The Government of Indonesia is in the process of enacting a new regulation aimed at enhancing legal awareness and improving compliance among businesses (Draft Bill). Key highlights from the Draft Bill include provisions to increase transparency in corporate governance, stricter penalties for non-compliance, and mandatory legal audit. Businesses operating in Indonesia should closely monitor the development of the Draft Bill, as it may bring significant changes to their compliance requirements and operational practices.
- Mandatory Annual Legal Audit.
The Draft Bill shows a new requirement for businesses to undergo a mandatory annual legal audit by legal auditors certified by the Minister of Law (MOL). The Draft Bill does not clearly indicate when the legal audit should take place, we anticipate that this will be clarified in forthcoming implementing ministerial regulations.The legal audit must be conducted at least once a year to assess the businesses’ compliance of laws, regulations, and good governance practices. The audit process involves identifying the objectives of legal audit, planning the scope of legal audit, collecting and analysing data, and providing compliance recommendations to the businesses. Subsequently, businesses must submit the legal audit report, along with details of corrective measures taken, to the MOL, the relevant sector ministries, and the regional authorities overseeing licensing and government affairs.
- Sanctions
If a business fails to comply with the mandatory annual audit requirement, the MOL may impose sanctions, among others appointing a legal auditor to conduct an independent legal audit. The Draft Bill mandates each relevant Minister to regulate detailed procedures and applicable sanctions.
We will closely monitor the development of the Draft Bill and keep you updated. In the meantime, if you have further inquiries about this newsletter, please reach out to us at info@wplaws.com or any of our lawyers.