Can a Company Be Criminally Liable? Here’s What the New Criminal Code Says

Introduction

For many years, the Indonesian criminal law system centered on individuals as the primary legal subjects. The previous Criminal Code (KUHP) did not explicitly recognize Corporations as entities capable of committing Criminal Offenses. Criminal law enforcement consistently focused on the phrase “any person” or individuals (natuurlijk persoon), so criminal liability for offenses committed within a business environment was imposed on the management rather than on the company itself.

Although several specific laws (lex specialis) outside the Criminal Code, such as the Law on the Eradication of Corruption Crimes, had introduced the concept of Corporate liability, the regulations remained partial in nature. The Government comprehensively reformed criminal law through the enactment of Law Number 1 of 2023 on the Criminal Code (“New Criminal Code”). This regulation expressly recognizes Corporations as subjects of criminal law and broadens the scope of criminal liability.

 

Relevant Articles

The primary legal basis on Corporate Crimes is now comprehensively regulated under the New Criminal Code. The following are the key articles forming its foundation:

Article 45: Corporation as a Subject of Criminal Offenses

Paragraph (1) states: “A Corporation constitutes a subject of Criminal Offenses.” Furthermore, paragraph (2) clarifies that Corporations include both legal entities (such as Limited Liability Companies, Foundations, Cooperatives, State-Owned Enterprises, and Regionally-Owned Enterprises) and non-legal entities (such as Firms and Limited Partnerships).

Articles 46 & 47: Scope of Perpetrators of Corporate Crimes

The New Criminal Code expands the definition of perpetrators of Corporate Crimes. Under Article 46, such Criminal Offenses may be committed by management holding a functional position, or by other persons acting for and on behalf of the Corporation or acting for the benefit of the Corporation within the scope of its business activities. In addition, Article 47 affirms that Criminal Offenses may also be committed by parties outside the organizational structure who are capable of controlling the Corporation, such as instructing parties, controlling parties, or beneficial owners.

Article 48: Requirements for Corporate Criminal Liability

A Corporation may be held criminally liable if the Criminal Offense:

1. Falls within the scope of business or activities stipulated in the articles of association or other applicable provisions governing the Corporation; 
2. Unlawfully benefits the Corporation; 
3. Is accepted as a Corporate policy; 
4. Occurs because the Corporation failed to take the necessary measures to prevent the offense, prevent greater impacts, and ensure compliance with applicable legal provisions in order to avoid the occurrence of the Criminal Offense; and/or 
5. Is allowed to occur by the Corporation. 

Article 49: Parties Subject to Liability

Under this article, criminal liability may be imposed on the Corporation itself, its management holding functional positions, instructing parties, controlling parties, and/or beneficial owners of the Corporation.

 

Criminal Sanctions for Corporations

The New Criminal Code formulates layered and substantial sanctions for Corporations proven to have committed Criminal Offenses, consisting of principal penalties, additional penalties, and measures.

Principal Penalty

Pursuant to Article 118 and Article 119, the principal penalty imposed on a Corporation is a criminal fine. The amount of the fine is regulated under Article 121, which stipulates fine categories ranging from Category IV (IDR 200,000,000) to Category VIII (IDR 50,000,000,000), depending on the severity of the imprisonment penalty attached to the committed Criminal Offense.

Additional Penalties

In addition to fines, judges may impose sanctions with broader consequences. Article 120 regulates various additional penalties, including:

1. Payment of compensation; 
2. Remedying the consequences of the Criminal Offense; 
3. Confiscation of goods or profits obtained from the Criminal Offense; 
4. Performance of neglected obligations; 
5. Fulfillment of customary obligations; 
6. Financing of job training; 
7. Publication of the court decision; 
8. Revocation of certain licenses; 
9. Closure or suspension of all or part of the Corporation’s business premises and/or activities; 
10. Dissolution of the Corporation. 

Measures

Furthermore, Article 123 also allows the imposition of measures against Corporations, such as the takeover of the Corporation, placement of the Corporation under supervision, and/or trusteeship.

 

Practical Implications

These new regulations introduce significant changes to Indonesia’s legal and business landscape:

• Expansion of Legal Subjects: Companies may now be prosecuted and punished as legal entities, no longer limited solely to individual managers. This allows law enforcement authorities to directly prosecute companies committing Criminal Offenses. 
• Reaching Behind-the-Scenes Actors: By regulating the roles of instructing parties, controlling parties, and beneficial owners, the law can now reach parties who were previously difficult to hold accountable because they operated outside the formal organizational structure. 
• Importance of Internal Prevention Systems: The liability requirements under Article 48 emphasize the importance of the Corporation’s active role in preventing crimes. The implementation of Good Corporate Governance (GCG) principles and clear Standard Operating Procedures (SOPs) becomes a crucial legal risk mitigation tool. Law enforcement authorities will examine the adequacy of these systems as one of the initial steps in an investigation. 
• Financial and Reputational Risks: Corporations involved in Criminal Offenses now face far more serious consequences, ranging from financial losses due to substantial fines to reputational damage, operational restrictions, and even dissolution of the Corporation. 

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Closing

The New Criminal Code reforms Indonesia’s criminal liability system. By recognizing Corporations as subjects of criminal law, the New Criminal Code provides a stronger legal foundation for law enforcement authorities to prosecute organized crimes committed within business structures. These regulations not only broaden the range of parties who may be held liable to include controlling parties and beneficial owners, but also encourage companies to proactively implement sound governance as a preventive safeguard. With sanctions ranging from substantial fines and asset confiscation to corporate dissolution, this new era of Corporate criminal law enforcement demands a higher standard of accountability and integrity from the business sector in Indonesia.