START NOW – Knowing the procedures for holding GMS (General Meeting of Shareholders) are very important for a company. It is especially for an LLC (Limited Liability Company). 

In this article, we will discuss the procedures for holding GMS in accordance with applicable rules and regulations.

What is GMS? 

Before discussing further about the procedures for holding GMS, it is important for us to its definition first.   

GMS stands for General Meeting of Shareholders. It is an internal meeting that held by a company to involve shareholders in the decision-making process.

At the GMS, shareholders can express their views, discuss with each other, and decide on various company’ s important agendas. 

There are two types of GMS that are commonly held by companies, namely: 

Annual GMS

As the name suggests, Annual GMS is a meeting that held routinely at least once a year. 

To be precise, this meeting is usually held no later than six months after the end of the financial year.

The main objective of the Annual GMS is to submit the company’s annual report to the shareholders.

This includes financial reports, directors’ reports, and supervisory reports from the board of commissioners. Several agendas that are usually discussed at the Annual GMS, include:

• Approval of annual reports and financial reports.
• Validation of the use of company net profit.
• Determination of dividend distribution, if any.
• Appointment and/or dismissal of members of the board of directors and commissioners.
• Determination of remuneration for members of directors and commissioners.
• Appointment of an external auditor for the next financial year.

Extraordinary GMS

Unlike the Annual GMS, an Extraordinary GMS can be held at any time according to the company’s needs. 

It is usually to discuss urgent agendas and cannot be postponed until the next Annual GMS, such as: 

• Changes to the company’s articles of association.
• Increase in paid-in and issued capital.
• Merger, consolidation, takeover or separation of companies.
• Appointment or dismissal of directors and/or commissioners outside the Annual GMS schedule.
• Significant changes in company strategic policies.

The Important Role of GMS Under the Eyes of Law in Indonesia

A discussion of the procedures for holding GMS would be incomplete if it did not mention about its important role. 

GMS is the highest forum in the corporate governance structure in Indonesia. It has an important role in determining company direction and policies.

That’s why, it is important for a company to know and carry out the procedures for holding GMS carefully. 

In Indonesia, GMS is regulated by Law no. 40 of 2007 concerning Limited Liability Companies or UUPT.

The invitation for the GMS must be in accordance with legal provisions and the company’s articles of association.

This ensures adequate participation of shareholders to achieve a legal quorum in decision making.

Quorum Requirements and GMS Invitation

One important aspect of organizing a GMS is that the meeting must meet quorum and summoning requirements.

These provisions are regulated by law and the company’s articles of association.

Quorum

Quorum is the minimum number of shareholders or shareholder proxies that must be present. Therefore, the GMS held (and its resolutions) can be considered valid.

The quorum requirements for GMS are usually specifically set out in the company’s articles of association.

However, in general, UUPT sets the minimum quorum for the annual GMS at 50% of all shares with voting rights.

If the GMS can’t reach quorum at the first call, company can hold a second one with a lower quorum. 

Even so, this lower quorum must still be in accordance with the provisions of the articles of association or UUPT.

Meanwhile, the quorum for an Extraordinary GMS is at least 2/3 of all shares with voting rights.

If a quorum is not reached on the first call, a second call can be made with a lower quorum.

Invitation to GMS

The procedures for holding GMS starts with providing notification at least 14 days before the date of the GMS.

The notice must include information about the GMS date, time, place, and agenda. It must be made officially and in writing to the shareholders.

The Procedures for Holding GMS

For the smooth process of discussion the meeting agenda, the procedures for holding GMS must take place systematically.

Therefore, the GMS agenda must be prepared clearly and conveyed to shareholders in the invitation to the GMS.

Each proposed agenda must be accompanied by adequate explanations so that shareholders can vote with sufficient information.

Order the Annual GMS’ Agenda

For an Annual GMS, the order of general agenda meeting includes:

1. Opening of Meeting
2. Explanation of the Annual Report of the Board of Directors and the Supervisory Report of the Board of Commissioners
3. Approval of the Current Year’s Financial Report
4. Determination of Use of Net Profit
5. Determination of Dividend Distribution
6. Appointment/Dismissal of Directors and Commissioners
7. Determination of Remuneration for Directors and Commissioners
8. Appointment of External Auditor
9. Closing

Order the Extraordinary GMS’ Agenda

Meanwhile, for Extraordinary GMS, the agenda can be more varied according to the company’s needs, for example:

1. Changes to the Articles of Association
2. Capital Increase
3. Merger or Acquisition
4. Strategic Policy Changes
5. Appointment/Dismissal of Directors/Commissioners Outside the Annual GMS Schedule
6. Closing

Circular Decisions

Circular Decisions are an alternative to decision-making outside of formal meetings. These decisions can be made in writing without having to hold a GMS.

This option is possible if all shareholders agree to the decision in writing and provide their signatures.

Circular Decisions are often used for urgent matters or those deemed unnecessary to discuss in formal meetings.

Although not through meetings, circular decisions have the same legal force as decisions taken at a GMS.

Circular Decision Process

Different from the procedures for holding GMS, the circular decision-making process usually involves several steps, namely:

• Preparation of Draft Decisions: The Board of Directors or the authorized party prepares a draft of the decision 
• Dissemination of Draft Decision: The draft decision is sent to all shareholders for study
• Written Consent: Each shareholder provides written approval to the draft decision by signing the document provided
• Documentation: After all shareholders agree and sign, the decision is documented and considered valid

By following the procedures for holding GMS correctly, the company can ensure that the meeting takes place efficiently and effectively.