian Capital
Market, 2017, Page 229
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Company Law,342 how a GMS can “directly” satisfy the way of how one can “see” and “hear” at
the GMS is not provided. Based on the Indonesian law dictionary, “video conference” refers to a
technology that integrates video and voice in real time to connect the user as if they are in the same
room.343
In a physical GMS, the shareholders shall not attend in the meeting but also cast votes. A GMS
resolution shall be valid if it is adopted based on the requirements for a GMS’ notice, attendance
quorum, and number of votes under the Indonesian Company Law, POJK 32/2014, or the articles
of association of the company.344
By virtue of this, Indonesia shall note that the proposed e-Platform should be able to facilitate a
live stream voting and provide a meeting ambience. This means that the participants are able to
ask questions, express their opinions, and vote online during the commencement of the e-voting
and e-meeting. Thus, an e-Platform where the shareholders only passively listen to a live stream
meeting and vote outside the time provided for the e-meeting may fail to conform the requirements
under Article 77 of the Indonesian Company Law.
V.1.1.1. Provision under eASY.KSEI Guidelines
KSEI has issued eASY.KSEI Guidelines on the proposed electronic voting and meeting that will
be implemented as the second stage of the e-Platform. Based on the guidelines, there will be a live
342 Ministry of Law and Human Rights, Academic Transcript of Indonesian Company Law. Available at
https://www.bphn.go.id/data/documents/na_ruu_pt.pdf. Accessed on 21 April 2020. As a general note that any
regulations in Indonesia shall be accompanied by information on their objective and scope drawn in a document
called ‘academic transcript’ (naskah akademik). Through this, we can see the basis to the legal framework of how the Indonesia Company Law was made and what was the intention of the regulator towards provisions contained in
Indonesia Company Law 343 Jonaedi Efendi, Ismu Gunasi Widodo, Fifit Fitri Lutfianingsih, Kamus Istilah Hukum Populer (Popular Law
Dictionary). (Jakarta: Prenadamedia Group, 2016). Page 436 344 Indonesian Company Law and POJK 32/2014
81
streaming ‘electronic opinion’,345 video screen,346 and microphone347 features on the eASY.KSEI
e-meeting platform.
The shareholder will be able to convey their opinions and questions as well as vote electronically
through a live streaming feature in eASY.KSEI platform.348 In addition, shareholders will also be
able to input their vote through eASY.KSEI, and change the vote a 1 day before the GMS starts.349
V.1.2. Indonesian Company Law and Notary Law: Minutes of Meeting for Electronic GMS
& Notary Physical Attendance
V.1.2.1. General Rule of the GMS’ Minutes for Electronic GMS
As discussed in Section III.2.1 of Chapter III herein, technically the shareholder will sign the GMS’
minutes prepared by the GMS’ chairperson. Pursuant to Article 77 of the Indonesian Company
Law, in electronic GMS, all GMS’ participants shall approve and sign the GMS’ minutes,
physically or electronically.350
Physical signature shall refer to a manual name written typically by hand of the person
themselves.351 Collecting physical signatures is practical for private companies where the
companies are commonly controlled by certain parties. However, this may not be the case for
public companies. Obtaining signatories may be impossible to make because shareholders in a
345 KSEI, Question 41 of Frequently Asked Questions: Utilization of Electronic General Meeting System Application
– eASY.KSEI. Available at https://www.ksei.co.id/Download/FAQ_Penggunaan_Aplikasi_eASY.KSEI.pdf. Accessed on 12 June 2020 346 KSEI, Company Data and User Guide:E-Meeting Hall for Issuers. Available at
https://www.ksei.co.id/data/download-data-and-user-guide?setLocale=en-US. Accessed on 12 June 2020. Page 3 347 KSEI, Company Data and User Guide:E-Meeting Hall for Shareholders. Available at
https://www.ksei.co.id/data/download-data-and-user-guide?setLocale=en-US. Accessed on 12 June 2020. Page 4 348 KSEI, Question 40 of Frequently Asked Questions: Utilization of Electronic General Meeting System Application
– eASY.KSEI. Available at https://www.ksei.co.id/Download/FAQ_Penggunaan_Aplikasi_eASY.KSEI.pdf.
Accessed on 12 June 2020 349 KSEI, Company Data and User Guide: Panduan Penggunaan Aplikasi eASY.KSEI (eASY.KSEI Application User
Guideline: Operations for Shareholder). Available at https://www.ksei.co.id/data/download-data-and-user-
guide?setLocale=en-US. Accessed on 12 June 2020. Page 12 350 Article 77 of Indonesian Company Law 351 Tanda Tangan (Def. 1). Kamus Besar Bahasa Indonesia (The Great Dictionary of the Indonesian Language).
Available at https://kbbi.web.id/tanda%20tangan. Accessed on 14 June 2020
82
public company are commonly very large in numbers.352 Further, physical attendance means that
the shareholders shall spend time and traveling expense to attend at the GMS.
Moreover, electronic signature (“e-signature”) shall refer to the definition defined under Law No.
11 of 2008 as amended by Law No. 19 of 2016 on Electronic Information and Transaction (“EIT
Law”) and Government Regulation No. 71 of 2019 on Implementation of Electronic System and
Transactions (“EIT Implementation Law”).
According to EIT Law and EIT Implementation Law, e-signature shall mean a signature that
contains electronic information that is attached to, linked with or associated with other electronic
information, adopted by a signatory in order to demonstrate his/her identity and status as a legal
subject.353 Certain criterions must be fulfilled for an e-signature to be considered valid and has
legal power:354
(i) e-signature data shall only be associated with the signatory;
(ii) e-signature data shall be in the possession of the signatory, during the electronic
signing process;
(iii) Any alteration to the e-signature, after the signing time, is not unknown;
(iv) Any alteration to the electronic information associated with the e-signature, after the
signing time is not unknown;
(v) There are certain methods adopted to identify the signatory; and
(vi) There are certain methods to demonstrate that the signatory has given consent to the
relevant electronic information.
Additionally, a certificate made by electronic certification agency is needed to certify an e-
signature before it can be used.355 This certification can be obtained by any Indonesian citizen,
foreign citizen and entity.356 Nonetheless, the EIT Law and EIT Implementation Law do not
352 Article 1 (22) of Indonesian Capital Markets Law. A “public company” is a company with at least 300 shareholders
and has a minimum paid-up capital of IDR 3 billion. In this context, the term “public company” includes both listed
and unlisted public companies. 353 Article 1 (12) of EIT Law and Article 1 (22) of EIT Implementation Law 354 Article 11 of EIT Law jo. Article 59 of EIT Implementation Law 355 Article 42 of EIT Implementation Law 356 Article 1 (11), 1 (36), 71 (1) of EIT Implementation Law jo. Article 31 (1) Ministry of Communication and
Information Technology No. 11 of 2018 on Electronic Certification Agency
83
mention the length of time on obtaining the e-signature certificate. It is common that the
inefficiency and bureaucracy in Indonesian institutional lead to delay of process.
Furthermore, in practice the request for the issuance of a certificate for foreign citizens have not
been implemented. However, there is no further explanation on this. A recent public update also
state that the e-proxy platform would only available for Indonesian individual shareholders.357
Further discussion on this practical issue of the availability of e-signature for foreign citizen will
be discussed in Section V.1.3.2. below.
V.1.2.2. Exemption to the Signature Requirement of GMS’ Minutes
According to the elaboration above, one can see that the use of e-signature is not that simple.
Certain requirements and certifications must be satisfied. The current practice also limits the
certification only to Indonesian citizens. Looking back to the Indonesian Company Law provision,
the law has already provided an exemption of obtaining shareholders’ signatories for GMS’
minutes. Pursuant to Article 90 (2) of the Indonesian Company Law, the aforementioned GMS’
minutes signature shall not be required if the GMS’ minutes is drawn up by a notarial deed.
Although a specific requirement on Article 77 of the Indonesian Company Law shall be satisfied
for electronic GMS, but it can be argued that Article 90 (2) shall also be applicable for electronic
GMS.
Based on Indonesia Notary Law, in drawing up a notarial deed, the notary shall physically attend,
read out the deed before the meeting participants and at least two witnesses, and sign the deed
before the meeting participants and witnesses.358 The witnesses shall satisfy certain requirements:
one of the requirements is having no marriage or blood relations with notary or other parties.359 In
practice, it is common that the notary’s staff will be the witnesses. Further, the notary shall only
perform its duty within the office area of the notary.360 For instance, if the notary’s office area is
within the Jakarta Province (i.e. this encompasses the area of South Jakarta, West Jakarta, East
357Putu Surystuti, Electronic GMS – What We Know So Far. Available at
https://www.ahp.id/clientalert/AHPClientUpdate-11April2020-2.pdf. Accessed on 23 April 2020
358 Article 16 (1) (m) of Notary Law 359 Article 40 (2) of Notary Law 360 Article 18 (2) of Notary Law
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Jakarta, and North Jakarta) then it is prohibited for the notary to drawn up a deed for GMS that is
hold outside Jakarta Province.
As the notary directly attends and prepares the minutes during the GMS, such notarial deed of
GMS minutes shall have the same date as of the GMS date (“GMS Minutes in Notarial Deed”).
As mandate by the Notary Law, the notary will keep the original of GMS Minutes in Notarial
Deed361 while the copy of the GMS Minutes in Notarial Deed must be delivered to the parties.362
At the end of the meeting, the Notary must read aloud the deed in front of the GMS witnesses and
participants.363 If there is any mistake on the draft of the minutes, the company can point out which
the parts that shall be revised.364 Regardless of whether there is revision or not, the Notary will
need time to issue the clean and final version of the copy of the GMS Minutes in the form of a
Notarial Deed at their office. However, the notary will need to obtain the executed version which
has been approved and signed at the GMS before the notary can finalize the minutes. Thus, as a
practical matter, although the date of the GMS Minutes in Notarial Deed will be the same as the
GMS date but the deliverance of the deed to the company will not be on the same day of the GMS.
There is no specific time on how long the notary shall deliver the copy of the GMS Minutes in the
form of a Notarial Deed to the company, but the GMS’ minutes must be submitted to the OJK no
longer than 30 days after the GMS date.365
V.1.2.3. Listed Company’s Electronic GMS Minutes
Article 32 (1) POJK 32/2014 provides that GMS’ minutes must be drawn for every GMS. In a
physical GMS, the minutes of a meeting shall be signed by GMS’ chairperson and one shareholder
(appointed from amongst and by the GMS’ participants).366 The procedure of signatory
appointment can refer to the discussion in Section III.2.1 of Chapter III of this thesis. Further,
POJK32/2014 also provides an exemption, such signature shall not be required if the GMS’
minutes is drawn up by a notarial deed.367
361 Article 1 (8) of Notary Law 362 Article 51 (3) of Notary Law 363 Article 16 (1) (m) of Notary Law 364 Article 50 of Notary Law 365 Article 33 (1) of POJK 32/2014 366Article 32 (2) of POJK 32/2014 jo. Article 90 (1) of Indonesian Company Law 367 Article 32 (3) of POJK 32/2014
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As for electronic GMS, the Indonesian Capital Market Law and POJK 32/2014 are silent on the
possibility of electronic GMS implementation.368 Based on Indonesian Company Law if the laws
and regulations in the field of capital markets do not govern otherwise, then provisions intended
under Indonesian Company Law shall also apply to public companies.369 Hence, we can refer to
Article 77 of the Indonesian Company Law for the electronic GMS for public companies.
Thus, in holding an electronic GMS, Listed Company shall make sure that all GMS’ participants
approve and sign the minutes, physically or electronically.370 Nonetheless, as mentioned in Section
V.1.2.2. above, it can be argued that an exemption under Article 90 (2) of the Indonesian Company
Law shall also be applicable to the Listed Companies’ electronic GMS minutes.
V.1.2.4. Practical View on GMS’ Minutes for Electronic GMS
Based on an interview with Mr. Humberg Lie, an Indonesian Notary, the exemption shall not be
applied to an electronic GMS.371 He argues that such exemption requires the notary to physically
attend at the GMS and directly draw up the GMS Minutes in the form of a Notarial Deed.372
Additionally, the notary shall make sure that the signing of the GMS Minutes in Notarial Deed is
done within the area of practice of the notary.373 However, if the shareholder attends via electronic
media the notary cannot make sure whether such shareholder is within the practice area of the
notary, and the ‘physical appearance’ of the notary in front of the video attendances is
questionable. While for the notarial deed to be valid there are formal requirements that need to be
fulfilled.374 One of the requirements is for the notary mentioning the identity and position of the
meeting participants and witnesses on the deed. Consequently, the notary does not want to take a
risk in assuming that the appearance through a media conference is the same as physical attendance
required under Notary Law.
368 Article 77 of Indonesian Company Law 369 Article 50 of Indonesian Company Law 370 Article 77 of Indonesian Company Law 371 Humberg Lie, WhatsApp message, May 25, 2020 372 Article 16 (1) (m) of Notary Law 373 Article 18 (2) of Notary Law 374 Article 38 of Notary Law
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The area of a notary’s office covers the entire province of his/her domicile.375 For instance, if the
notary’s office area is within the Jakarta Province (i.e. this includes the area of South Jakarta, West
Jakarta, East Jakarta and North Jakarta) where the GMS is also held within this area, but the
shareholder who appears via electronic media is located in Bali Province (which is different island,
thus a different province) then the notary is not sure whether the notary’s physical appearance in
Jakarta will fulfil the requirement of signing the GMS Minutes in a Notarial Deed physically before
the GMS participants located in Bali.
According to Mr. Lie, there might be two scenarios:
(i) the company may hold an electronic GMS without notary attending the GMS. Then, the
minutes of electronic GMS shall still need to be signed by all GMS participants; or
(ii) such GMS minutes be then incorporated into a statement of GMS meeting in notarial deed
form (“Statement of GMS Meeting in Notarial Deed”).376
For general information, not all GMS resolutions need to be incorporated into a notarial deed form.
The notarial deed form is needed when there is an amendment of company’s Articles of
Association (“AOA”) (e.g. name of company, objective & purpose of company, duration of
company, amount of capital, number of BOD/BOC, etc.). Based on Article 23 of the Indonesian
Company Law, any amendment of AOA shall become effective from the date of approval from,
or notice to, the Ministry of Laws and Human Rights of Republic of Indonesia.
375 Article 18 (2) of Notary Law 376 In general, the GMS resolution can approve anything related to the company. Either amendment of Articles of
Association (“AOA”) (e.g. name of company, objective & purpose of company, duration of company, amount of
capital, number of BOD/BOC, etc.) or not (e.g. Merger acquisition, bankrupt, company’s transaction, etc.). GMS
resolution that is not contained any amendment of AOA of the company, shall be signed (right after the meeting
finished) by the GMS chairman and at least one GMS participant, then kept by the company (Article 90 Indonesian Company Law). As for the amendment of AOA, based on Article 23 Indonesian Company Law, any amendment of
AOA shall become effective from the date of Ministry of Laws and Human Rights’ (“MOLHR”) approval or notice.
Before such MOLHR Approval/Notice, the Minutes of GMS Resolution shall be incorporated into a notarial deed of
minutes of GMS within 30 days of the date of GMS Resolution. The Notary shall submit the Minutes within 30 days
as of the notarial deed date.
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Therefore, if the electronic GMS resolution contain amendments of the company’s AoA but the
notary does not attend the GMS, the company may make a GMS minutes signed by all GMS
participants, and company’s representative will appear before the notary.
Since the notary does not attend the GMS, the drawing-up procedure between GMS Minutes in
Notarial Deed (that is directly made by notary on the same date of GMS) and a Statement of GMS
Meeting in Notarial Deed (can be made after the GMS date) is a bit different. In drawing up a
Statement of GMS Meeting in Notarial Deed form, the notary will only rely on, among others: the
GMS minutes made by the company, announcement and notification of GMS to shareholders, list
of GMS attendances, and the company’s representative physical appearance. The GMS minutes
will be attached on the notarial deed form and be signed by the notary and the company’s
representative. The physical appearance of the company’s representative before the notary shall
satisfy the requirement under Notary Law that the notary shall physically attend and sign the deed
before the meeting participants and witnesses.
If we look at scenario (ii), this scenario seems to be significantly easier. Which would be to
implement an electronic GMS, then make the GMS Minutes in a Notarial Deed. However, based
on further discussion with the Indonesian Notary Association, although there is no mandatory rule,
GMS for Listed Companies usually involve notary attendance.377 There is no legal basis for this,
but since the GMS involve a large number of participants, it is impractical for the company to
obtain signatures for the GMS minutes from all participants. Furthermore, in practice the notary
will technically assist in checking the GMS attendances at the front door of the GMS hall. The
notary will also attend the GMS and directly draw up the notarial deed of GMS meeting. This is
also confirmed by Mr. Lie. Thus, the scenarios above, especially scenario (ii), will generally not
be found for the case of Listed Company’s GMS.378
Even if both scenarios happened, it could be concluded that GMS held by electronic means under
Article 77 of the Indonesia Company Law shall still need to be signed by all GMS participants,
either electronically or physically. This research will further discuss the issue regarding the e-
signature in Indonesian business practice in Section V.1.3 below.
377Aulia Taufanni, telephone call, April 6 and 26 May, 2020 378 Humberg Lie, WhatsApp message, May 26, 2020
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V.1.2.5. Provision under eASY.KSEI Guidelines
At the latest, the Listed Company shall be responsible to upload the summary of GMS’ minutes
on the eASY.KSEI platform at the end of the GMS day.379 There is no further information on the
guidelines whether there are still any requirements on signing the electronic GMS’ minutes
required under Article 77 of the Indonesian Company Law or possible exemption as provided
under Article 90 of the same law. Due to this, OJK may consider issuing a legal basis that explicitly
allows the exemption, provided under Article 90 of the Indonesian Company Law, for electronic
GMS. However, with regard to what has been exhibited by the practical issues under Notary Law,
an amendment to Notary Law is certainly necessary.
V.1.3. Indonesian Electronic Information and Transaction Law: Exclusion of e-Proxy and
e-Signature for Foreign Shareholders
V.1.3.1. The Validation Scheme of e-Proxy Conferment
Based on the Proposed e-proxy Regulation, the proxy can be granted through the e-proxy platform
without requiring the grantor’s signature. Since the Proposed e-proxy Regulation does not further
qualify what kind of e-proxy validation scheme, e.g. either (a) without any signature at all or (b)
without a physical signature (but there is still a requirement of an e-signature through the
platform), is required to accomplish the transfer of the power of attorney from shareholders to the
proxy person, it could be presumed from the literal language of the Proposed e-proxy Regulation
that the e-proxy process through the platform shall be sufficient without any kind of signature
required.
Such assertion is avowed based on Indonesian Civil Code. Based on Article 1792 of Indonesian
Civil Code, that a mandate is an agreement by which a grantor assigns authority to another, to act
on behalf of the grantor. Such power of attorney can be in the form of a public deed, private deed,
letter, or verbal.380 Thus, the form of e-proxy validation scheme (e.g. with or without e-signature)
379 KSEI, Question 39 of Frequently Asked Questions: Utilization of Electronic General Meeting System Application
– eASY.KSEI. Available at https://www.ksei.co.id/Download/FAQ_Penggunaan_Aplikasi_eASY.KSEI.pdf.
Accessed on 12 June 2020 380 Article 1793 (1) of Indonesian Civil Code
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would be immaterial. However, in practice it is recommended to have a physical power of attorney.
This practice is common in Indonesian legal practice where the third party ask the physical power
of attorney as an evidence.
Furthermore, based on eASY.KSEI Guidelines elaborated in Section III.2.2.1 of Chapter III herein,
the e-proxy instruction shall be granted solely from processing the relevant instruction in the
eASY.KSEI platform without e-signature required. The access to eASY.KSEI is limited to the
parties (i.e. Listed Company, Indonesian individual shareholder, and proxy holder) who are
registered on the eASY.KSEI platform.381 There is no further validation scheme required. The
access to the eASY.KSEI obtained through registration shall be sufficient verification measure,
where the access of eASY. KSEI is limited to authorized parties only.382
V.1.3.2. Implication to the Unavailability of E-Proxy for Foreign Shareholders
Since the e-proxy through the eASY.KSEI platform has not yet been implemented, foreign
shareholders who prefer to attend the GMS by a proxy shall need to provide a physical power of
attorney. Further, if the foreign shareholder has a domicile outside of the Indonesian territory, then
the power of attorney is granted to the proxy person who shall be subject to certain lines of
procedure.
Pursuant to the Ministry of Foreign Affairs Regulation, all foreign documents which are issued
outside of Indonesia for the use in the Indonesian jurisdiction, require a legalization from the
Ministry of Law and Human Rights and/or Ministry of Foreign Affairs as well as by the
Representative Office of the Republic of Indonesia in the relevant country.383
Further to the above, the Indonesian Supreme Court also rules under its Decision Number 3038
K/Pdt/1981 dated 18 September 1986 that a Power of Attorney which is made outside of Indonesia
requires, in addition to fulfilling all of the formal requirements, to also be legalized by the relevant
381 KSEI, Company Data and User Guide:Panduan Penggunaan Aplikasi eASY.KSEI. (eASY.KSEI. Application
User Guideline). Page 5 - 6 382 KSEI, Question 3 of Frequently Asked Questions: Utilization of Electronic General Meeting System Application
– eASY.KSEI. Available at https://www.ksei.co.id/Download/FAQ_Penggunaan_Aplikasi_eASY.KSEI.pdf.
Accessed on 12 June 2020 384Attachment to Regulation of Minister of Foreign Affairs Number 09/A/KP/XII/2006/01 regarding General
Guidance of Procedure of Offshore Relationship and Cooperation by Regional Government dated 28 December
2006
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Indonesian embassy or representative office. This decision becomes a precedent which is
applicable to all high courts and district courts in Indonesia.
Consequently, the power of attorney or any other document which are made or signed outside of
Indonesia, for the use in Indonesian jurisdiction, needs to be legalized by the Indonesian Embassy
in the signatory's domicile.
This legalization procedure issue has also been raised by Indonesian Ministry of Law and Human
Rights. It is generally acknowledged that Indonesia is still facing a barrier in international relation
where there is a need of foreign documentation to be made in such international cooperation, since
Indonesia is not a member of the Hague Apostille Convention.384 Based on discussion paper made
by the ministry, one solution is for Indonesia to sign the treaty.
In this research, one can understand that this legalization issue is far from any capital market
institution’s control. However, this procedure is a part of the GMS implementation. Therefore, we
view that it is also important for OJK to provide a solution to this barrier. We also view that
availability of e-proxy through eASY.KSEI for foreign shareholders might enlighten this issue.
V.2. Conclusion
To conclude, this research has discovered the following challenges:
(i) Live Streaming GMS
Indonesian prevailing business practice:
Indonesia shall make sure that the development of eASY.KSEI be able to facilitate a live stream
of e-voting and e-meeting.
385Ministry of Law and Human Rights, Urgent Transcript: Pengesahan Convention of 5 October 1961 Abolishing
The Requirement of Legalisation for Foreign Public Documents (Konvensi 5 Oktober 1961 tentang Penghapusan
Persyaratan Legalisasi Terhadap Dokumen Publik Asing). Available at
http://jdih.kkp.go.id/bahanrapat/bahanrapat_01082019145700.pdf. Accessed on 23 April 2020
91
Provisions under eASY.KSEI Guidelines:
We discover that there will be a live streaming ‘electronic opinion’,385 video screen,386 and
microphone387 features on the eASY.KSEI e-meeting platform. This may satisfy requirement
under Article 77 of Indonesian Company Law.
(ii) GMS Minutes in Notarial Deed Process
Indonesian prevailing business practice:
In practice, Indonesian Listed Companies generally use notarial deeds in drawing up their GMS
minutes. By this, the notary shall physically attend the GMS and directly made the GMS Minutes
in Notarial Deed, and sign the deed of GMS meeting in front of meeting participants. However,
there is a confusion between notaries: whether the electronic shareholders’ appearance fulfil the
requirement for a notary to physically attend and sign the deed of GMS meeting in front of the
meeting participants. Consequently, the electronic appearance then will not be counted as an
attendance at the GMS. This practice therefore defeats the purpose of electronic GMS.
Provisions under eASY.KSEI Guidelines:
This research did not find any information on the guidelines whether there is still any requirement
on signing the electronic GMS’ minutes as required under Article 77 of the Indonesian Company
Law or possible exemption as provided under Article 90 of the same law. Due to this, OJK may
consider issuing a legal basis that explicitly allows the exemption as provided under Article 90 (2)
Indonesian Company Law for electronic GMS. However, under the observance to the practical
issues under Notary Law, an amendment to Notary Law is certainly necessary;
385 KSEI, Question 41 of Frequently Asked Questions: Utilization of Electronic General Meeting System Application
– eASY.KSEI. Available at https://www.ksei.co.id/Download/FAQ_Penggunaan_Aplikasi_eASY.KSEI.pdf. Accessed on 12 June 2020 386 KSEI, Company Data and User Guide:E-Meeting Hall for Issuers. Available at
https://www.ksei.co.id/data/download-data-and-user-guide?setLocale=en-US. Accessed on 12 June 2020. Page 3 387 KSEI, Company Data and User Guide:E-Meeting Hall for Shareholders. Available at
https://www.ksei.co.id/data/download-data-and-user-guide?setLocale=en-US. Accessed on 12 June 2020. Page 4
92
(iii) e-Signature
Indonesian prevailing business practice:
the current practical use of e-signature implementation is discriminating foreign shareholders.
Provisions under eASY.KSEI Guidelines:
The e-proxy instruction shall be granted solely from processing the relevant instruction in the
eASY.KSEI platform without an e-signature required. The access to eASY.KSEI is limited to the
parties (i.e. Listed Company, Indonesian individual shareholder, and proxy holder) who are
registered on the eASY.KSEI platform. There is no further e-signature required to validate the
proxy. The access to the eASY.KSEI is obtained through registration, which shall be a sufficient
verification measure, due to the fact that the access of eASY.KSEI is limited only to authorized
parties.
(iv) Legalization
Indonesian prevailing business practice:
Legalization procedure still needs to be met for the power of attorney made outside Indonesia, this
defeats the entire purpose of e-proxy. One now argues that the limitation of the foreign
shareholders in point (iii) and (iv) is not in-line with the equitable opportunity principle that all
shareholders are mandated under Indonesian CG Code.
Provisions under eASY.KSEI Guidelines:
Foreign individual shareholders who decide not to attend in person at the GMS can instruct their
securities depositories as intermediary to operate the e-proxy feature on eASY.KSEI and to declare
through the aforementioned platform that their attendance will be represented by an intermediary.
This research views that availability of e-proxy through eASY.KSEI for foreign shareholders may
enlighten this issue.
Based on the discussion above, one can see that physical documentations and appearance would
still need to be maintained unless new or amended laws and regulations can omit the potential
issues and implementation on the eASY.KSEI platform in an effective manner. Therefore, one
93
views that the current applicable laws and regulations have not yet projected a complete
implementation of electronic means. Therefore, the initial purpose of Article 77 of the Indonesian
Company Law, electronic meeting shall only be a supplemental to the physical meeting has merit.
94
CHAPTER VI
CONCLUSION AND RECOMMENDATION
VI.1. Conclusion
To summarize, this research concludes that the proposed e-Platform cannot fully accommodate the
equitable opportunity of shareholders’ rights in Indonesian Listed Companies, as mandated under
CG Code. To arrive to that conclusion, this research has discovered the following factors:
1. The general nature of shareholders ownership in Indonesia is concentrated to certain parties
The motivation behind KSEI’s effort in promoting the use of e-Platform to GMS is the lack of
shareholder participation at the GMS due to geographical constraints which hampers corporate
actions. Looking to the e-Platform implementation in the U.S., the effort in endorsing the e-
Platform is conceivably a favorable way for Indonesia to possibly solve the aforementioned
problems.
This research understands through the implementation of e-Platform for GMS in the U.S., e-
Platform can facilitate a greater participation for shareholders to deliver their voices as mandated
under shareholder democracy or the CG Code. Companies with geographical constraints and
dispersed shareholder ownership may benefit from e-Platform with the increased shareholders’
participation. E-Platform may also contribute in reducing printing, traveling, and other costs that
may be incurred due to a physical GMS.
However, this research also learned from the e-Platform implementation in the U.S. that the use of
virtual-only meeting method raises concerns from minority shareholders. These minority
shareholders argue that the virtual-only meeting has circumvented their ability to ask questions to
the company. Moreover, there is a tendency that the company filters, rephrases or disregards
questions from shareholders. Further, this research notes that although the implementation of e-
Platform in U.S. companies with dispersed shareholder ownership may engage greater GMS
participation, but the e-Platform fails to facilitate in protecting minority shareholders, unless there
is an option of using the hybrid meeting method.
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At its apex, we learned that Indonesia cannot escape from the fact that the majority nature of
shareholders ownership in Indonesia is concentrated to certain parties, the participation of minority
shareholders may not provide a significant influence on the GMS’ decision. Even if minority
shareholders actively participated at the GMS through the e-Platform, the company’s decision still
presumably represent the desires of the majority shareholders. This condition might impact the
minority shareholders’ behavior towards the lack of care to any GMS performance. Consequently,
this research doubts whether the proposed e-Platform could completely protect the rights of
minority shareholders in Indonesia.
That being the case, Indonesian shareholders may not expect a greater participation at the GMS
through voting. Leaving that aside, this research believe that e-Platform still can offer a greater
voice for Indonesian shareholders, if not by voting, to at least be heard by the company.
Although, this research notes that a virtual-only meeting method is not favorable for U.S. minority
shareholders, we generally discover that the e-Platform implementation in the U.S. shall not only
engage a greater shareholders’ participation but also facilitate a greater chance for the shareholders
to speak at the GMS, regardless of whether such shareholder holds one or one million shares of
the company. In this regard, we also note that hybrid meeting method is preferable since the
shareholders can directly submit questions without previously being filtered, rephrased, or
disregarded by the company.
Having observed eASY.KSEI, it was noted that there will be a live streaming ‘electronic opinion’,
video screen, and microphone features for the eASY.KSEI e-meeting platform. The shareholders
will be able to deliver their opinion and pose questions as well as vote electronically through a live
streaming feature on eASY.KSEI platform. However, unlike the U.S., there is no information on
whether the shareholders will need to submit questions to the Listed Company through or without
the eASY.KSEI platform before the GMS. To prevent such issues, Indonesia may also opt for a
hybrid meeting method. Hence, shareholders can freely deliver any kind of questions through the
physical meeting without previously being filtered by the company. Thus, there will be an extra
burden on the part of Indonesia in overcoming how to establish the e-Platform that may provide
an equitable opportunity to all shareholders in giving inputs and opinions, as mandated under CG
Code. In regard to this effort, this research will deliver recommendations in section VI.2. below.
96
2. There are barriers to Indonesian prevailing laws and practices
Based on prevailing Indonesian laws and business practices, this research found three main
barriers. Firstly, this research discovers that in practice, Indonesian Listed Companies generally
uses notarial deeds in drawing up their GMS minutes. This means that the notary physically attends
the GMS and directly create the GMS Minutes in a Notarial Deed, and then sign the deed of GMS
meeting in front of meeting participants. However, there is a confusion between notaries on
whether the electronic shareholders’ appearance fulfils the requirement for the notary to physically
attend and sign the deed of GMS meeting in front of the meeting participants. Consequently, the
electronic appearance then will not be counted as attend the GMS. This practice therefore defeats
the purpose of an electronic GMS. Secondly, the current practical use of e-signature and the
proposed e-proxy implementation discriminate foreign shareholders. Lastly, as the projection of
the proposed e-Proxy, such e-Proxy would only be available for individual Indonesian
shareholders, whereas foreign shareholders are still required to grant a proxy that still needs a
physical power of attorney and shall adhere to the legalization procedure for the power of attorney
made outside Indonesia.
This research also points out that the limitation set upon the foreign shareholders does not reflect
the equitable opportunity principle for all shareholders mandated under Indonesian CG Code.
Thus, this is not in-line with CG Code and defeats the purpose e-proxy.
VI.2. Recommendation
This research finds that the benefits and drawbacks from the implementation of GMS method in
the U.S. shall give a considerable choice for the implementation of e-Platform in Indonesia. For
the ease of reference, a comparison table between GMS implementation in the U.S. and Indonesia
is provided in Annex II herein. In brief, refer to Annex II of this thesis, this research sets forth the
following recommendations:
1. Indonesia should make sure that the development of the proposed electronic meetings be
able to facilitate a live stream of GMS that is to be in-line with requirements of ‘hearing’
and ‘seeing’ as well as directly participative at the GMS under Article 77 of the Indonesian
Company Law
97
2. As discussed in Chapter V, the Indonesian prevailing laws and business practices may still
require physical documentations and appearances. Hence, this research recommends for
Indonesia to consider the following points in the development of the proposed e-Platform:
a. a hybrid meeting method
b. offering an option to submit a GMS proposal electronically
c. allowing shareholder or the proxy person to attend through electronic media
d. electronic attendance can be counted as present (which fulfils the requirements of “to
see and hear each other directly”) at the meeting
e. e-proxy shall also available for foreign shareholders, and shall not be deemed as a
foreign document that still requires legalization
f. the proposed regulation shall clearly state how the e-Platform verifies the shareholders
or proxy persons who attend and vote through the e-Platform
g. the proposed regulation shall clearly state that the minutes of electronic GMS shall need
no signature from shareholders, and shall be made in a notarial deed form. However,
with due observance to the practical issue under Notary Law, an amendment to Notary
Law is certainly necessary.
98
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114
ANNEX I
QUORUM OF ATTENDANCES AND VOTING DECISION
UNDER INDONESIAN COMPANY LAW AND POJK 32/2014
Indonesian Company Law
No. Matters
Quorum for Attendance (“A”) and Vote (“V”) under the
Indonesian Company Law
for 1st GMS for 2nd GMS
1.
Subscription of shares
by way of in-kind
participation
A: more than 1/2 (one half) of
the total amount of shares
having voting rights.
V: more than 1/2 (one half) of
total votes cast.
A: at least 1/3 (one third) of the
total amount of shares having
voting rights.
V: more than 1/2 (one half) of
total votes cast.
2.
Conversion of loan to
equity by a
shareholder and/or
other creditor
A: at least 2/3 (two third) of the
total amount of shares having
voting rights.
V: at least 2/3 (two third) of total
votes cast.
A: at least 3/5 (three fifth) of the
total amount of shares having
voting rights.
V: at least 2/3 (two third) of total
votes cast.
3. Buy back shares of the
company
A: at least 2/3 (two third) of the
total amount of shares having
voting rights.
V: at least 2/3 (two third) of total
votes cast.
A: at least 3/5 (three fifth) of the
total amount of shares having
voting rights.
V: at least 2/3 (two third) of total
votes cast.
4. Increase of the
authorized capital
A: at least 2/3 (two third) of the
total amount of shares having
voting rights.
V: at least 2/3 (two third) of total
votes cast.
A: at least 3/5 (three fifth) of the
total amount of shares having
voting rights.
V: at least 2/3 (two third) of total
votes cast.
5.
Increase the issued
and paid-up capital
within the limit of the
authorized capital
A: more than 1/2 (one half) of
the total amount of shares
having voting rights.
V: more than 1/2 (one half) of
total votes cast.
A: at least 1/3 (one third) of the
total amount of shares having
voting rights.
V: more than 1/2 (one half) of
total votes cast.
115
6.
Reduce the capital of
the company
A: at least 2/3 (two third) of the
total amount of shares having
voting rights.
V: at least 2/3 (two third) of total
votes cast.
A: at least 3/5 (three fifth) of the
total amount of shares having
voting rights.
V: at least 2/3 (two third) of total
votes cast.
7.
Approval of business
plans
Notes:
The business plan
must be initially
reviewed by the BOC
A: more than 1/2 (one half) of
the total amount of shares
having voting rights.
V: more than 1/2 (one half) of
total votes cast.
A: at least 1/3 (one third) of the
total amount of shares having
voting rights.
V: more than 1/2 (one half) of
total votes cast.
8.
Approval of annual
report, including
financial statement
and report of BOC’s
duties
A: more than 1/2 (one half) of
the total amount of shares
having voting rights.
V: more than 1/2 (one half) of
total votes cast.
A: at least 1/3 (one third) of the
total amount of shares having
voting rights.
V: more than 1/2 (one half) of
total votes cast.
9.
Appropriation of net
profits including the
determination of
amount to be allocated
for reserve fund
A: more than 1/2 (one half) of
the total amount of shares
having voting rights.
V: more than 1/2 (one half) of
total votes cast.
A: at least 1/3 (one third) of the
total amount of shares having
voting rights.
V: more than 1/2 (one half) of
total votes cast.
10. Declaration of
dividends
A: more than 1/2 (one half) of
the total amount of shares
having voting rights.
V: more than 1/2 (one half) of
total votes cast.
A: at least 1/3 (one third) of the
total amount of shares having
voting rights.
V: more than 1/2 (one half) of
total votes cast.
19.
Division of duties and
authorities of
management amongst
the members of the
BOD
A: more than 1/2 (one half) of
the total amount of shares
having voting rights.
V: more than 1/2 (one half) of
total votes cast.
A: at least 1/3 (one third) of the
total amount of shares having
voting rights.
V: more than 1/2 (one half) of
total votes cast.
20.
Appointment,
replacement and
dismissal of the
members of the BOD
A: more than 1/2 (one half) of
the total amount of shares
having voting rights.
V: more than 1/2 (one half) of
total votes cast.
A: at least 1/3 (one third) of the
total amount of shares having
voting rights.
V: more than 1/2 (one half) of
total votes cast.
116
21. Salary and allowance
of the BOD
A: more than 1/2 (one half) of
the total amount of shares
having voting rights.
V: more than 1/2 (one half) of
total votes cast.
A: at least 1/3 (one third) of the
total amount of shares having
voting rights.
V: more than 1/2 (one half) of
total votes cast.
22.
Appointment of other
party(s) to represent
the company if all
members of BOD or
BOC have conflict of
interest with the
company
A: more than 1/2 (one half) of
the total amount of shares
having voting rights.
V: more than 1/2 (one half) of
total votes cast.
A: at least 1/3 (one third) of the
total amount of shares having
voting rights.
V: more than 1/2 (one half) of
total votes cast.
24.
Appointment,
replacement and
dismissal of the
members of the BOC
A: more than 1/2 (one half) of
the total amount of shares
having voting rights.
V: more than 1/2 (one half) of
total votes cast.
A: at least 1/3 (one third) of the
total amount of shares having
voting rights.
V: more than 1/2 (one half) of
total votes cast.
25. Salary and allowance
of the BOC
A: more than 1/2 (one half) of
the total amount of shares
having voting rights.
V: more than 1/2 (one half) of
total votes cast.
A: at least 1/3 (one third) of the
total amount of shares having
voting rights.
V: more than 1/2 (one half) of
total votes cast.
26.
Approval for the BOC
to conduct managerial
activities for certain
circumstances and
definitive period
A: more than 1/2 (one half) of
the total amount of shares
having voting rights.
V: more than 1/2 (one half) of
total votes cast.
A: at least 1/3 (one third) of the
total amount of shares having
voting rights.
V: more than 1/2 (one half) of
total votes cast.
27.
Appointment of
Independent
Commissioners
A: more than 1/2 (one half) of
the total amount of shares
having voting rights.
V: more than 1/2 (one half) of
total votes cast.
A: at least 1/3 (one third) of the
total amount of shares having
voting rights.
V: more than 1/2 (one half) of
total votes cast.
28.
Approval of report
submitted by
liquidator
A: more than 1/2 (one half) of
the total amount of shares
having voting rights.
V: more than 1/2 (one half) of
total votes cast.
A: at least 1/3 (one third) of the
total amount of shares having
voting rights.
V: more than 1/2 (one half) of
total votes cast.
29. Appointment of the
liquidator
A: more than 1/2 (one half) of
the total amount of shares
having voting rights.
V: more than 1/2 (one half) of
total votes cast.
A: at least 1/3 (one third) of the
total amount of shares having
voting rights.
V: more than 1/2 (one half) of
total votes cast.
POJK 32/2014
117
No. Matters
Quorum for Attendance (“A”) and Vote (“V”) under the
Indonesian Company Law
for 1st GMS for 2nd GMS
1.
Amendments to the
Articles of
Association (Art. 27
(a), (b))
A: at least 2/3 (two third) of the
total amount of shares having
voting rights are present.
V: more than 2/3 (two third) of
the total amount of shares
having voting rights.
A: at least 1/3 (one third) of the
total amount of shares having
voting rights.
V: more than 1/2 (one half) of
total votes cast.
2.
Transfer or encumber
the company’s assets
having value that
exceeds 50% of the
net assets of the
company (Art. 28 (a),
(b))
A: at least 3/4 (three fourth) of
the total amount of shares
having voting rights are present.
V: more than 3/4 (three fourth)
of the total amount of shares
having voting rights.
A: at least 2/3 (two third) of the
total amount of shares having
voting rights are present.
V: more than 3/4 (three fourth)
of the total amount of shares
having voting rights.
3.
Merger, consolidation,
acquisition and spin-
off (Art. 28 (a), (b))
A: at least 3/4 (three fourth) of
the total amount of shares
having voting rights are present.
V: more than 3/4 (three fourth)
of the total amount of shares
having voting rights.
A: at least 2/3 (two third) of the
total amount of shares having
voting rights are present.
V: more than 3/4 (three fourth)
of the total amount of shares
having voting rights.
4.
Filing of a petition for
a company to be
declared bankrupt
(Art. 28 (a), (b))
A: at least 3/4 (three fourth) of
the total amount of shares
having voting rights are present.
V: more than 3/4 (three fourth)
of the total amount of shares
having voting rights.
A: at least 2/3 (two third) of the
total amount of shares having
voting rights are present.
V: more than 3/4 (three fourth)
of the total amount of shares
having voting rights.
5.
Extension of
company’s duration
(Art. 28 (a), (b))
A: at least 3/4 (three fourth) of
the total amount of shares
having voting rights are present.
V: more than 3/4 (three fourth)
of the total amount of shares
having voting rights.
A: at least 2/3 (two third) of the
total amount of shares having
voting rights are present.
V: more than 3/4 (three fourth)
of the total amount of shares
having voting rights.
6. Dissolution
A: at least 3/4 (three fourth) of
the total amount of shares
having voting rights are present.
V: more than 3/4 (three fourth)
of the total amount of shares
having voting rights.
A: at least 2/3 (two third) of the
total amount of shares having
voting rights are present.
V: more than 3/4 (three fourth)
of the total amount of shares
having voting rights.
118
ANNEX II
COMPARISON AND NOTES TO THE ELECTRONIC GMS IMPLEMENTATION FOR
LISTED COMPANIES IN THE U.S. AND INDONESIA
Matters Delaware, U.S. Indonesia Indonesian
Proposed e-proxy
Regulation
Remarks for
proposed Indonesian
e-Platform
Shareholders
Ownership
Composition
Dispersed Mostly controlled
by certain party
- -
Shareholders’
ability to
propose agenda
- proposal can be
submitted in
electronic means
- eligible
shareholders:
who held at least
$2,000 in market
value, or 1% of
company’s
shares entitled to
be voted at the
GMS
- the shareholders
must continue to
hold its shares for
at least 1 year
after such
proposal
submission
- proposal can be
provided in
writing
- eligible
shareholders: 1
or more
shareholders
who represent
1/20 or more of
all shares with
voting rights
- no requirement
to hold the
shares in the
company
- The proposed e-
Platform may
consider offering an
option to submit a
GMS proposal
electronically
Method of
Meetings
Virtual-only or
Hybrid meeting
Physical meeting.
Electronic media
is possible under
Indonesian
Company Law but
not performed in
practice.
- - Considering (i) the
issues arise from
virtual only meeting
method in the U.S.
discussed in
Chapter IV, and (ii)
the barriers in
Indonesian
prevailing laws and
business practices
119
discussed in
Chapter V, a Hybrid
meeting method
may more desirable
for minority
shareholders and
may has a closer
approach to the
current Indonesian
laws and practice.
- the proposed
regulation shall
clearly state that the
electronic media
can facilitate a real
time
communication,
with clear voice and
vision in
compliance with
Article 77
Indonesian
Company Law
Notice,
Announcement,
or Invitation of
GMS
writing or
electronic
transmission
hardcopy and
softcopy
online -
Proxy and
Attendance
- No physical
power of
attorney, other
than the form of
proxy
- The proxy can
attend through
electronic media
- a record date (to
determine the
authorized GMS
participant) must
generally be
physical letter of
power of attorney
required
- e-proxy is optional
- the proposed rule
does not regulate
whether the proxy
person can attend
the GMS
electronically but
eASY.KSEI
Guidelines states
that physical
attendance is still
mandatory. The
eASY.KSEI will
Based on notary
practice discussed in
Chapter V, there is a
confusion between the
notary whether the
electronic
shareholders
appearance fulfill the
requirement for the
notary to physically
attend and sign the
deed of GMS meeting
in front of meeting
120
delivered to
shareholders
before certain
days of the
meeting
be used as an e-
proxy platform at
the first stage.
- physical power of
attorney document
(a proxy without e-
proxy system) still
can be done
participants.
Consequently, the
electronic appearance
then will not be
counted as attend the
GMS. This practice
therefore defeating the
purpose of electronic
GMS.
The proposed
regulation shall
clearly state that
- shareholder / the
proxy person can
attend through
electronic media
- electronic
attendance can be
counted as present
(which fulfil the
requirements of
“see and hear each
other directly”) at
the meeting
- e-proxy shall also
available for
foreign
shareholders, and
shall not be deemed
as foreign
document that
needs to be
legalized
Verifying the
validity of
proxy
- company takes
reasonable
measures to
verify that each
person deemed
present and
- Physical power
of attorney shall
be showed up at
GMS
registration
The proxy can be
granted through the e-
proxy platform
without grantor’s
signature required.
the proposed
regulation shall
clearly state on how
the e-Platform verify
the shareholder /
proxy person who
121
permitted to
vote at the
meeting is a
shareholder or
the holder of a
valid proxy
from a company
shareholder;
- company takes
reasonable
measures to
provide such
shareholders
and proxy
holders a
reasonable
opportunity to
participate in
the meeting
(including an
opportunity to
read or hear the
proceedings as
they happen
substantially
and
concurrently
with such
proceedings),
and to vote on
matters
submitted to the
shareholders;
and
- some U.S. states
adopt digital
signature, while
others use
personal
The party who can
access the e-proxy
eASY.KSEI platform
is limited to the
authorized person (i.e.
shareholder and
registered proxy
person):
- the right to access
the e-proxy
platform given by
KSEI to
shareholder
- the proxy person
shall be an
independent party
who is registered
in the e-proxy
platform
attend and vote
through the e-
Platform
122
identification
number
- company
maintains a
record of votes
and other
actions taken at
the meeting
Record /
Minutes of
Meeting
Electronic media
that can be
converted into
legible paper
physically made
and approved by
- GMS’ chairman
and shareholder
for offline
GMS, unless a
notary attends
the GMS and
drawn-up the
notarial deed of
GMS minutes
- All
shareholders
participated at
the GMS, for
electronic GMS
- The summary of
GMS’ minutes
shall be uploaded
by the company on
eASY.KSEI
platform at the
latest at the end of
the GMS day
- No information on
whether there is
any requirement on
signing the
electronic GMS’
minutes on the
eASY.KSEI
Guidelines, as
required under
Article 77
Indonesian
Company Law or
possible exemption
as provided under
Article 90
Indonesian
Company Law.
- Before the second
stage of e-Platform
implemented, the
GMS performance
will still be subject
under POJK
32/2014
- By this, OJK may
consider issuing a
legal basis that
explicitly allowing
the exemption as
provided under
Article 90
Indonesian
123
Company Law for
electronic GMS.
However, with due
observance to the
practical issue
under Notary Law,
an amendment to
Notary Law is
certainly necessary
Benefit / goals
of e-Platform
Benefit of e-
Platform for U.S.
public companies:
- increase
shareholders’
participation at
the GMS
- minority
shareholders
have a chance to
express their
voice at the
GMS,
representing the
shareholder
democracy
campaign in the
U.S.
- increase
efficiency of
discussion and
communication
between
shareholders and
company through
the platform
- incentive of cost
saving both for
shareholders’
travel expense
and physical
The Article 77 of
Indonesian
Company Law
initially drafted to
provide an option
for shareholders
who cannot
physically attend
to the GMS, can
also come through
electronic media.
Hence, the initial
purpose of Article
77 is not for a
total electronic
GMS, but only to
provide an option
to a hybrid
meeting method
The goals of e-
Platform for
Indonesia Listed
Company:
- increase
shareholders’
participation at the
GMS
- minority
shareholders have a
bigger voice and
chance speak and
involve at the GMS
- incentive of cost
saving both for
shareholders’
travel expense, and
physical
documentations
prepared by
company and
shareholders
- In line with
shareholders
rights’ principle
under CG Code,
that the e-Platform
can provide an
equitable
opportunity to all
shareholders to
The fact that the
shareholders
ownership in
Indonesia is controlled
by certain party, the
existence of e-
Platform may not give
a significant impact
for minority
shareholder.
The platform would
merely provide a
greater voice and
chance to speak and
involve at the GMS
discussion, but the
vote might still
represent the majority
voice.
Looking to the
implementation of e-
Platform in the U.S.,
discussed in Chapter
IV, we see from the
U.S. that hybrid
meeting might be
better than virtual-
only meeting for the
dialogue between
124
documentations
prepared by
company
give input and
opinions in the
interest of the
company
minority shareholders
and companies.
To conclude, we
believe that Indonesia
cannot escape from the
fact that minority
shareholders might not
obtain a maximum
protection through the
e-Platform. However,
the existence of the
proposed e-Platform
may offer a greater
opportunity for all
shareholders to
participate at the
GMS, as mandated
under CG Code.
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