Definition of Limited Liability Companies according Article 1 paragraph 1 of Law Number 40 of Year 2007 (“Company Law”), stated:

“Limited Liability Company” hereinafter called a (“Company”) means a legal entity which constitutes an alliance of capital established pursuant to a contract in order to carry on business activities with an authorized capital all of which is divided into shares and which fulfils the requirements stipulated in this law and its implementing regulations”

According to the Article above, a Company is established under the “agreement”, whereas the establishment of a Company which constitutes an alliance of capital among the founder and/or shareholder, shall  fulfill the law agreement which is regulated in the Book Three of Indonesia Civil Code (“Civil Code”), especially Chapter Two, Section 1 (one) concerning General Provisions of Agreement (Article 1313-1319 of Civil Code) and the section concerning the condition that are required for the validity of agreement  (Article 1320-1337 of Civil Code) and the Section 3 (three) concerning the effect of agreement (Article 1338-1341 of Civil Code).

If it is viewed by in terms of  agreement, the establishment of Company as a legal entity is a “contractual basis” that is the establishment of a Company constitutes the effect that arise from an agreement, and also be “consensual” that is consented to bind the agreement to establish a Company.

According to Article 1313 of Civil Code, the definition of an agreement is an act pursuant to which one or more individuals commit themselves to one another. The provision is consistent with Article 7 paragraph (1) of Company Law, that regulates concerning the valid Company establishment that shall be established by 2 (two) “persons” or more. In accordance with the explanation of Article 7 paragraph (1) of Company Law, “persons” refers to individuals, both Indonesian and foreign citizens or Indonesian or foreigner legal entity. The provisions of this paragraph describes the principle that applies under the Company Law that is as a legal entity, a Company is established under the agreement, because it has more that 1 (one) shareholder.

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In order to make a validagreement, it shall fulfill the requirement of consent, capacity to conclude an agreement, a specific object, and alegal cause (Article 1320 of Civil Code).

Sofie Widyana P.