Can a Biological Child Be a Shareholder in a Family-Owned Limited Liability Company?

Under Indonesian company law, the status of a biological child as a shareholder in a Limited Liability Company (LLC) must be examined from the perspective of legal capacity. Under Article 1330 of the Civil Code (KUHPerdata), those who are not capable of entering into an agreement are: (1) persons who have not yet reached the age of majority, (2) persons placed under guardianship (curatele), and (3) married women.

If a biological child is not yet legally capable, he or she cannot act directly as a shareholder. Share ownership, however, remains possible, only the rights of management and representation are exercised by the parent/guardian, as provided under Article 47(1) of the Marriage Law. Accordingly, shares may be registered in the child's name, but authority at the General Meeting of Shareholders (GMS) is exercised by the parent as guardian on the child's behalf.

In addition, shares in an LLC may be transferred or assigned. Under Article 56(1) of the Company Law, the transfer of rights to shares is carried out by means of a deed of transfer. This means shares may be bequeathed or gifted to a biological child in the context of inheritance, as provided under Article 833 of the Civil Code. Accordingly, when a parent who is a shareholder passes away, the biological child is, by operation of law, entitled to become the owner of the shares as an heir.

In practice, however, family-owned LLCs often include provisions in the company's Articles of Association (AD) restricting who may become a shareholder. This is permitted under Article 15(1)(e) of the Company Law, which states that the Articles of Association must contain provisions on the classification of shares (if any), the number of shares, the rights attached to shares, and the procedure for transferring rights to shares. Thus, a family may stipulate that only certain family members are entitled to hold shares, or, conversely, impose restrictions to prevent shares from falling into the hands of outside parties.

From the foregoing, it may be concluded that a biological child may become a shareholder in a family-owned PT so long as they meet the requirements of legal capacity. If the child has not yet reached the age of majority, share ownership remains possible, but the rights attached to shareholder status are exercised by the parent or guardian. The transfer of shares through gift or inheritance to a biological child is also legally valid, provided it is set out in a valid deed and recorded in the register of shareholders. Furthermore, any specific arrangements regarding a biological child's participation as a shareholder should also be addressed in the company's Articles of Association.