Journal of Xi’an Shiyou University, Natural Science Edition ISSN : 1673-064X

Construction of Minority Shareholders Legal Protection

in a Company's Limited Liability System
I Gde Sukarmo*, Hayyanul Haq*, Zainal Asikin*, Salim HS*

*Doctoral Study Program of Law, Faculty of Law, University of Mataram, Indonesia

Abstract- The purpose of this study is to determine the legal shareholders and minority shareholders. The existence of this
protection model for majority shareholders and minority distinction often creates conflicts of interest between
shareholders in public limited companies. This research method shareholders and often leads to legal issues (Li et al., 2020);
is normative research. In order to investigate the ineffectiveness (Zakiyah, 2017). Minority shareholders or minority shareholders
of laws and regulations, in particular, Law No. 40 of 2007 on are often only used as a complement in a company. In the
limited liability companies in providing shareholder protection, decision-making mechanism in the company, it can be
researchers have studied the laws and regulations and considered ascertained that these minority shareholders will always lose to
the views of experts on legal concepts related to legal protection the majority shareholder because the decision-making pattern is
for shareholders, in particular minority shareholders. The results based on the large percentage of shares owned. This situation
showed that the law was not maximal in providing fair legal will get worse if it turns out that the majority shareholder uses
protection for minority shareholders, so there was an imbalance this opportunity to control the company based on their interests
between the rights of minority shareholders and majority alone and does not heed the interests of the minority shareholder.
shareholders. For this reason, 1) reform or progressive changes in There is a tendency for the majority shareholder to take
laws and regulations are needed, in this case, PT Law No. 40 of advantage of their position irresponsibly through a mechanism in
2007. These changes should be fundamental to philosophical the General Meeting of Shareholders, namely by utilizing the
aspects (values and perspectives) in providing shareholder principle of one share one vote, for example dominating through
protection, 2) changing views of protection shareholders should the Board of Directors, where the Board of Directors' policy is in
pay attention to aspects of fairness. favor of the majority shareholder which can cause the company
to act only a tool for the benefit of majority shareholders who do
Index Terms- Protection, Reform, Minority Shareholders not have good faith.
Another form of domination by the majority shareholder
I. INTRODUCTION is the company's Directors or Commissioners (Supriatna &
Ermond, 2019). If it is not carried out without moral hazard, it
Legal protection for minority shareholders in a limited will be possible to pierce the corporate veil or carry out ultra
liability company is a legal issue that is always interesting and up vires actions which through the rectification agency will be
to date for discussion. Various legal regulations have been legalized as an act of the company which will harm minority
issued, most recently Law Number 40 of 2007 concerning shareholders, other stakeholders, or the company itself. Majority
Limited Liability Companies or known as the PT. However, over shareholder abuse also occurs in company liquidation where the
time, the existence of this law for approximately 13 (thirteen) basis for the dissolution or liquidation is not carried out
years of its validity period, there are still weaknesses that must be transparently. In this context, the law must be able to guarantee
corrected immediately. The results of the 2018 EODB survey by the protection of shareholders in a company (La Porta et al.,
the World Bank conducted in 2017, Indonesia was ranked 72nd 2007); (Haryono, 2016). In providing legal protection, it can be
out of 190 countries in the world (Setianto, 2020). The EODB done by providing various concepts, methods, and theories which
indicator that is directly related to the UUPT is starting a will later become the basis for the formulation of positive law
business (Sinaga, 2017), protecting minority investors (Nanda, which will be used as legitimacy for the legal protection of
2017), and resolving insolvency (Asmara et al., 2019). company shareholders, especially minority shareholders. Law
Shareholders are one of the components (stakeholders) in aims to integrate and coordinate various interests in society
a company in addition to other components (stakeholders) such because in traffic of interests, protection of certain interests can
as workers, creditors, investors, consumers, and the wider be done by limiting various interests on the other hand (Wendur
community who have an interest in the company (Yunia, 2018). et al., 2020). The interest of law is to take care of human rights
More than that, the real shareholders are also the parties who are and interests so that the law has the highest authority to
the funders for the sustainability of the company's activities determine human interests that need to be regulated and
(Wahidah & Iman, 2019). Thus in addition to being stakeholders, protected (Nawawi, 2019).
shareholders are also often termed bagholders (Hapsari et al., Legal protection for Minority Shareholders in a company
2020). Because of its important position, it is only natural that is very important because the shareholders and stakeholders have
the law should be able to guarantee the protection of shareholders regulated their rights and obligations as well as their authority
in a company at any time. proportionally. This concept can only be successful if the
In the practice of company management, as followed by shareholders and management of the company uphold the ethics
the PT Law, there are two types of shareholders, namely majority and principles of justice which are the source of the standard of

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Journal of Xi’an Shiyou University, Natural Science Edition ISSN : 1673-064X

behavior of individual shareholders. These principles must be against the rights of minority shareholders, classification of types
reflected in the legal content so that they become the rules of the of customers, analysis, examination, and decision.
game in running the company. The application of the principle of Article 138 paragraph (1) of the PT Law confirms that
justice in providing legal protection for a company requires that minority shareholders can apply for an examination of the
the highest power is given to the general meeting of shareholders company, on the suspicion that the board of directors has
(Permatasari, 2014), where the majority vote (majority share) committed an illegal act. The aforementioned action is an effort
will determine the decision, but minority shareholders must also that can be made by shareholders in the context of identifying
be guaranteed by giving their rights. suspected violations of shareholder rights. The purpose of the
Therefore, to fulfill the element of justice, a balance is examination is to obtain information related to the alleged
needed so that the minority shareholders can still enjoy their existence of illegal acts that harm shareholders or third parties, or
rights as the majority, including regulating the company. On the a member of the Board of Directors or the Board of
other hand, even minority shareholders need to pay attention to Commissioners committed an unlawful act that harmed the
their interests and their rights cannot simply be ignored. To Company or shareholders or a third party.
safeguard the interests of both parties, the company's legal Data or information that is sought and obtained from the
science is known as the principle of "Majority Rule Minority results of the examination to be used as evidence that can clarify
Protection", namely the ruler in the company remains the whether or not the alleged illegal act committed by the Board of
majority party, but the power of the majority party must be Directors is a process that can be categorized as an identification
exercised by always protecting (to protect) the party. minority. If process for suspected violations of the rights of minority
this does not get attention from the government, it is feared that it shareholders. This identification is the first step in obtaining
will disrupt the investment climate and kill small investors information/data from the company to assess whether there has
been a deviation/violation that could harm the rights of
II. RESEARCH METHODS shareholders. If the results of the examination reveal facts about
the occurrence of unlawful acts that may harm the interests of
The research method used in this research is the shareholders, then the results of the examination can be used as
normative legal research method, which is legal research that evidence stating that the Board of Directors has committed an
examines legal rules aimed at identifying and describing legal illegal act.
aspects related to legal protection for minority shareholders. According to Article 1915 of the Civil Code, it is affirmed
that the allegations are the conclusions which by law or by the
III. RESULT AND DISCUSSION judge draws from a well-known incident to an unknown event.
Two kinds of allegations, namely: allegations according to law
In any condition, the presence of law must be able to and allegations not based on the law. In Article 1916 of the Civil
realize 3 (three) basic values, namely the value of justice, Code, it is stated that the allegations according to the law are
certainty, and utility value (Purwanto, 1993). The synergy suspicions that are based on a special provision of law, connected
application of the three is certainly not easy, however ideally in with certain actions or certain events.
every legal product preparation and law enforcement, the Allegations or allegations that have the quality as valid
presence of the three must get a balanced proportion. Good law is evidence, such allegations must be a conclusion drawn from an
a law that contains the principles of sustainability (Dernbach & event, an event, or an action that occurred, and from the
Mintz, 2011), justice, and democracy (Bedner, 2010); (Hayat, conclusion drawn there is an indication or fact of an element of
2015). unlawful acts committed by the Board of Directors. The
The value of justice is a measure of the fairness of the law allegations that meet the requirements to submit a request must
(Rismawati, 2015). Not only that, but the value of justice also have at least the evidence required for examination of the
forms the basis of the law as law. Thus justice has a normative Company to obtain valid evidence in the form of documents,
and constitutive character for the law (Jovanov & Velinov, testimony of witnesses or experts, as preparation for filing a
2019). It is normative because it functions as a transcendental lawsuit against the Law based on Article 1365 of the Civil Code
prerequisite that underlies any dignified positive law (Harun, against the Board of Directors.
2019). It becomes the moral foundation and yardstick of positive Regarding the classification of types of violations, by
law (Burns, 1998). It is constitutive because justice must be an looking at the provisions of chapter IX of the company law, there
absolute element of law as law (Mubayyinah, 2019); (Kelsen, are two possibilities. First, that the classification is included in
1948). Thus talking about justice, basically talking about the the category of illegal acts and not in the category of illegal acts.
essence of the existence of law in the human world, namely to As stipulated in Article 139 paragraph (1) of the PT Law, it is
guarantee justice (Kabrtova et al., 2012). stated that the Chairman of the District Court can reject or grant
Concerning this paper, the author is interested in the company examination request. If the company examination
examining several provisions or articles in the PT Law which request is granted, the head of the Court shall appoint at least 3
according to the author are closely related to legal protection for (three) expert teams to carry out the task of the examination.
shareholders, especially minority shareholders. These articles are The expert team as appointed by the head of the Court has
related to the stages or procedures that must be followed by the right to examine and analyze all company documents and
shareholders in fighting for their rights. At least several stages or company assets deemed necessary. In the analysis and
processes are passed starting from the identification of deviations examination process, the expert team can request information
from all related parties such as the board of commissioners,

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directors, and company employees and for that, the Legal reform, especially in the field of Limited Liability
commissioners, directors, and employees are required to provide Companies as one of the pillars of the national economy in a
all the information needed by the expert team in carrying out global context, is very much needed as a form of state
their duties. appreciation in providing protection for all communities and in
Article 140 paragraph (1) of the Company Law states that the context of realizing the people's welfare and prosperity.
if after an examination is carried out, the examiner is obliged to Building a professional business world and prioritizing the
make a report on the results of the examination, and the examiner principle of equality/balance is one of the factors that determine
may not announce the results of the examination to other parties, the success or failure of development. The direction of
but must be submitted to the Chair of the District Court within a development in the economic sector is the government's
maximum period of 90 (ninety) days, and also no later than 14 obligation to provide direction and guidance in the context of
(fourteen) days from the date the examination result report is developing the business world and creating a good business
received, the Head of District Court must provide a copy of the climate that encourages economic growth
examination result report to the applicant (minority shareholder)
and the Company concerned based on Article 140 paragraph (2) IV. CONCLUSION
PT Law. If the head of the District Court has obtained the results
of an examination conducted by a team of experts appointed as The existence of the PT Law has not been maximal in
stipulated in Article 139 paragraph (3), the chairman of the Court providing legal protection for minority shareholders. Therefore,
will provide a copy of the examination report to the applicant and legal reform, especially the PT Law, is necessary. One of the
the company within 14 (fourteen) days. important points that must be reformed in the PT Law is the
Observing the provisions of Article 140 paragraph (2), the provision regarding the results of the examination of the
author concludes that the District Court does not have the company due to the alleged illegal activity by the company.
authority to issue decisions on violations based on the report of Article 140 paragraph (2) of the PT Law emphasizes that district
the appointed expert team. The court is only obliged to submit an courts are only given the authority to submit reports on the
examination report to the applicant and the company. According results of examinations of suspected illegal acts to the applicant
to the author, this provision has not provided certainty to and the company. This provision does not give the court the
shareholders in fighting for their rights. Why is that, because authority to give a verdict on the violation based on the report of
when the judge returns the results of the examination report and the appointed expert team. The matter was handed back to the
submits the settlement of the matter to the company internally. company to be followed up internally. The results of the
Thus, the next process will depend on the applicant. At this point, examination should be the basis for the court to state that the
according to the author, it is necessary to carry out a legal reform reported party has committed an illegal act so that it can proceed
movement that can guarantee protection for shareholders. to the next legal process without having to go through a lawsuit.
Because the law including the PT Law is the result of human This is important to reduce procedures that have had to go
construction, both social, political, and cultural construction through a lengthy process. Therefore, in the context of reforming
(Rahayu et al., 2019). the PT Law, there must be provisions that regulate or give
The construction includes the procurement of doctrines, authority to the court to explicitly give a decision on the
principles, and other parts of it. The existence of law in society existence of an illegal act. Thus, legal protection guarantees for
aims to serve the increasingly complex interests of society. Law shareholders, especially minority shareholders, can be realized .
as an ideal is closely related to the conceptualization of justice,
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http://journal.ubaya.ac.id/index.php/yustika/article/view/19 First Author – I Gde Sukarmo, Doctoral Study Program of
54/1655 Law, Faculty of Law, University of Mataram, Indonesia
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Of The Political Right To Hold Public Office Against Law, Faculty of Law, University of Mataram, Indonesia.
Corruption Convicts. Prophetic Law Review, 1(1).

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Third Author – Zainal Asikin, Doctoral Study Program of Correspondence Author – I Gde Sukarmo,
Law, Faculty of Law, University of Mataram, Indonesia. sukarmo_gde@unram.ac.id
Third Author – Salim HS, Doctoral Study Program of Law,
Faculty of Law, University of Mataram, Indonesia.

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