Navigating the New KUHP and KUHAP: Criminal Law Reform and Corporate Risk in Indonesia
Authors
Background
On 2 January 2026, the Government of the Republic of Indonesia officially enacted Law No. 1 of 2023 on the Criminal Code (Kitab Undang-Undang Hukum Pidana) (“National KUHP”) and Law No. 20 of 2025 on the Criminal Procedure Code (Kitab Undang-Undang Hukum Acara Pidana) (“New KUHAP”). The enforcement of the National KUHP and the New KUHAP marks a significant shift in Indonesia’s criminal law landscape, from a traditional focus on individual liability and purely punitive enforcement to a broader approach that emphasises corporate criminal liability, introduces restorative and negotiated justice mechanisms, and allows for state intervention in corporate governance in certain circumstances.
In this ARMA update, we will further explain the key provisions of the National KUHP and the New KUHAP that have meaningful implications for commercial activities and corporate practices.
Corporate Criminal Liability
A. Recognition of Corporations as Criminal Subjects of Criminal Liability
Conceptually, Indonesia’s criminal law was based on the Netherlands’ Wetboek van Strafrecht, or Criminal Code, known as the Previous Criminal Code. The Previous Criminal Code reflected the doctrine of societas delinquere non potest, which states that a corporation cannot commit a criminal offence. Consequently, Indonesia adhered to the principle that the subject of criminal law is an individual (natuurlijke person), and it did not expressly regulate corporations as subjects of criminal law.
Under the National KUHP and the New KUHAP, corporations are expressly recognized as subjects of criminal liability. The concept of “setiap orang” (every person) is expanded to expressly include corporations. The scope of corporations is defined broadly and includes: (i) legal entities in the form of limited liability companies, foundations, cooperatives, state-owned enterprises, regional-owned enterprises, or other equivalent entities; (ii) associations with legal entity status; (iii) associations without legal entity status; and (iv) business entities in the form of general partnerships (firma), limited partnership (commanditaire vennootschap), or other equivalent entities.
This scope intentionally reflects a broader, non-exhaustive definition, as indicated by the inclusion of the phrase “or other equivalent entities,” which encompasses a wider legal subject, covering both legal entities and non-legal entities that operate in a corporate or organisational form. As a result, criminal liability is no longer limited to individuals. Businesses themselves can now be directly exposed to criminal sanctions, significantly increasing legal and compliance risks at the corporate level.
B. Criminal Offences Committed by Corporations
Under the National KUHP, criminal offences committed by corporations are attributed through the acts or negligence (actus reus) of those connected to the company. There are five categories of persons whose conduct may constitute a “criminal offence by a corporation,” namely:
- Members of management who hold a functional position within the corporate organizational structure;
- Individuals who, based on an employment relationship or other legal relationship, act for and on behalf of the corporation or in the interest of the corporation;
In both cases, the relevant conduct must occur within the scope of the corporation’s business or activities.
- A person who gives instructions;
- A controlling person who possesses the authority or power to determine corporate policy or to implement corporate policy without requiring authorization from a superior; or
- The beneficial owners of the corporation.
The last three categories fall outside the formal structure of the corporation, yet they can still exercise control over it. This shows that liability is no longer confined to the individual actor but can be attributed to the corporation based on how it operates and is controlled.
A criminal offence committed by a corporation may be attributable to the corporation (mens rea) when:
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the conduct falls within the scope of the corporation’s business or activities as outlined in its articles of association or other relevant instruments;
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the conduct unlawfully benefits the corporation;
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the conduct is accepted as corporate policy;
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the corporation fails to take necessary measures to prevent the offence, mitigate its wider impact, and ensure compliance with applicable laws and regulations to prevent the offence; and/or
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the corporation permits the offence to occur.
In light of the above, where a criminal offence is committed by and for the benefit of a corporation, prosecution may be brought, and its criminal sanctions can be imposed against the corporation itself, the corporation together with its management, or the management alone.
In summary, the National KUHP establishes a comprehensive and far-reaching framework for corporate criminal liability, extending attribution not only to structural actors but also to external controlling parties. From a commercial perspective, this significantly expands risk exposure. Accordingly, corporations must treat compliance, risk management, and internal controls as core strategic priorities, ensuring that the governance structure is not only formally in place but also demonstrably effective in preventing and responding to potential criminal exposure.
C. Sanctions Against Corporations
The National KUHP states that criminal sanctions against a corporation consist of primary penalties and additional penalties.
Primary Penalties
The primary penalty applicable to a corporation is a fine. The statutory minimum fine is IDR 200 million, thereby setting a baseline below which a fine may not be imposed, unless otherwise stipulated under a relevant law. The maximum fine is set at IDR 50 billion. These provisions create a structured, tiered financial penalty framework, calibrated to reflect the severity of the corporation's criminal offence.
A fine must be paid within the period specified in the court judgment. The court may allow payment by instalments. If the fine is not paid within the designated timeframe, the corporation’s assets or revenues may be seized and auctioned by the public prosecutor to recover the outstanding amount. If the assets or revenues are insufficient to fully settle the fine, a substitute penalty may be imposed, such as a partial or complete suspension of the corporation’s business activities. Such a sanction is a serious measure with potentially significant consequences for the corporation’s ongoing operations and overall viability.
Additional Penalties
The National KUHP introduces additional penalties that may be imposed on a corporation and can directly affect a company’s ability to operate. These include: payment of compensation, remediation of the consequences of the criminal offences, fulfilment of obligations that have been neglected, fulfilment of customary obligations, funding of job training programs, confiscation of assets or proceeds derived from the criminal offense, (vii) publication of the court judgement, revocation of specific licences, permanent prohibition from engaging in certain activities to the extent of business closure of all or part of the places of business and/or operations, suspension of all or part of the corporation’s business activities, and even corporate dissolution in serious cases. Such measures elevate criminal enforcement from a monetary risk to a potential existential threat for businesses.
D. State Intervention
A notable feature of the National KUHP is the introduction of state intervention mechanisms in corporate affairs. These include the possibility of a state takeover of a company—although detailed implementing regulations have yet to be issued—as well as forms of supervision or trusteeship imposed on the business. The forms of supervision or trusteeship are generally regarded as a less intrusive measure than a takeover, as they afford the corporation an opportunity to rectify its operations under the guidance of a supervisory authority. While the precise contours of these powers remain uncertain, their inclusion provides a graduated spectrum of intervention options, enabling regulators to calibrate enforcement responses in accordance with the severity of the circumstances faced by the corporation, thereby signalling a significant expansion of criminal law into the domain of corporate control.
From a commercial perspective, these measures raise concerns about a form of indirect state takeover, as criminal enforcement goes beyond punishment and allows authorities to step into a company’s management and operations. This blurs the line between criminal law and corporate governance, creating uncertainty for businesses in assessing their legal and operational risks.
The implications are particularly significant for parties (e.g., shareholders, investors, lenders) involved in the company’s transactions, such as mergers and acquisitions. The possibility of state intervention may influence valuation, due diligence, and risk allocation, as stakeholders seek to account for potential disruptions to control, management, and continuity of the business.
Restorative Justice Strengthens
Recent developments in the National KUHP and New KUHAP place greater emphasis on restorative justice, introducing an approach to handling criminal cases that involves the participation of relevant parties, including the victim and their family, the suspect and their family, and other related parties, with a more balanced approach that prioritizes compensation and restoring the situation to its original state. This reflects a broader policy direction to resolve certain criminal matters in ways that repair harm and restore commercial relationships, rather than focusing solely on sanctions.
That said, restorative justice is not automatically available in all cases. Its application is generally limited to offences that fall within specified thresholds—such as the offense is punishable by a fine not exceeding Category III or by imprisonment of up to five years, first-time offenders; and/or the offense does not constitute a repeat offense, except where prior convictions resulted solely in a fine or where the offense was committed through negligence—and typically requires the consent of the affected parties, formalized in a settlement agreement as well as approval from the relevant authorities in relevant stages. The restorative justice may be applied at the stages of preliminary inquiry (penyelidikan), investigation, prosecution, and court trial proceedings. As such, eligibility and process remain important considerations in determining whether this mechanism can be used effectively.
From a commercial standpoint, this marks a meaningful shift in how businesses approach disputes with potential criminal exposure. There is now a stronger incentive to pursue early resolution through compensation and negotiated settlement, particularly to avoid escalation into formal criminal proceedings. This is especially relevant in practical scenarios such as vendor and supply chain disputes, cases involving minor fraud or internal mismanagement, and incidents of operational negligence. In these contexts, restorative justice can provide a more efficient, cost-effective, and commercially pragmatic outcome, while also helping businesses manage reputational risk and maintain ongoing relationships.
Plea Bargaining (Pengakuan Bersalah)
The New KUHAP introduces a procedural option that allows a defendant to formally admit guilt, subject to judicial approval, in exchange for a simplified and more efficient court process known as Plea Bargaining (Pengakuan Bersalah). Once the court accepts the admission, the case proceeds without a full evidentiary trial, significantly reducing procedural complexity, time, and costs. This mechanism reflects a shift toward efficiency and case management within the criminal justice system, while still preserving judicial oversight to prevent abuse.
However, access to plea bargaining is not automatic. It is generally limited to first-time offenders, applies only where the potential penalty is punishable by imprisonment of up to five years or a fine not exceeding Category V, and/or requires a demonstrated willingness by the defendant to provide restitution or compensate the affected parties. These conditions are designed to ensure that plea bargaining is used for proportionate cases and to encourage accountability, rather than serving as a shortcut for serious or repeat offences.
Plea bargaining must be submitted at a specific hearing before the trial on the merits of the case begins. When plea bargaining is accepted, a written agreement is made between the public prosecutor and the defendant, subject to the presiding judge's approval. The judge must ensure that the plea bargaining is made voluntarily, without coercion, and with the defendant’s full understanding. If the court accepts the plea bargaining, the proceeding will continue under a simplified procedure (pemeriksaan acara singkat). When the judge is satisfied that the plea bargaining meets the applicable requirements and is supported by at least two valid evidence, the court may render a decision in accordance with the written agreement.
From a commercial perspective, plea bargaining can materially accelerate case resolution. Faster closure reduces prolonged legal uncertainty for companies and their investors, allowing business operations, financing, and strategic decisions to proceed without being overshadowed by an extended criminal process. This predictability is particularly valuable in regulated industries and in transactions where pending litigation can delay or derail deals.
The availability of plea bargaining encourages a shift in legal strategy. Rather than adopting an adversarial, all-or-nothing approach, companies may increasingly assess whether a controlled admission—combined with restitution and swift resolution—better serves their long-term commercial interests. This represents a move toward risk-based decision-making, where legal outcomes are weighed alongside reputational, operational, and investment considerations.
Deferred Prosecution Agreement (Perjanjian Penundaan Penuntutan/DPA)
The New KUHAP introduces a significant breakthrough for corporations in Indonesia through the Deferred Prosecution Agreement (DPA), an alternative method for resolving corporate criminal matters. DPA is a negotiated resolution mechanism in which criminal prosecution against a company is formally suspended, subject to the fulfilment of mutually agreed-upon conditions. These conditions typically include the payment of compensation, the implementation or strengthening of compliance and governance programs, active cooperation with law-enforcement authorities and other corrective measures.
The corporation as an applicant must submit prior to the case being referred to the court. The application will first be assessed by the public prosecutor and subsequently reviewed by a judge. If the company complies with the stipulated obligations within the agreed timeframe, prosecution may ultimately be discontinued, allowing enforcement objectives to be achieved without a full criminal trial. Conversely, in the event of non-compliance, the public prosecutor will proceed in accordance with the applicable criminal procedure.
The DPAs are designed specifically for corporate offenders, reflecting the recognition that corporate misconduct often requires a different enforcement approach from individual criminal liability. By focusing on institutional behaviour rather than individual punishment alone, DPAs aim to correct systemic failures within organizations while preserving their economic and social functions.
From a commercial standpoint, DPAs signal a move toward compliance-based justice. Rather than emphasizing purely punitive outcomes, this framework incentivizes companies to invest in robust ESG standards, anti-corruption controls, and internal governance reforms. The threat of prosecution is transformed into a catalyst for structural improvement, embedding compliance as a core business function rather than a reactive legal obligation.
Finally, the adoption of DPAs brings Indonesia closer into alignment with global enforcement practices, particularly those developed in the United States and the United Kingdom. This convergence enhances legal familiarity for multinational investors and cross-border counterparties, and signals Indonesia’s intention to adopt internationally recognized tools that balance accountability, economic stability, and corporate reform.
The Expansion of the Scope of Coercive Measures
The New KUHAP regulates a broader range of coercive measures compared to the previous KUHAP. Normatively, these measures include: (i) designation of a suspect; (ii) arrest; (iii) detention; (iv) search; (v) seizure; (vi) interception of communications; (vii) examination of correspondence; (viii) account blocking; and (ix) travel restrictions prohibiting the suspect or defendant from leaving the territory of Indonesia. Such coercive measures inherently carry direct implications for the continuity of a company’s business operations, particularly where law enforcement proceedings target a corporation as a legal subject or as a party connected to a case. In a commercial context, it must be understood that each form of coercive measure affects not only legal aspects but may also impact the company’s operations, reputation, and financial stability. For instance, searches and seizures of corporate documents or electronic devices may disrupt day-to-day operations, especially when the seized items involve financial data, commercial contracts, or the company’s internal systems. Such disruptions may not only delay business processes but also pose risks of exposing strategic information and trade secrets if not properly managed. In addition, interception and examination of correspondence, including the company’s electronic communications, may affect the confidentiality of business communications. In practice, this may raise concerns among business partners regarding information security, thereby influencing the level of trust and the continuity of commercial cooperation. Accordingly, it must be recognized that the regime of coercive measures under the new KUHAP serves not only as an instrument of law enforcement, but also carries significant legal and commercial risk dimensions for corporations. Companies should therefore strengthen their compliance systems, document governance, and legal crisis management mechanisms to mitigate potential operational disruptions and business losses arising from the application of coercive measures during an investigation.
Impact on Commercial Disputes
The increasing criminalization of commercial conduct has a direct and material impact on how business disputes evolve. Matters that were traditionally resolved through civil litigation—such as breach of trust, fraud allegations, or claims of corporate mismanagement—are now more likely to attract criminal scrutiny. As a result, commercial disputes may escalate more quickly into criminal proceedings, raising the stakes for companies and transforming routine business disagreements into high-risk legal exposures with potential personal liability for management and reputational consequences for the enterprise.
In this environment, companies must develop a structured crisis management framework to respond effectively when criminal risk emerges. This begins with early detection of red flags through internal controls and reporting mechanisms, followed by the rapid deployment of a coordinated legal response team combining internal management, in-house counsel, and external advisors. Proactive and measured engagement with law-enforcement authorities can be critical in containing risk, shaping the narrative, and preventing unnecessary escalation.
At the same time, heightened criminal exposure underscores the importance of transaction readiness as a core commercial discipline. Companies with clean corporate structures, consistent and well-maintained documentation, and clear decision-making records are better positioned to withstand scrutiny in disputes, investigations, or due diligence processes. Systematic risk mapping—covering operational, contractual, and governance risks—enables companies to identify potential criminal triggers in advance and to address them before they crystallize into enforcement actions or derail commercial transactions.
Disclaimer:
This client update is the property of ARMA Law and intended for providing general information and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. ARMA Law has no intention to provide a specific legal advice with regard to this client update.
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