Business Judgment Rule and Limits of Directors' Liability in Limited Liability Company Law in Indonesia

Abstract

The Business Judgment Rule principle is a legal doctrine that provides protection for directors in carrying out their managerial functions, as long as the business decisions taken are made in good faith, with prudence, and based on adequate information. In the context of limited liability company law in Indonesia, this principle plays an important role in balancing the legal responsibilities of directors and the freedom to make risky business decisions. This study aims to analyze the concept and application of the Business Judgment Rule in the legal system of companies in Indonesia and to examine the limits of directors' liability for losses arising from business decisions they take. The research method used is a normative juridical approach by examining relevant laws and regulations, doctrines, and court decisions. The results of the study indicate that the application of the Business Judgment Rule principle in Indonesia has been reflected in Article 97 paragraph (5) of Law Number 40 of 2007 concerning Limited Liability Companies, which provides limitations on directors' liability if the decisions taken are made in good faith and based on rational considerations. Thus, the directors cannot be held responsible for company losses arising from reasonable business risks, as long as the decisions are taken professionally and do not contain elements of negligence or abuse of authority.