Navigating Oversight: The Board of Commissioners’ Role and Responsibilities

---

Authors

---

The Board of Commissioners (“BOC”) plays a crucial role in overseeing a company’s management to ensure compliance with laws and protect stakeholders’ interests. Appointed by the General Meeting of Shareholders (“GMS”), the BOC supervises on corporate policies and provides guidance to the Board of Directors (“BOD”). Under Articles 108 to 121 of Law No. 40 of 2007 on Limited Liability Companies and its amendments (“Company Law”), the BOC carries significant responsibilities that extend beyond mere oversight.

This ARMA Update examines the BOC’s responsibilities, liabilities, and available exemptions from liability.

BOC’s Responsibility

As the supervisory body of a company and as an advisor to the BOD, BOC is obligated to act in good faith, with due care, and in a responsible manner. ^[1] If the company suffers a loss due to the negligence of the BOC in fulfilling its duties, its members may be held personally liable. ^[2] When the BOC consists of multiple members, liability is joint and several, holding all members collectively responsible for the loss. ^[3]

Beyond its supervisory function, the BOC must also: ^[4]

1. Maintain and preserve minutes of BOC meetings;
2. Report their share ownership, including that of their family members in the company and other companies; and
3. Submit an annual report detailing the supervisory duties.

Reserve Matter under BOC’s Authority

Article 117 of the Company Law grants BOC the authority to approve or reject BOD actions that require its consent. These strategic decisions, known as Reserve Matters, can be decided under a shareholders agreement made by shareholders and must be reflected in the company’s Articles of Association. The Reserve Matters cannot be executed by the BOD without BOC approval. Examples of Reserve Matters include large-scale loans, acquisitions, and other significant corporate actions that significantly impact the company’s financial position.

Exemption from Liability

BOC members may be exempt from liability for company losses if they can prove that: ^[5]

1. They have exercised their supervisory role in good faith and with due care in the best interest of the company, and in accordance with the company’s purposes and objectives;
2. They had no direct or indirect personal interest in the management decisions that led to the losses; and
3. They provided advice to the BOD to prevent or mitigate the losses.

BOC’s Liability in Bankruptcy Cases

If a company goes bankrupt due to the BOC’s negligence in supervising the company, and the company’s assets are insufficient to cover its obligations, each member of the BOC may be held jointly and severally liable alongside the BOD. ^[6]

However, BOC members may be exempted from this liability if they can prove that the bankruptcy did not result from their fault or negligence. This includes meeting the three exemption criteria outlined in the previous section (liability exemption from the company’s losses). ^[7]

---

1. Article 114 (2) of Company Law. ↩︎

2. Article 114 (3) of Company Law. ↩︎

3. Article 114 (4) of Company Law. ↩︎

4. Article 116 of Company Law. ↩︎

5. Article 114 (5) of Company Law. ↩︎

6. Article 115 (1) of Company Law. ↩︎

7. Article 115 (3) of Company Law. ↩︎

---

Disclaimer:
This client update is the property of ARMA Law and intended for providing general information and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. ARMA Law has no intention to provide a specific legal advice with regard to this client update.

Go to

1. BOC’s Responsibility
2. Reserve Matter under BOC’s Authority
3. Exemption from Liability
4. BOC’s Liability in Bankruptcy Cases

Related Updates

Latest Updates