QUERIES
After reading the news about the former President Director of BRI Ventures being prosecuted for corruption because the start-up TaniHub, in which the company invested, went bankrupt, I became concerned while serving as a company director because making business decisions now seems extremely risky. My question is: why are so many company directors personally sued, even facing criminal charges, for making business decisions that result in corporate losses- even though there’s no fault or negligence? Isn’t business inherently associated with the risk of loss?

SUMMARY OF THE ANSWER
Directors may indeed be held personally liable, including criminally liable, for business decisions that cause company losses. However, this does not apply absolutely, because directors may be exempt from legal liability or entitled to immunity protection as long as their decisions or policies are made in accordance with the Business Judgment Rule and fiduciary duty principles. In simple terms, the Business Judgment Rule is a legal doctrine that protects company directors from liability for business decisions made reasonably, prudently, and professionally, even if those decisions ultimately result in losses for the company. The essence of business itself is inseparable from risk.

BUSINESS AND RISK
In the business world, every business decision inherently involves risk. Not every decision will generate profit. Even decisions made in good faith may still result in corporate losses. It must be understood that these risks arise from uncertainty in dealing with various unknown and fluctuating internal and external variables.

Examples include market shifts, technological disruptions, regulatory changes, or sudden changes in economic trends. These uncertainties create an unavoidable possibility in business: risks that may lead to financial losses.

THE ROLE OF DIRECTORS IN A COMPANY
In practice, a corporation is actively managed by the Board of Directors, which plays a vital role in carrying out the company’s business activities. The Board of Directors acts as the corporate organ fully authorized and responsible for managing the company in its best interests, including serving as the company’s primary decision-maker and policy-maker regarding business direction.

Note on the distinction between “Board of Directors” and “Director”: The “Board of Directors” refers to the collective governing body responsible for managing the company, whereas a “Director” refers to an individual position as a member of that board.

The phrase “fully authorized and responsible for managing the company” has resulted in many directors facing legal problems arising from the decisions or policies they made while carrying out corporate management duties.

One example is the case of Nicko Widjaja, the former President Director of BRI Ventures, who is currently facing an 11-year prison sentence in relation to the TaniHub Group investment case after the invested company went bankrupt.

This situation illustrates how crucial the decisions made by directors are. If a decision ultimately causes losses to the corporation, there have been many instances where directors were personally sued or prosecuted by law enforcement authorities, both civilly and criminally.

THE BUSINESS JUDGMENT RULE DOCTRINE
Many people do not realize that company directors actually possess certain legal protections when making business decisions. This protection is known as the Business Judgment Rule doctrine. In Indonesia, this doctrine functions as an “immunity doctrine” protecting corporate managers, particularly within State-Owned Enterprises (BUMN/BUMD), from personal or criminal liability (especially corruption-related charges) arising from ordinary business risks.

In other words, directors cannot automatically be held legally liable for decisions that result in corporate losses as long as those decisions were made in accordance with the Business Judgment Rule doctrine. The doctrine only applies when directors make decisions:
– in good faith,
– for proper purposes,
– using proper procedures,
– without conflicts of interest,
– on rational grounds,
– in the company’s best interests,
– and with due care and prudence.

This principle emerged because business inherently involves uncertainty and risk, and it is rooted in the doctrine of fiduciary duty.

FIDUCIARY DUTY AS A DIRECTOR’S OBLIGATION
The Business Judgment Rule arises from the fulfillment of fiduciary duty by directors, particularly the DUTY OF SKILL AND CARE: a legal obligation requiring directors to perform their duties with competence and prudence.

When business risks and losses arise from a director’s decision, but the director has fulfilled their fiduciary duty obligations, the director may be exempt from personal or criminal legal liability.

Essentially, the Business Judgment Rule provides legal protection for directors acting in good faith so they may manage corporate business activities without excessive fear of liability.

This legal protection addresses concerns faced by directors who wish to innovate and pursue opportunities amid uncertain business environments while fearing legal consequences.

THE CONSEQUENCES WITHOUT THE BUSINESS JUDGMENT RULE
Without the protection of the Business Judgment Rule, all directors would become afraid to make business decisions due to concerns over personal lawsuits or criminal prosecution whenever the company suffers losses.

If directors could be personally liable for every business loss without any legal defense mechanism, no director would dare to take strategic business actions. As a result, corporate growth would stagnate. More broadly, this could hinder national economic development.

THE KEY ELEMENTS OF THE BUSINESS JUDGMENT RULE
Although the term “Business Judgment Rule” is not explicitly stated in Indonesian legislation, the principle is reflected within the provisions governing directors’ liability.

Its primary legal basis can be found in Section 92 juncto Section 97 paragraph (5) of the Indonesian Company Law (Undang-Undang Nomor 40 Tahun 2007 tentang Perseroan Terbatas / “UU PT”), which essentially provides legal protection for directors against personal liability for company losses arising from business decisions, provided they can prove four cumulative elements:
1. The losses did not occur due to the directors’ fault or negligence;
2. The directors acted in good faith and exercised due care in managing the company;
3. The directors had no conflict of interest;
4. The directors took preventive measures to avoid or minimize the losses.
These four requirements are cumulative, meaning all must be fulfilled for directors to be released from personal liability.

THE APPLICATION OF THE BUSINESS JUDGMENT RULE
In practice, Indonesian law enforcement authorities have not yet reached a uniform understanding regarding the application of the Business Judgment Rule doctrine.

This is because Section 97 paragraph (5) of the Company Law (UU PT) does not provide detailed standards for determining whether each element has been fulfilled. Consequently, liability determinations are left largely to judicial interpretation during court proceedings. This has resulted in inconsistencies in legal interpretation and judicial assessment across Indonesian legal precedents.

For example, in Supreme Court Decision No. 121 K/Pid.Sus/2020, the former Director of PT Pertamina Hulu Energi was acquitted because the failed oil exploration decision remained within the scope of the Business Judgment Rule, as there was no evidence of fraud, conflict of interest, unlawful conduct, or intentional wrongdoing.

However, in Supreme Court Decision No. 417 K/PID.SUS/2014, the former Director of PT Merpati Nusantara Airlines (Persero) was found guilty due to a breach of contract committed by the aircraft supplier, not because of the director’s negligence or misconduct. Ironically, the decision had been made based on authority granted under the company’s approved Work Plan and Budget (RKA) and approved by the General Meeting of Shareholders (RUPS). The business decision was also intended to support corporate expansion by increasing and modernizing the airline fleet in accordance with Good Corporate Governance principles. Nevertheless, the court still found the director guilty of corruption.

Currently, the prosecution of former BRI Ventures President Director Nicko Widjaja has become another major controversy involving the Business Judgment Rule doctrine. He faces corruption charges for his investment decision involving TaniHub Group, which later went bankrupt.

This case has attracted major attention because it is considered the first case bringing venture capital business practices into the realm of criminal corruption law (prosecution). Some legal opinions argue that the investment decision already fulfilled Business Judgment Rule standards because it complied with prudential standards and completed proper due diligence processes. Therefore, some experts argue that the investment loss suffered by BRI Ventures should arguably be considered an ordinary business risk rather than a criminal act.

Author: Jose Tjahjono, S.H., LL.M., CPLA.

REFERENCES

1. Pasal 109 angka 1 Peraturan Pemerintah Pengganti Undang-Undang Nomor 2 Tahun 2022 tentang Cipta Kerja (“Perppu Cipta Kerja”) yang mengubah Pasal 1 angka 5 Undang-Undang Nomor 40 Tahun 2007 tentang Perseroan Terbatas (“UU PT”).
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2. Asep Mulyana. Business Judgment Rule, Praktik Peradilan Terhadap Penyimpangan dalam Pengelolaan BUMN/BUMD. Jakarta: PT Grasindo, 2018, hal. 10 ↩︎
3. Pasal 97 ayat (2), (3) UU PT. ↩︎
4.  Hendra Setiawan Boen. Bianglala Business Judgment Rule, Cetakan Pertama, Jakarta: PT Tatanusa, 2008, hal. 100. ↩︎
5. Eri Hertiawan. 2024. Penerapan Doktrin Business Judgment Rule di Indonesia. HukumOnline. Diakses pada https://www.hukumonline.com/klinik/a/penerapan-doktrin-ibusiness-judgment-rule-i-di-indonesia-lt62565dbe855a0/#_ftn2