Director Fee Agreement Template for Indonesia

A Director Fee Agreement is a fundamental corporate document that formalizes the compensation arrangement between your Indonesian PT company and its directors. Under Indonesian Law No. 40/2007 on Limited Liability Companies, this agreement ensures transparency and legal compliance in director remuneration while protecting both company and director interests.

When do you need this document?

You need a Director Fee Agreement whenever appointing new directors to your PT company or when revising existing compensation structures. This document becomes essential when your shareholders approve director appointments and need to formalize remuneration terms. For publicly listed companies, OJK Regulation No. 34/POJK.04/2014 mandates transparent remuneration processes, making this agreement crucial for regulatory compliance. You'll also require this document when restructuring executive compensation, introducing performance-based incentives, or ensuring tax compliance under Income Tax Law No. 36/2008. Banks and investors often require these agreements during due diligence processes to verify proper corporate governance structures.

Key legal considerations

Your Director Fee Agreement must clearly define the compensation structure, including basic fees, performance bonuses, and additional benefits. The agreement should specify payment schedules, currency, and any conditions affecting remuneration adjustments. Tax implications require careful attention, as director fees are subject to Indonesian income tax regulations with specific withholding and reporting requirements. Performance metrics and evaluation criteria must be objective and measurable to avoid disputes. The agreement should address termination scenarios, including severance arrangements and benefit continuation. For listed companies, ensure compliance with remuneration committee requirements and disclosure obligations. Include provisions for expense reimbursements, professional indemnity coverage, and confidentiality obligations to protect company interests.

Legal requirements in Indonesia

Indonesian law requires proper corporate authorization for director fee agreements, typically through shareholder resolutions or board of commissioners approval. Law No. 40/2007 mandates that director remuneration decisions follow company articles of association and shareholder meeting procedures. For significant compensation amounts, general meeting of shareholders approval may be required. Listed companies must establish remuneration committees and follow OJK transparency requirements for executive compensation disclosure. The agreement must comply with Indonesian tax laws, including proper withholding procedures and annual tax reporting obligations. Documentation should be in Indonesian language or include certified translations for legal validity. Ensure the agreement doesn't violate maximum compensation limits set by company bylaws or shareholder resolutions. Regular review and approval processes must be established to maintain ongoing compliance with evolving regulations and corporate governance standards.