The Importance of Capital Participation

Oct 13, 2025 by magicalceylontours.com 104 views

Legal Aspects of Capital Participation of the North Sumatra Provincial Government at PT. North Sumatra Bank

Economic development in a region requires the support of various parties, including financial institutions. One of the financial institutions that has an important role in economic development in North Sumatra Province is PT. North Sumatra Bank. This bank was established based on Law No. 13 of 1962 and further regulated in Government Regulation No. 35 of 1999. The main function of the North Sumatra Bank is to raise funds from the public and distribute them to increase Regional Original Revenue (PAD). In this context, the role of local government's capital is very vital to ensure the availability of funds for credit to the public.

The Importance of Capital Participation

Capital Participation by the Provincial, City and Regency Governments in North Sumatra to the North Sumatra Bank refers to the Regional Budget (APBD). Every submission of capital participation must obtain approval from the Regional Representative Council (DPRD) through making regional regulations, a process that is often hampered by complex requirements. This process becomes more complicated because it must be approved by the Minister of Finance, thus adding a layer of uncertainty for the proposed capital participation.

In practice, there is an imbalance that is visible, where the DPRD seeks to represent the votes of the people, while the North Sumatra Bank reasoned to increase capital to generate greater dividends. This raises questions about transparency and accountability in managing funds from the community. The lack of transparency and accountability in managing public funds can lead to mistrust among the public and undermine the credibility of the government. It is essential to ensure that the capital participation process is transparent, accountable, and in line with the principles of good governance.

Dividend Responsibility and Policy

The regulation regarding the capital participation of the North Sumatra Provincial Government to the North Sumatra Bank is regulated in Regional Regulation No. 2 of 1999. The provincial government is fully responsible for this investment, and this is strengthened by government laws and regulations that give the authority to do so. In this case, the dividend distribution policy from the North Sumatra Bank uses an interim dividend approach, as regulated in Law No. 40 of 2007 concerning Limited Liability Companies. This approach aims to minimize the risk of stock vacuum and ensure stable cash flow.

However, the interim dividend approach may not be the most effective way to distribute dividends, as it may not reflect the true financial performance of the bank. A more effective approach would be to use a dividend policy that is based on the bank's financial performance and is transparent and accountable. This would ensure that the dividend distribution is fair and in line with the principles of good governance.

The need for regulatory revisions

The results of the analysis showed that there was an urgent need to review regulations regarding capital participation by the North Sumatra Provincial Government to the North Sumatra Bank. In this context, Regional Regulation No. 5 of 2009 needs to be revised so that it is in line with Law No. 10 of 2004 concerning the Establishment of Legislation. After the revision, the regional head must play an active role as a shareholder by complying with the principle of Duty of Care and Duty of Loyalty in each General Meeting of Shareholders (GMS). This is important to ensure that decision making in company management does not release its responsibilities.

The revision of regulations is essential to ensure that the capital participation process is transparent, accountable, and in line with the principles of good governance. This would ensure that the capital participation process is effective and contributes to economic development and overall community welfare.

Conclusion

By looking at the legal aspects of the Capital Participation of the North Sumatra Provincial Government at PT. Bank of North Sumatra, we can understand the importance of compliance with regulations and the need to improve existing regulations. The success of capital participation not only has an impact on increasing the capital of the North Sumatra Bank, but also contributes to economic development and overall community welfare. Accountability and transparency in managing public funds must always be upheld to maintain public confidence.

In conclusion, the capital participation of the North Sumatra Provincial Government at PT. North Sumatra Bank is a complex issue that requires careful consideration and regulation. The revision of regulations is essential to ensure that the capital participation process is transparent, accountable, and in line with the principles of good governance. This would ensure that the capital participation process is effective and contributes to economic development and overall community welfare.

Recommendations

Based on the analysis, the following recommendations are made:

Revision of Regional Regulation No. 5 of 2009: The regulation needs to be revised to ensure that it is in line with Law No. 10 of 2004 concerning the Establishment of Legislation.
Active role of the regional head: The regional head must play an active role as a shareholder by complying with the principle of Duty of Care and Duty of Loyalty in each General Meeting of Shareholders (GMS).
Transparency and accountability: The capital participation process must be transparent and accountable to maintain public confidence.
Effective dividend policy: The dividend distribution policy must be based on the bank's financial performance and be transparent and accountable.

By implementing these recommendations, the capital participation of the North Sumatra Provincial Government at PT. North Sumatra Bank can be made more effective and contribute to economic development and overall community welfare.
Frequently Asked Questions (FAQs) about the Legal Aspects of Capital Participation of the North Sumatra Provincial Government at PT. North Sumatra Bank

Q: What is the purpose of the capital participation of the North Sumatra Provincial Government at PT. North Sumatra Bank?

A: The purpose of the capital participation is to increase the capital of the North Sumatra Bank and contribute to economic development and overall community welfare.

Q: What is the role of the regional government in the capital participation process?

A: The regional government plays an active role as a shareholder by complying with the principle of Duty of Care and Duty of Loyalty in each General Meeting of Shareholders (GMS).

Q: What is the significance of the revision of Regional Regulation No. 5 of 2009?

A: The revision of the regulation is essential to ensure that it is in line with Law No. 10 of 2004 concerning the Establishment of Legislation, and to make the capital participation process more transparent and accountable.

Q: What is the interim dividend approach, and why is it used by the North Sumatra Bank?

A: The interim dividend approach is a method of distributing dividends that is based on the bank's financial performance. It is used by the North Sumatra Bank to minimize the risk of stock vacuum and ensure stable cash flow.

Q: What are the benefits of using a more effective dividend policy?

A: A more effective dividend policy would ensure that the dividend distribution is fair and in line with the principles of good governance. It would also ensure that the dividend distribution is based on the bank's financial performance and is transparent and accountable.

Q: What are the consequences of not revising the regulations regarding capital participation?

A: If the regulations are not revised, the capital participation process may not be transparent and accountable, which could lead to mistrust among the public and undermine the credibility of the government.

Q: What are the recommendations for improving the capital participation process?

A: The recommendations include revising Regional Regulation No. 5 of 2009, ensuring transparency and accountability in the capital participation process, and implementing an effective dividend policy.

Q: What is the significance of the capital participation of the North Sumatra Provincial Government at PT. North Sumatra Bank for the community?

A: The capital participation is significant for the community because it contributes to economic development and overall community welfare. It also ensures that the regional government is accountable and transparent in its management of public funds.

Q: What are the potential risks of the capital participation process?

A: The potential risks of the capital participation process include the risk of stock vacuum, the risk of unstable cash flow, and the risk of mistrust among the public.

Q: How can the risks of the capital participation process be mitigated?

A: The risks can be mitigated by revising the regulations, ensuring transparency and accountability, and implementing an effective dividend policy.

Q: What is the role of the Minister of Finance in the capital participation process?

A: The Minister of Finance plays a crucial role in the capital participation process by approving the regional regulations and ensuring that the capital participation process is in line with the principles of good governance.

Q: What are the implications of the capital participation process for the regional government?

A: The implications of the capital participation process for the regional government include the need to ensure transparency and accountability, the need to implement an effective dividend policy, and the need to revise the regulations to ensure that they are in line with the principles of good governance.