The enactment of Indonesia’s New Criminal Code (Law No. 1 of 2023) introduces a more structured and expansive framework governing the liability of directors and corporations—particularly in relation to financial reporting and corporate disclosures.

Key highlights from KUHP 1/2023 (Indonesia’s New Criminal Code Law No. 1 of 2023)

1. Liability for False Corporate Reporting

The New Criminal Code explicitly regulates criminal acts related to inaccurate or misleading corporate reports—previously governed under the old code.

Article 508 states that:

Entrepreneurs, directors, or commissioners who publish false financial statements or misleading company conditions may face imprisonment of up to 1 year and 6 months or a criminal fine.

This represents an increase from the previous maximum imprisonment of 1 year and 4 months under the old code.

2. Increased Financial Penalties

A significant change in the New Criminal Code is the structured categorization of fines.

Under Article 508, the maximum fine falls under Category III, which—based on Article 79(1)(c)—amounts to up to: IDR 50,000,000

3. Expanded Corporate Criminal Liability

The New Criminal Code strengthens corporate liability mechanisms, directly impacting directors and management.

Key provisions include:

  • Corporations as Criminal Subjects (Article 45)
    Corporations—including limited liability companies, foundations, cooperatives, state-owned enterprises, partnerships—can now be prosecuted.

  • Dual Liability (Directors & Corporation)
    Criminal acts committed by management within their authority and for corporate benefit can result in both personal and corporate liability.

  • Conditions for Corporate Liability (Article 48)
    A corporation may be held liable if:

    1. The act falls within its business activities

    2. It provides unlawful benefit to the corporation

    3. It is accepted as corporate policy

    4. The corporation fails to implement preventive compliance measures

    5. The corporation allows the violation to occur

This means: if directors issue false reports and these conditions are met, the corporation itself can also be penalized.

4. Additional Sanctions for Directors

Courts may impose additional penalties (Article 49), including:

  • Revocation of rights (Articles 86–87), such as:

    • Holding certain positions

    • Practicing specific professions

    • Voting or being elected

  • Public announcement of the court decision

These sanctions can effectively end a professional career.

5. Other Relevant Criminal Offenses

Directors may also be exposed to broader criminal provisions, including:

  • Document Forgery (Article 391)
    Up to 6 years imprisonment for falsifying documents causing legal consequences

  • Forgery of Specific Financial Instruments (Article 392)
    Up to 8 years imprisonment for falsifying shares, bonds, or corporate securities

  • False Testimony Under Oath (Article 373)
    Up to 7 years imprisonment

  • Destruction of Official Documents (Article 365)
    Up to 4 years imprisonment

Corporate reports and financial statements are often legally categorized as documents, making them subject to these provisions.

Key Takeaways for Directors and Business Leaders

1. Personal Risk is Now Real

This is no longer just about company reputation. You face direct criminal exposure, including imprisonment and fines.

2. You and Your Company Can Be Prosecuted Together

The New Criminal Code allows simultaneous liability—both you and your company can be punished for the same violation.

3. Loss of Professional Rights

Beyond fines or prison, you may lose your ability to:

  • Serve as a director

  • Practice your profession

  • Participate in public office

4. Internal Controls Are Your Legal Shield

Strong governance is no longer optional. It is your first line of legal defense.

5. Every Document Matters

Financial statements, declarations, and corporate documents can all become criminal evidence.

6. Transparency Is No Longer Optional

“Window dressing” financial data is now a criminal risk, not a business tactic.

7. Compliance Must Be Embedded in Policy

If violations are tolerated or embedded in company policy, liability expands significantly.

8. Legal Counsel Is a Strategic Necessity

Regular legal audits and professional legal advice are now essential to safeguard both directors and corporations.

Conclusion

Indonesia’s New Criminal Code fundamentally shifts corporate accountability—from organizational responsibility to personal accountability at the leadership level.

Compliance is no longer just a legal function—it is a core responsibility of every director.

Act with integrity. Build strong systems. Protect yourself through transparency.

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