Introduction

In Indonesia, legal entities are generally classified as public or private entities. State-Owned Enterprises (SOEs) represent a distinct category, in which all or a majority of the capital is directly owned by the state or the state holds special rights. SOEs established as limited liability companies primarily operate for profit and are governed by Law No. 19 of 2003 on State-Owned Enterprises, while public companies remain subject to Law No. 40 of 2007 on Limited Liability Companies.

The treatment of assets invested in SOEs, however, has historically been subject to legal ambiguity. Certain regulations, including Minister of Finance Regulation No. 179/PMK.02/2022 and Law No. 1 of 2004 on the State Treasury, have treated dividends and assets associated with SOEs within the framework of state finances, potentially reflecting the state’s position as a public authority rather than solely as a shareholder.

Law No. 16 of 2025, the Fourth Amendment to the State-Owned Enterprises Law, seeks to clarify this position. The amendment transfers the authority to manage SOE dividends from the Minister of Finance to BP Danantara and clarifies that, following a state capital injection, the resulting assets become the property of the SOE and are governed by private law, particularly the Limited Liability Companies Act. The Elucidation of Article 4B further establishes that profits and losses incurred by an SOE constitute those of the SOE, rather than those of the state.

This amendment therefore marks a normative shift in the treatment of SOE assets—from a public finance approach to a corporate asset approach, reinforcing the SOE’s status as a separate legal entity and its accountability for its own assets, profits, and losses.

Implications of the Paradigm Shift in the Treatment of State-Owned Enterprises Assets: From Public Finance Logic to Corporate Asset Logic and Its Significance for Legal Certainty in SOE Business Activities 

A paradigm shift in the interpretation of state wealth as SOEs’ assets can provide legal certainty for SOEs themselves in the conduct of their business activities. Directors of SOEs are often embroiled in corruption cases because their business policies that cause losses to the enterprises are deemed to be detrimental to the state’s finances. In the business world, no one seeks to incur a loss. However, business conditions can be highly dynamic and difficult to predict, such that business strategies and decisions that were initially expected to be profitable may ultimately produce the opposite result. For instance, the cases involving the Managing Directors of BJB and Bank Jateng, and the Director of Bank DKI, resulted in acquittals in the Sritex case.

Another example is the corruption case involving the former Chief Executive of PT ASDP Indonesia Ferry, Ira Puspadewi. The case attracted considerable attention because one of the judges issued a dissenting opinion in the judgment. The presiding judge, Sunoto, opined that Ira Puspadewi and her co-defendants should have been acquitted due to the lack of sufficient evidence establishing the existence of corruption. Apart from the fact that no state funds were involved, ASDP’s acquisition of PT JN was purely a business decision; treating it as an act of corruption would create a chilling effect on SOEs and discourage them from making legitimate business decisions. 

Strengthening the Business Judgment Rule under the Fourth Amendment to the State-Owned Enterprises Act 

The fourth amendment to the State-Owned Enterprises Act, which has transformed the State’s status from that of a public authority holding shares in State-Owned Enterprises into that of an ordinary shareholder, has also strengthened SOE governance through the application of the Business Judgment Rule (BJR). Business Judgment Rule is a legal doctrine in the common law system.  This doctrine serves as a guiding framework for the board of directors to ensure that it does not act rashly when making business decisions. As every business decision may have far-reaching consequences, directors must, when making decisions, uphold the principle of prudence, act in good faith and in the best interests of the company, and comply with the provisions of the company’s articles of association and applicable laws and regulations. 

In Indonesia, the application of the BJR doctrine to directors is enshrined in Article 97 Paragraph (5) of Law Number 40 of 2007 on Limited Liability Companies Act. The four conditions set out in this section are cumulative; that is, all four conditions must be satisfied for the board of directors to be exempt from personal liability. However, it should be emphasised that the board of directors cannot invoke the BJR if its decisions are found to involve fraud, conflicts of interest, illegality, or gross negligence. 

Thus, the focus of the application of the BJR lies in the mechanisms and procedures followed by the board of directors prior to making a decision, rather than in the substance of the decision itself. In principle, the BJR is closely linked to the presence or absence of elements of intent - namely, knowledge and intention - on the part of the directors when making the decision. 

This principle is contained in Law No. 1 of 2025 concerning the Third Amendment to Law No. 19 of 2003 concerning State-Owned Enterprises. Several provisions introduced by the Third Amendment were not amended by the Fourth Amendment, one of which is Article 9F. Article 9F expressly adopts the BJR principle. The provision states that the board of directors and the board of commissioners of a State-Owned Enterprise cannot be held liable for investment losses, provided that the relevant business decision was made based on rational considerations, without any personal interest, and in good faith for the benefit of the company.  Consequently, this article provides legal certainty and promotes professionalism in business decision-making within state-owned enterprises.

The existence of this provision has driven a transformation in the governance of SOEs, bringing them more closely in line with private-sector practices. This is because, until now, boards of directors have often refrained from making certain business decisions for fear that such decisions might expose them to legal action, even where those decisions were based on sound business analysis. With the legal protection afforded by the BJR, boards of directors have greater freedom to undertake corporate actions, such as expansion, mergers, acquisitions, and business diversification,  without fear of criminal consequences should the outcome result in a loss.

Conclusion

Law No. 16 of 2025 concerning the Fourth Amendment to Law No. 19 of 2003 concerning State-Owned Enterprises marks a significant paradigm shift in the legal treatment of state-owned enterprises, particularly with respect to the status of state assets invested in SOEs and the management of SOEs' dividends. By reaffirming that assets invested as capital become the property of the SOEs and are subject to the legal regime governing limited liability companies under Law Number 40 of 2007 on Limited Liability Companies. The amendment also strengthens the distinction between state assets and corporate assets. This shift moves the legal framework governing SOEs away from a predominantly public finance logic towards corporate asset logic, thereby providing greater legal certainty in the conduct of SOE business activities. 

This development is particularly important for SOE directors, whose business decisions may involve substantial commercial risks. Article 4B explicitly states that any profit or loss incurred by an SOE constitutes a profit or loss of the enterprise, rather than a profit or loss of the State. In other words, a director should not be held criminally liable merely because a legitimate business decision ultimately results in a loss. However, the exemption of the directors of a SOE from criminal liability applies only if the directors satisfy the requirements of the BJR, namely, that they act in good faith, without personal interests, and in the best interests of the company.   The legality of a business decision should instead be assessed by examining the decision-making process, the considerations underlying the decision, and the director’s compliance with applicable laws and corporate governance requirements. 

This article is intended for general informational purposes only and does not constitute legal advice. For legal assistance or inquiries specific to your situation, please contact us at info@adplaws.com.