On January 2nd 2023, the Indoensian government passed Law No: 1 of 2023 concerning the Indonesian Criminal Code (“ICC”) to replace the previous criminal code which was first introduced by the Dutch government during the colonization over Indonesia 300 (three hundred) years ago. The new ICC aim to be more modernized and grounded to the development of corporate practice. To that end, the corporation may now be subject to criminal liability under the new criminal code.

Corporations as Subject to Law Number 1 of 2023

Previously, the subject to criminal liability is only limited to individual since the concept of corporation as well as corporate criminal liability is not common during the Dutch colonial period. Article 145 of the the new ICC has included corporation in the definition of a ‘person’. Meaning, whenever the new criminal code refers to a person, it will also include corporation.

The new ICC further defines what it means by ‘corporation’ which includes more than limited liability companies i.e., foundations, cooperatives, state-owned and region-owned enterprises, civil partnerships, firms, and other equivalent entities.

The new ICC also defines the concept of corporate crime as any criminal act committed by:

1. An individual who holds a functional role in the management of a corporation;
2. Any individual who maintains a working or other relationship that authorizes them to act on behalf of the corporation;
3. Any individual who acts in the best interests of the corporation;
4. Any individual who gave the order for the crime; and
5. The person who controls and/or owns the corporation for their own benefit.

When Corporation Is Liable

The new criminal code outlines the criteria for imposing criminal penalties on corporations. The criteria include the following:

1. The alleged offense must be related to the corporation’s business or activities as stated in its articles of association or other applicable provisions;
2. The corporation has unlawfully benefited from the crime;
3. The corporation has adopted the alleged crime as corporate’s policy;
4. The corporation fails to take preventive measures to avoid the damages from occurring nor ensuring legal compliance;
5. The corporation allows the alleged crime to occur.

It is important to note that these criteria are not cumulative. As such, the corporation may be held liable even if it satisfies only one of the above criteria.

Corporate Sanction

A corporation is subject to (i) primary sanction, and (ii) additional sanctions. The primary sanction for corporations is in the form of fines with a minimum of Category IV fine in the amount of IDR 200.000.000,00 (two hundred million Rupiah) up to Category VII fine in the amount of IDR 50.000.000.000,00 (fifty billion Rupiah). On top of primary sanctions, the sentence against corporate crime can also include additional sanctions which may include:

1. Order to provide compensation for damages;
2. Requirement to implement measures to address or remedy the effects of the alleged offense;
3. Fulfillment of local customary obligation;
4. Order to pay for work training;
5. Confiscation of goods or profits obtained through the alleged offense;
6. Public announcement of the court’s decision;
7. Revocation of permits;
8. Permanent ban on certain actions;
9. Partial or complete closure of business premises and/or corporate activities;
10. Suspension of business activity;
11. Dissolution of the corporation.

Furthermore, the government reserves the right to take over or place the corporation under supervision or guardianship in addition to the above-mentioned sanctions. In the event that the corporation does not carry out the additional sanction from letter a to letter e, the corporation’s asset may be confiscated and auctioned to pay for the unfulfilled additional sanction.

Key Takeaways

While the new criminal code would only enter into force 3 (three) years after its promulgation, corporations have to anticipate the increase of prosecution of corporate crime in the future. As dragging a multi-million corporation into lengthy criminal procedure would be as mundane as a police report, corporations have to implement good corporate governance by virtue of vigilence and compliance with law.