Terminating BOD & BOC in the Company

How to Terminate the Board of Directors and Board of Commissioners in a Company

In corporate governance, terminating the Board of Directors (BOD) or Board of Commissioners (BOC) is a serious decision with legal, operational, and reputational consequences. Whether due to underperformance, misconduct, restructuring, or shareholder pressure, the process must follow legal protocols and the company’s Articles of Association.

1. Understand the Legal Framework

Every company is governed by a set of laws depending on its jurisdiction. In many countries, including Indonesia, the Company Law (UU No. 40 Tahun 2007) regulates the appointment and dismissal of directors and commissioners. The Articles of Association of the company also lay out specific terms and procedures for termination.

2. Grounds for Termination

Termination must be based on legitimate reasons such as:

• Breach of fiduciary duty

• Fraud or unethical conduct

• Conflict of interest

• Poor performance or failure to meet business targets

• Organizational restructuring or mergers

3. Shareholders’ General Meeting (GMS)

The most common and legally binding method to remove members of the BOD or BOC is through a General Meeting of Shareholders (GMS). The steps typically include:

• Scheduling the GMS with proper notice

• Including the termination as an agenda item

• Providing reasons and supporting evidence

• Holding the vote – typically, a simple majority or two-thirds majority is required, depending on the company’s rules

4. Document Everything

All decisions made during the GMS must be documented in minutes of meeting, notarized, and submitted to the Ministry of Law and Human Rights (or its equivalent, depending on the jurisdiction) to officially record the changes.

5. Communicate Internally and Externally

After termination, inform stakeholders, including employees, partners, clients, and regulatory bodies. Transparency helps maintain trust and prevents rumors or speculation.

6. Appoint Replacements (if necessary)

If the termination leaves key roles vacant, the GMS can also appoint interim or permanent replacements during the same meeting. Continuity in leadership is critical to avoid disruption in company operations.

Conclusion

Terminating members of the BOD or BOC isn’t just a leadership change—it’s a strategic move with long-term impact. Done improperly, it can lead to lawsuits, regulatory penalties, or internal instability. Done right, it opens the door for stronger governance and better performance.