Directors Service Agreement Template for Indonesia

When appointing a director to your Indonesian company (PT), you need a comprehensive Directors Service Agreement to establish clear legal boundaries and protect both parties. This contract serves as the foundation of the director-company relationship under Indonesian Company Law (Law No. 40 of 2007) and incorporates essential corporate governance requirements mandated by local regulations.

When do you need this document?

You'll require a Directors Service Agreement when appointing new directors to any Indonesian PT, whether for initial company formation or board restructuring. This includes situations where multinational corporations establish Indonesian subsidiaries and need to appoint local or expatriate directors. The agreement is also necessary when promoting internal candidates to director positions, replacing departing directors, or when public companies must comply with OJK remuneration regulations. Additionally, you need this document when restructuring existing director arrangements to meet evolving regulatory requirements or when investors require formal documentation of management structures.

Key legal considerations

Your Directors Service Agreement must carefully balance director authority with company protection mechanisms. Include detailed fiduciary duty clauses that outline the director's obligation to act in the company's best interests, avoid conflicts of interest, and maintain confidentiality. Establish clear performance metrics and accountability standards that align with your company's strategic objectives. The compensation structure should comply with tax obligations under Law No. 36 of 2008 and include provisions for benefits, bonuses, and expense reimbursements. Termination clauses must specify grounds for removal, notice periods, and post-termination obligations including non-compete restrictions where legally enforceable. Risk management provisions should address indemnification, insurance coverage, and limitation of personal liability within legal boundaries.

Legal requirements in Indonesia

Under Indonesian Company Law, director appointments must follow specific procedural requirements including Board of Commissioners approval and, for certain decisions, shareholder consent. Your agreement must comply with minimum and maximum director requirements based on company size and type, with public companies subject to additional OJK regulations regarding independence and remuneration policies. The contract should reference relevant board resolutions authorizing the appointment and ensure alignment with the company's Articles of Association. For expatriate directors, include work permit and visa compliance obligations. The agreement must also address reporting requirements to regulatory authorities and specify the director's role in corporate governance frameworks including risk management, internal controls, and compliance monitoring systems required under Indonesian corporate law.