Dismissal And Resignation Of Director In A Limited Company

Members of the board of directors in a limited liability company ("Company") have the task of managing the Company, as well as holding an important and central position in a Company, with such roles and functions can a director be dismissed or resigned?

Prosedur for Dismissal of Directors

According to Article 105 Paragraph (1) of the Company Law, “Members of the board of directors may be dismissed at any time by resolution of the GMS by stating the reasons.”

Members of the board of directors may be dismissed at any time by resolution of the General Meeting of Shareholders ("GMS"). Such dismissal must state the reasons and be preceded by an opportunity for self-defense by the director to be dismissed.

The resolution of the GMS to dismiss a member of the board of directors may be made on the grounds that the person concerned no longer fulfils the requirements as a member of the board of directors stipulated in the Company Law, among others, committing actions that are detrimental to the Company or for other reasons deemed appropriate by the GMS.

Then based on Article 105 Paragraph (3) of the Company Law, a member of the board of directors may also be dismissed by a resolution outside the GMS provided that the member of the board of directors concerned is notified in advance of the dismissal plan and given the opportunity to defend himself/herself in writing before the dismissal decision is taken.

Dismissal of directors is effective since: 

1. the GMS is completed;
2. the date of the resolution as refferd to in the resolution outside the GMS; or
3. any other date specified in the resolution of the GMS or resolution outside the GMS. 

Then based on Article 106 Paragraph (1) of the Company Law, "Members of the board of directors may be temporarily dismissed by the board of commissioners by stating the reasons."

Dismissal of directors can also be done temporarily. According to Article 106 of the Company Law, the temporary dismissal of directors is carried out by the board of commissioners, not necessarily through a GMS.

This is because the dismissal of directors by the GMS takes a long time, while the interests of the Company cannot be delayed. However, after 30 days after the temporary dismissal, a GMS must be held to determine whether the temporary dismissal will become a permanent dismissal or the directors will return to their original positions. If the 30-day period elapses, the dismissal of the directors becomes void.

Resignation of Directors

Although resignation by directors is not specifically explained by the Company Law, it is explained in Article 107 of the Company Law that, the articles of association may contain provisions regarding:

1. procedure for resignation of members of the board of directors;
2. procedures for filling vacant positions of members of the board of directors; and
3. the party authorised to carry out management and represent the Company in the event that all members of the board of directors are absent or temporarily dismissed. 

Responsibility of Directors Who Are Dismissed or Resigned

The board of directors who have been dismissed or have voluntarily resigned are not thereby absolved of their responsibilities.

As stipulated in Article 97 Paragraphs (3) of the Company Law,

“Each member of the board of directors shall be personally liable for the losses of the company if he/she is guilty or negligent in carrying out his/her duties."

Based on the explanation of Article 97 Paragraph (3) of the Company Law above, the directors who are dismissed or whose resignation is approved still have the obligation to be responsible for all their actions and decisions during the term of office of the directors, including those related to the accountability of the annual report and financial statements of the Company.

However, based on Article 97 Paragraph (5) of the Company Law,

“Members of the board of directors shall not be liable for the loss as referred to in paragraph (3) if they can prove:

1. The loss is not due to his fault or negligence;
2. Have conducted the management in good faith and prudence for the interests and in accordance with the purposes and objectives of the Company;
3. Has no conflict of interest, either directly or indirectly, over the management actions that resulted in the loss; and
4. Have taken measures to prevent the incurrence or continuance of the loss."

The release of responsibility of directors who are dismissed or whose resignation is approved can be carried out in a GMS resolution or a resolution outside the GMS with the statement:

"the directors are released from responsibility (acquite de charge), duties or obligations for activities that have been carried out during the management"

- Rizky Prakoso -