When establishing a Limited Liability Company (PT), understanding share distribution is essential for every founder or shareholder. Under Indonesian law, PT shares have specific classifications that affect the rights and obligations of shareholders.
This article provides a comprehensive discussion of share classification, distribution rules, and the importance of understanding PT share ownership structure.
Also Read: Company Law: Legal Basis for Establishment and Operations
PT share classifications are governed by Law Number 40 of 2007 on Limited Liability Companies, with further regulations from Government Regulation in Lieu of Law Number 2 of 2022 on Job Creation.
These classifications help differentiate shareholder rights based on the type of shares they hold.
Generally, PT shares are divided into two main types:
Common shares grant the holder voting rights in the General Meeting of Shareholders (GMS). Holders of common shares are entitled to dividends and the remaining assets after liquidation. According to Article 52(1) of the Company Law, common shareholders have the right to:
- Attend and vote at the GMS.
- Receive dividends and a share of remaining assets after liquidation.
- Exercise other rights as provided by the Company Law.
Preferred shares offer special rights not available to common shares, such as the right to receive dividends first or nominate candidates for directors and commissioners.
According to Article 53(4) of the Company Law, preferred shares may provide the following rights:- Voting rights or non-voting rights.
- Special rights to nominate members of the board of directors and commissioners.
- Rights for redemption or conversion after a certain period.
- Priority in receiving dividends, either cumulative or non-cumulative.
- Priority in receiving remaining assets during liquidation, before common shareholders.
Preferred shares provide priority in certain aspects, such as dividend distribution and specific voting rights.
Also Read: Public PT: Definition, Characteristics, and Requirements for Tbk
Under Law No. 40 of 2007, there are no specific rules regarding the share distribution structure in a PT. However, a PT must be established by at least two individuals or legal entities (Article 7(1) of the Company Law). This requirement emphasizes that a PT must be based on an agreement between a minimum of two shareholders.
Each founder is also required to take shares upon the establishment of a PT, even if the share is very small.
In practice, many PTs have one shareholder with a small portion, such as only 1% of the total shares, to meet the legal requirement that a PT must have at least two shareholders.
Also Read: PT Establishment Deed: Definition, Cost, and Creation Process
Essentially, PT shareholders are not limited to Indonesian citizens. According to Article 7(1) of the Company Law, shareholders can be individuals, either Indonesian or foreign, or legal entities, either local or foreign.
This allows foreign investors to participate in PTs in Indonesia, although they must observe sector-specific restrictions.
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