The agreement made and signed by X as the director of the company before he was dismissed is essentially in accordance with the provisions of the Company Law because during his tenure as director, X had the authority to act on behalf of the company both in and out of court, including representing the company for and on behalf of the company in making loan agreements with other companies.

In the law, the authority of the board of directors is regulated in the following article:

Article 109 paragraph 1 of the Job Creation Law Omnibus Law amends Article 1 paragraph 5 of the Company Law

The Board of Directors is the Company’s organ that is fully authorized and responsible for managing the Company in the interest of the Company, in accordance with the Company’s objectives and purposes, and represents the Company, both in and out of court, in accordance with the provisions of the articles of association.

Article 92 paragraph (1) of the Company Law

The Board of Directors manages the company for the benefit of the company and in accordance with the company’s purpose and objectives.

Article 98 of the Company Law

1. The Board of Directors represents the Company both in and out of court.
2. In the event that the Board of Directors consists of more than one person, each member of the Board of Directors is authorized to represent the Company, unless otherwise specified in the articles of association.
3. The authority of the Board of Directors to represent the Company as referred to in paragraph (1) is unlimited and unconditional, unless otherwise specified in this Law, the articles of association, or the GMS Resolution.
4. The GMS Resolution as referred to in paragraph (3) must not contradict the provisions of this Law and/or the articles of association of the Company.

As a result, the debts incurred by the directors are not based on the personal obligations of the directors; instead, the company can be held liable if X is dismissed as a director. In other words, the debts incurred by the directors are valid and binding on the company, and the company must pay them even if the directors change. If the company continues to refuse to pay its debts to other companies, those companies can file a lawsuit in court against the company, not its directors.

One of the Supreme Court’s decisions, Supreme Court Decision No. 419 K/Pdt/1988, states that a limited liability company, as a legal entity, is a legal subject that performs legal acts in the form of a general indemnity agreement, so the lawsuit should be filed against the limited liability company and not against its director.

According to this jurisprudence, a legal entity is a legal subject that protects rights and obligations under the law. A legal entity such as a limited liability company (PT) has performed legal acts, such as entering into, creating, and signing agreements with other legal subjects. If a breach of contract occurs, the civil lawsuit must be directed against the legal entity (PT) that signed the agreement. Then, based on the loan agreement, which is regulated in Article 1243 of the Civil Code, the lawsuit is based on default.

Legal Basis:

1. Civil Code;
2. Law Number 40 of 2007 concerning Limited Liability Companies;
3. Government Regulation in Lieu of Law Number 2 of 2022 concerning Job Creation;
4. Law Number 6 of 2023 concerning the Enactment of Government Regulation in Lieu of Law Number 2 of 2022 concerning Job Creation into Law.

Reference:
Hukumonline.com