The Revision of the State-Owned Enterprises Law: Key Changes in State-Owned Enterprises Governance, the Establishment of BPI Danantara, and A Major Shift to Business Judgment Rule

On February 24, 2025, the President of the Republic of Indonesia, Prabowo Subianto, enacted Law No. 1 of 2025 on the Third Amendment to Law No. 19 of 2003 on State-Owned Enterprises/Badan Usaha Milik Negara (BUMN - Revised BUMN Law). This article will highlight some key points of change in the Revised BUMN Law, including (i) Change in the Definition of BUMN; (ii) BPI Danantara and the Presidential Oversight in BUMN; (iii) Investment Holding; (iv) Operational Holding; and (v) A Major Shift to Business Judgment Rule.

Change in the Definition of BUMN

Previously, Law No. 19 of 2003 on BUMN, as amended by Law No. 6 of 2023 on Job Creation (the BUMN Law), defined BUMN as business entities whose entire or majority capital is owned by the Republic of Indonesia through direct capital participation originating from separated state assets. The Revised BUMN Law expands the scope of BUMN by redefining them as business entities that meet at least one of the following criteria:

a.    the entire or majority of their capital is owned by the Republic of Indonesia through direct capital participation; or

b.    there are special rights held by the Republic of Indonesia.

The implementation of these special rights is further regulated in Article 4C of the Revised BUMN Law, which stipulates that the Republic of Indonesia holds Series A Dwiwarna shares with special rights in investment holdings, operational holdings, and BUMN. These Series A Dwiwarna shares grant at least the following special rights:

a.    the right to approve matters in the General Meeting of Shareholders (GMS);

b.    the right to propose GMS agendas;

c.    the right to request and access company data in accordance with laws and regulations;

d.    the right to determine guidelines/strategic policies in certain areas, including:

e.    accounting and finance,

f.    development and investment, and

g.    operations and procurement of goods and/or services;

h.    information technology;

i.    human resources;

j.    risk management and internal control;

k.    legal and compliance;

l.    corporate social and environmental responsibility programs;

m.    environmental, social, and governance programs;

n.    the right to appoint and dismiss members of the board of directors and board of commissioners with the President’s approval; and

o.    other rights as stipulated in the articles of association.

The Revised BUMN Law does not specifically regulate the status of business entities that are no longer officially classified as BUMN but in which the Republic of Indonesia still holds special rights—particularly in former BUMN that became part of BUMN holding formations. The question arises as to whether these former BUMN would be reclassified as BUMN under the Revised BUMN Law.

However, the Revised BUMN Law only provides that BUMN are required to align with the provisions of the Revised BUMN Law within one year after its enactment. Further provisions concerning the special rights attached to Series A Dwiwarna shares will be regulated by Government Regulation.

BPI Danantara and the Presidential Oversight in BUMN

The Revised BUMN Law provides for the establishment of Badan Pengelola Investasi Daya Anagata Nusantara (BPI Danantara) as an entity tasked with carrying out the government's responsibilities in managing BUMN. BPI Danantara is granted authority as the holder of Series B shares in both Investment and Operational Holdings.

BPI Danantara is established with the aim of enhancing and optimizing BUMN investments, operations, and other funding sources. In fulfilling this purpose, BPI Danantara reports directly to the President. To carry out its duties, BPI Danantara is granted several powers, including:

a.    managing dividends from Investment Holdings, Operational Holdings, and BUMN;

b.    approving capital injections and/or reductions in state equity participation in BUMN sourced from dividend management; and

c.    issuing loans, receiving loans, and pledging assets—with Presidential approval.

Additionally, BPI Danantara shares authority with the Minister of BUMN on matters such as:

a.    establishing Investment and Operational Holdings;

b.    approving business plans and budgets of these holdings; and

c.    approving write-offs of BUMN assets and receivables.

The Revised BUMN Law mandates that BPI Danantara must have a minimum capital of IDR 1,000 trillion. This capital may come from state capital participation in the form of cash, state-owned assets, and/or shares in BUMN, as well as other sources. Since BPI Danantara is established by the Revised BUMN Law, it can only be dissolved through an act of law, thereby ensuring the continuity of BUMN management under its authority.

Investment Holding

The Investment Holding is a BUMN whose shares are entirely owned by BPI Danantara and the Republic of Indonesia. In this holding company, BPI Danantara will hold 99% of the Series B shares, while the Republic of Indonesia will hold 1% of the Series A Dwiwarna shares, which carry special rights.

According to Article 3AB of the Revised BUMN Law, the Investment Holding is tasked with the following:

a.    managing investments;

b.    optimizing asset utilization to enhance investment value; and

c.    carrying out other duties as assigned by the Minister of BUMN or BPI Danantara.

The establishment of an Investment Holding may be carried out by either incorporating a new BUMN or designating an existing BUMN as the Investment Holding.

Operational Holding

The Operational Holding is a BUMN with a shareholding structure identical to that of the Investment Holding. According to Article 3AK of the Revised BUMN Law, the Operational Holding is responsible for:

a.    managing the operations of BUMN; and

b.    carrying out other duties assigned by the Minister of BUMN or BPI Danantara.

As with the Investment Holding, the explanation of Article 3AK of the Revised BUMN Law states that the Operational Holding may be established by either incorporating a new BUMN or designating an existing BUMN to serve as the Operational Holding.

A Major Shift to Business Judgment Rule

One of the key reforms introduced by the Revised BUMN Law is the reinforcement of the Business Judgment Rule (BJR) principle. This reinforcement is carried out through four primary measures:

1.    BUMN as Separate State Assets

The separation of BUMN from state finances is affirmed in Article 4B of the Revised BUMN Law, which stipulates that profits or losses incurred by BUMN are considered their own, and do not automatically translate into profits or losses for the state. In line with this, Article 4A Paragraph (5) emphasizes that BUMN capital—regardless of whether it originates from the State Budget (APBN) or non-APBN sources—constitutes BUMN-owned assets, for which the BUMN are fully responsible.

2.    BUMN Officials Not Classified as State Organizers

The business judgment rule is further reinforced in Articles 3X Paragraph (1), Article 9G, and Article 87 Paragraph (5), which clearly state that:

a.    the governing bodies and employees of BPI Danantara; and

b.    the board members, commissioners, supervisory board, and employees of BUMN, are not considered state officials. 

Therefore, they should not be subject to legal liabilities imposed on state functionaries.

3.    Limiting Legal Liability Based on Good Faith

Article 3Y provides legal safeguards for the Minister of BUMN, and the governing bodies and employees of BPI Danantara, shielding them from liability for financial losses if they can demonstrate that:

a.    The loss was not caused by their fault or negligence;

b.    They acted in good faith and with prudence in accordance with the purpose and governance of the investment;

c.    They had no direct or indirect conflicts of interest in managing the investment; and

d.    They did not unlawfully obtain personal gains.

Similarly, under Article 9F Paragraph (1), members of the board of directors of BUMN are protected from liability for losses if they can prove:

a.    The loss was not due to their fault or negligence;

b.    They acted in good faith and with due care in line with the interests and objectives of the BUMN;

c.    They had no direct or indirect conflict of interest; and

d.    They took necessary actions to prevent or mitigate the loss.

Further, Article 9F Paragraph (2) extends the same protection to the board of commissioners or supervisory board, provided they can demonstrate that:

a.    They exercised oversight in good faith and with prudence for the benefit of the BUMN;

b.    They had no personal interest—direct or indirect—in the actions of the board of directors that led to the loss; and

c.    They had advised the board of directors to prevent or limit the loss.

These provisions align the responsibilities of BUMN organs with those of limited liability companies under the Indonesian Company Law (UUPT), shifting the accountability framework from public finance mechanisms to corporate governance principles.

4.    Restricting BPK’s Authority Over BUMN

To reinforce the status of BUMN as separate from state finances, Articles 71 and Article 72 mandate that BUMN annual financial reports will no longer be audited by Badan Pemeriksaan Keuangan (BPK), but by independent public accountants or auditors registered with the BPK. However, Articles 71 Paragraph (2) and Article 71 Paragraph (3) still permit the BPK to conduct special-purpose audits upon request by the House of Representatives (DPR) commission overseeing BUMN. According to the explanation of Article 71 Paragraph (2), these special-purpose audits pertain to the use of government funds—such as capital injections—and not general corporate business matters.

Contact Information

 
Jourdany Timothy
Associate
Jakarta