Modern economic growth brings both opportunities and challenges. While corporations drive development, create jobs, and support national progress, they can also be involved in legal violations such as environmental pollution, labour breaches, tax evasion, and corruption. With Indonesia’s new Criminal Code (KUHP) set to take effect in January 2026, corporate criminal liability will be reinforced, holding not only individuals but also corporations as legal entities accountable.
Before the enactment of Law Number 1 of 2023 concerning the Indonesian Criminal Code (“KUHP 2023“), the regulation of corporate crime in Indonesia were mainly regulated through specific laws, such as the Consumer Protection Law, the Environmental Law, and the Anti-Corruption Law. This often resulted in inconsistencies in law enforcement practices. Through KUHP 2023, Indonesia for the first time explicitly recognizes corporations as subjects of criminal liability within the codified national criminal law.
KUHP 2023 recognizes corporations as subjects of criminal liability, as stipulated in Article 45 (1), which provides that a corporation may be held liable if a criminal act is committed by its management in a functional position within the organizational structure or if the act is carried out for the benefit of the corporation. This provision marks a paradigm shift from the previous Criminal Code, which recognized only individuals as subjects of criminal liability.
The recognition of corporations as subjects of criminal liability stems from the awareness that many modern crimes are committed through legal entities as instruments of wrongdoing. Corporations may gain substantial benefits from criminal acts, while the resulting harm is often borne by the wider public or even the state. Consequently, limiting criminal liability to individuals alone is considered insufficient.
The board of executives must understand the key elements in the application of corporate criminal liability under KUHP 2023, which include:
- The criminal act committed by the corporation falls within the scope of its business activities.
- The corporation derives benefits or gains from the criminal act.
- The act is accepted or treated as corporate policy.
- The corporation fails to take preventive measures to mitigate or prevent broader consequences of the act.
- The corporation allows or tolerates the act to occur.
Furthermore, the board of executives must recognize that KUHP 2023 regulates two forms of criminal liability, namely:
- Corporate Liability: if the act is carried out for the interests or benefits of the corporation, criminal sanctions may be imposed on the legal entity and/or its management.
- Executive Board Liability: if the act is committed by an individual member of the executive board holding authority or a specific position within the corporation, criminal sanctions may be imposed on that executive.
Through these forms of criminal liability, judges are granted the authority to impose sanctions on the corporation, its executives, or both, depending on the extent of involvement and the benefits gained by the corporation.
With KUHP 2023 set to take effect in January 2026, the board of executives must ensure that business operations are conducted in full compliance with the law to avoid exposure to corporate criminal liability.
To mitigate these risks and obtain further legal advice on corporate crime, you may contact us at your earliest convenience for comprehensive legal opinions and tailored guidance.