Starting a business in Indonesia with a partner can be exciting. But before focusing on the opportunity ahead, there is an important question to answer:
What happens when the shareholders no longer agree?
One of the most common mistakes we see is relying entirely on the Deed of Establishment (Akta Pendirian) and Articles of Association of an Indonesian PT, assuming these documents cover everything the shareholders have agreed between themselves.
In practice, they often do not.
The Deed Establishes the Company. It Does Not Necessarily Explain the Partnership.
The establishment and governance of an Indonesian PT are regulated principally under Law No. 40 of 2007 on Limited Liability Companies (UU PT), as amended, including amendments introduced through Indonesia’s Job Creation legislation. The law regulates matters including incorporation, capital and shares, General Meetings of Shareholders (RUPS), Directors, Commissioners, corporate actions and dissolution.
The Deed of Establishment and Articles of Association therefore provide the formal corporate framework of the company.
For example, the corporate documents may establish that:
- Shareholder A owns 60% of the company.
- Shareholder B owns 40%.
- A is appointed as a Director.
- B remains a shareholder.
But that still leaves many practical questions unanswered.
Who is expected to run the business every day? Who controls the bank account? Can one shareholder approve a major expense without the other? What happens if the company needs another IDR 2 billion in capital? What happens if one shareholder wants to sell but the other wants to continue?
And perhaps most importantly:
What happens when the relationship between the shareholders breaks down?
These are exactly the situations where a Shareholders Agreement (SHA) can become important.
What Does a Shareholders Agreement Actually Do?
A Shareholders Agreement is a separate contractual agreement between shareholders that sets out more detailed rules governing their relationship.
Depending on the business and ownership structure, an SHA may deal with:
Roles and responsibilities
Who is responsible for operations, finance, marketing, development or other areas of the business?
Decision-making
Which decisions can management make independently, and which decisions require approval from both shareholders?
Reserved matters
Should major decisions such as taking on substantial debt, buying property, issuing new shares or selling significant company assets require unanimous or supermajority approval?
Future funding
If the company requires additional capital, how much must each shareholder contribute? What happens if one shareholder cannot or does not contribute?
Profit distribution
When should profits be retained by the company, and when can dividends be considered?
Share transfers
Can a shareholder simply sell their shares to a third party, or must they first offer them to the existing shareholder?
Exit mechanisms
What happens if one shareholder wants to leave the business?
Deadlock
What happens when shareholders cannot agree on an important decision and the company effectively becomes stuck?
Indonesian legal commentary notes that contractual arrangements can include mechanisms such as rights of first offer or refusal, anti-dilution provisions, tag-along and drag-along rights, lock-up periods, exit strategies and approval rights, provided the agreement remains consistent with applicable Indonesian law.
A Simple Example
Imagine two partners establish a hospitality company in Bali.
Partner A owns 60% and manages the business. Partner B owns 40% and provides part of the investment.
Three years later, the company wants to open a second property requiring another IDR 5 billion.
Partner A wants to proceed immediately.
Partner B believes the expansion is too risky and refuses to invest more.
Now several questions arise.
Can A approve the investment because A owns 60%? Is B required to contribute another 40% of the capital? Can the company issue additional shares if B refuses? Could B’s ownership become diluted? Can either partner sell their shares? What happens if neither side will compromise?
The original 60/40 ownership structure does not necessarily answer those questions.
A properly prepared Shareholders Agreement can establish the rules before the disagreement happens.
Why Minority Shareholders Should Pay Particular Attention
Share percentage can significantly affect corporate decision-making.
Under the Indonesian company law framework, shareholders generally exercise corporate rights through mechanisms such as the RUPS rather than simply making corporate decisions individually. Indonesian legal commentary has also highlighted the potential tension between majority and minority shareholders where a majority shareholder can dominate voting outcomes.
That makes negotiated protections particularly relevant in companies where one shareholder owns a clear majority.
For example, a 70% shareholder and a 30% shareholder could agree that certain fundamental matters still require the consent of both parties.
The purpose is not necessarily to give both shareholders equal control over everything. It is to decide, in advance, which decisions are important enough that ownership percentage alone should not determine the outcome, subject always to Indonesian company law and the company’s constitutional documents.
The SHA and the Deed Must Work Together
A Shareholders Agreement does not replace the Deed of Establishment or Articles of Association.
They perform different functions.
The Deed and Articles of Association establish the formal corporate structure and governance of the PT.
The Shareholders Agreement can provide more detailed contractual rules governing the relationship between the shareholders.
This distinction matters because an SHA cannot simply override mandatory Indonesian law or automatically change something that legally needs to be implemented through the company’s corporate documents.
For example, Indonesia’s Company Law specifically regulates the authority and procedures of the RUPS, Directors and Board of Commissioners.
The documents should therefore be drafted together and checked for consistency rather than treating the SHA as an entirely separate document.
Corporate Authority Is Not Just a Technicality
A recent Bali case provides a useful reminder of why formal corporate authority matters.
In April 2026, ANTARA reported that a lawsuit involving the investor behind the Kelingking Beach glass-lift project faced a procedural issue because the relevant power of attorney had not been signed by the authorised director. The Administrative Court considered the first filing deficient during the dismissal process, after which a new lawsuit was filed.
The dispute was not a Shareholders Agreement case, but it illustrates a broader corporate lesson: who has authority to act for a company, how that authority is documented, and whether the correct corporate procedures have been followed can have significant legal consequences.
This is why governance should not be treated as paperwork to deal with after the business has already started operating.
Another Common Scenario: The 50/50 Company
A 50/50 structure can appear fair when two partners start a business together.
But consider what happens when:
One shareholder wants to sell the business for IDR 30 billion. The other refuses.
Neither shareholder controls the majority.
Without an agreed deadlock mechanism, the company can potentially reach a point where important decisions cannot move forward.
An SHA can anticipate this situation by establishing a process such as negotiation, mediation, buy-out mechanisms or other agreed exit procedures.
The objective is simple:
Agree on the rules while the relationship is good, rather than trying to invent them when the relationship has already deteriorated.
Our Advice
If you are establishing a PT in Bali with another shareholder, do not only ask:
“Who owns how many shares?”
Ask:
“What have we agreed about how we will actually run this business together?”
Then go further.
What happens if we need more money? What decisions require both of us? What happens if one of us stops working? Can either of us sell our shares? What happens if we disagree? And how does either shareholder eventually exit?
Share ownership tells you who owns the company.
A well-structured Shareholders Agreement helps establish how those owners are expected to work together when circumstances change.
If you are establishing a PT, bringing a new shareholder into an existing company, restructuring your shareholding, or reviewing an existing shareholder arrangement, Bali Exception can assist you in understanding the appropriate corporate and shareholder structure and coordinating the required legal documentation.
This article provides general information only and should not be treated as legal advice. The appropriate structure and documentation will depend on the circumstances of each company and its shareholders.
