Companies’ Obligation to Submit Annual Company Financial Reports Removed
Following the enactment of Law No. 11 of 2020 on Job Creation (“Omnibus Law”), the Ministry of Trade (“MoT”) has posted a notification on the MoT website namely Integrated Licensing Information System or Sistem Integrasi Perizinan Terpadu (“SIPT”) in the second half of 2021. The notification reinstates the removal of the obligation to submit the Annual Company Financial Reports or Laporan Keuangan Tahunan Perusahaan (“ACFR”).
To briefly explain, companies were required to submit ACFR and the relevant company’s profile information to the MoT through the SIPT Portal under Minister of Trade Regulation No. 25 of 2020 on Annual Company Financial Report (“MoT Reg 25/2020”). The submission of ACFR must be done within six months from the end of each financial year and was mandatory for companies who met one of the following criteria:
- limited liability companies that:
- are public companies;
- operate in a business sector related to the allocation of public funds;
- issue acknowledgments of indebtedness;
- having total assets of at least IDR 25 billion; or
- are debtors required by banks to audit their financial reports.
- foreign companies which are located and conducting their business activities in the territory of Indonesia, including branch offices, subsidiary companies, agents, and other forms of company representatives which are able to enter into agreements; or
- state-owned enterprises (in the form of Perusahaan Perseroan or PERSERO and Perusahaan Umum or PERUM) and regional-owned enterprises.
ACFR must be audited by an independent public accountant, authorised by the General Meeting of Shareholders, and at least include information regarding (i) the company’s balance sheet that can show the company’s financial position; (ii) statement of income; (iii) report on the changes of equity (if any); (iv) cash flow report; and (v) annotated financial statements which should at the least outline the current condition of any debts.
Removal of ACFR obligation by the MoT
ACFR obligations are abolished as a result of the revocation of the legal basis for these obligations by the Omnibus Law. Consisting of 186 articles which amend a total of 1,244 articles in 79 laws, Omnibus Law has expressly stipulated the revocation of Law No. 3 of 1982 on Mandatory Company Registration which is the legal basis of Government Regulation No. 24 of 1998 on Companies Annual Financial Information, as lastly amended by Government Regulation No. 64 of 1999. Consequently, the revocation of GR 24/1998 has also resulted in its implementing regulation, i.e. MoT Reg 25/2020 that governs the obligation to submit ACFR to be revoked.
With the removal of ACFR Obligations, companies that previously required to submit ACFR by end of Q2 every year will no longer be required to do so. Further, based on the confirmation we had obtained from our discussion with the MoT officers, companies will no longer be required to submit the outstanding ACFR for the previous years.
Companies’ obligation for audited financial statement
Regardless of the revocation of ACFR obligations, however, the requirement of an audited financial statement is still mandatory as part of Annual General Meetings of Shareholder (“AGMS”) obligations. Under Law No. 40 of 2007 on Limited Liability Companies, the Board of Directors must submit the financial statement to be audited if any of the following criteria apply to the relevant company:
- the line of business of the company is raising and/or managing public funds;
- the company issues a bond to the public;
- the company is a Publicly-Traded Company;
- the company is a State-Owned Limited Liability Company;
- the company owns assets and/or turnover of at least IDR 50 billion; or
- required by the laws and regulations.
Unaudited financial statements of companies fulfilling any criteria stipulated should not be ratified by the AGMS of such companies, which will then result in the actions and responsibilities of the relevant board members in that particular financial year cannot be accepted and ratified by the AGMS.
Below is the unofficial English translation of the notification posted by the MoT.
This alert is for general information only and is not a substitute for legal advice.