Derivative Action in Limited Liability Company

In the Law Dictionary (Gifis, Steven H.; 1984: 129), derivative action is explained as an action or claim based on the primary right of the company, but performed by the shareholders for and on behalf of the company. This claim can be filed by the shareholders in the event of failure and losses on the company conducted by the member of directors.

 With regards to the definition, the doctrine of law of Munir Fuady in his book “The Modern Doctrines in Corporate Law and its Existence in Indonesian Law” (Doktrin Modern dalam Corporate Law dan Eksistensinya dalam Hukum Indonesia), states that the element of derivative action is as follows:

1. the existence of a claim;
2. the claim is filed through a court;
3. the claim is filed by the shareholders of the company;
4. the shareholders file a claim for and on behalf of the company;
5. the sued party, other than the company, is usually the board of directors of the company;
6. the cause to do a claim is due to failure in the company or event that damages the relevant company;
7. since it is filed for and on behalf of the company, then all the results of the company’s lawsuit become the property of the company even if the parties that filed a lawsuit are the shareholders.

Derivative action is regulated under the Law No. 40 of 2007 on Limited Liability Company (“Company Law”). Under Article 97 paragraph 6 of the Company Law, on behalf of the company, the shareholders representing at least 1/10 (one-tenth) from the total number of shares with voting right, may submit a claim to a district court against member of directors which causes losses to the company due to their fault.

With regards to the provision, the explanation of this article states that in regards to an action of directors of the company that cause losses, shareholders may represent the company to perform demands or a claim against directors through the court.

If the shareholders act as a plaintiff, the shareholders do not represent themselves but for and on behalf of the company. As a result, based on the doctrine of law of Munir Fuady (The Modern Doctrines in Corporate Law and its Existence in Indonesian Law; 2002; 76), there are some special characteristics in derivative action, namely:

1. prior to a claim, as far as possible, the authorities persons (directors) are requested to perform a claim for and on behalf of the company in accordance with the provisions of the articles of association;
2. the other shareholder can also be requested to participate in this derivative action, considering that the claim is also for his own interest;
3. in additions, the interests of other shareholders, the employees, and creditors should also be taken care of;
4. the refusal of derivative action by reason of ne bis in idem should not be detrimental to the interests of other stakeholders;
5. acceptance of benefits by shareholders who are involved in detrimental action against the company has to be limited or even restricted, namely the benefits of the compensation given as a result of derivative claim;
6. the entire benefits deriving from the company’s claim becomes the property of the company;
7. as a consequence, the company must cover the entire costs in derivative claim.

Deby Selina Panjaitan