Advisory Board Agreement Template for Indonesia
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What is a Advisory Board Agreement?
The Advisory Board Agreement is a critical document used when companies in Indonesia seek to formally engage external experts to provide strategic guidance and industry insights. This document is essential for establishing clear parameters of the advisory relationship while ensuring compliance with Indonesian legal requirements, including corporate law, employment regulations, and language requirements. The agreement typically includes comprehensive provisions covering appointment terms, compensation, confidentiality, intellectual property rights, and independence of the advisor. It's particularly important in the Indonesian context where business relationships often require careful documentation and clear distinction from employment relationships. The document should be drafted in both Indonesian and English languages to comply with Law No. 24 of 2009, with the Indonesian version prevailing in case of inconsistencies.
About the Advisory Board Agreement
An Advisory Board Agreement is a specialized contract that formalizes the relationship between your Indonesian company and external advisors who provide strategic guidance, industry expertise, and business insights. This document is crucial for establishing clear legal boundaries while ensuring compliance with Indonesia's complex regulatory framework governing business relationships.
When do you need this document?
You need an Advisory Board Agreement when your Indonesian company seeks to engage external experts for strategic advice without creating an employment relationship. This is particularly important for startups seeking mentorship from industry veterans, established companies expanding into new markets, or businesses requiring specialized expertise for major projects. The document becomes essential when compensation is involved, confidential information will be shared, or when the advisor's guidance could significantly impact business decisions. Indonesian companies also use these agreements when foreign advisors are involved, ensuring proper documentation for regulatory compliance and tax purposes.
Key legal considerations
The agreement must clearly distinguish the advisory relationship from employment to avoid triggering obligations under Law No. 13 of 2003 on Manpower. Key provisions should include specific terms of appointment, scope of advisory duties, compensation structure, confidentiality obligations, and intellectual property ownership. The document should address potential conflicts of interest, establish meeting attendance requirements, and define the advisor's independence. Liability limitations are crucial, as advisors typically provide guidance rather than make binding decisions. The agreement should also include termination clauses, non-compete provisions where legally permissible, and dispute resolution mechanisms that comply with Indonesian arbitration laws.
Legal requirements in Indonesia
Indonesian law requires that advisory agreements comply with the Indonesian Civil Code's contract formation principles, including clear offer, acceptance, and consideration. Under Law No. 24 of 2009 on Flag, Language, State Symbol and National Anthem, contracts involving Indonesian entities should be prepared in Indonesian language, with Indonesian versions taking precedence in disputes. The agreement must respect Indonesia's employment laws by ensuring advisors maintain genuine independence and are not subject to day-to-day control typical of employees. Data protection provisions must align with Indonesia's ITE Law (Law No. 11 of 2008), particularly regarding confidential information handling. Companies must also ensure the agreement structure doesn't inadvertently create tax withholding obligations or violate foreign investment regulations if international advisors are involved.
GOVERNING LAW
Applicable law
This Advisory Board Agreement is drafted to comply with Indonesia law. Key legislation includes:
Law No. 13 of 2003 on Manpower: Governs employment relationships and must be considered to properly structure the advisory relationship as non-employment to avoid misclassification
Law No. 28 of 2014 on Copyright: Regulates intellectual property rights and protection, relevant for any intellectual property created or shared during the advisory relationship
Law No. 11 of 2008 on Electronic Information and Transactions (ITE Law): Governs electronic communications and data protection, important for confidentiality provisions and electronic communications between parties
Law No. 20 of 2001 on Anti-Corruption: Sets requirements for preventing corruption in business relationships, including restrictions on gifts and payments to advisors who may have government connections
Law No. 36 of 2008 on Income Tax: Governs taxation of advisory fees and compensation, including withholding tax obligations
Government Regulation No. 71 of 2019 on Electronic Systems and Transactions: Provides framework for electronic document validity and digital signatures if the agreement will be executed electronically
Law No. 24 of 2009 on National Flag, Language, Emblem and Anthem: Requires agreements involving Indonesian parties to be drafted in Indonesian language or be bilingual with Indonesian version
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