Process of Dissolving a Company in Indonesia – Part 1

Potential Reasons for Dissolution a Company

The decision to closing or dissolving a company is the final decision in dealing with a complicated situation. To be able to dissolve a company, a set of lawful efforts need to be done based on the Indonesian Company Law. In this article, we will give you some information regarding the dissolution of a company. We will also show you some reasons the companies finally make this decision.

Dissolution means the business operations come to end and also with the company’s legal existence. In Indonesia, everything from incorporation to dissolution of the company should be resolved legally. Per Indonesian law, company dissolution is generally regulated under Limited Liability Company Act number 40 of 2007 section 142 about wrapping up operations, liquidation, and expiry of the status of a company as a legal entity.

PMA dissolution specifically is subject to BKPM Regulation number 3 of 2012 regarding procedures for investment control and implementation. The dissolution process for both local PT and PT PMA are almost the same, except for a PMA’s obligation to revoke its business license from the BKPM.

Company dissolution is not always the result of business failure, which can include insufficient resources, poor management, unstable economic conditions, or unprofitability. Often the decision to dissolve comes in the midst of growing the business. Legally, following Act number 40 of 2007, several reasons can lead to dissolution, such as:

1. A valid resolution of a General Meeting of Shareholders (GMS) through mutual consensus with at least three-quarters of voting shares in favor of dissolution.
2. The expiration of the term of incorporationas stated in the articles of association.
3. Revocation of the business license, particularly for companies with specific licenses.
4. Based on a court decision, because of any non-compliance with the law, including a legal defect of the deed of establishment and the inactive operations of a company for more than three years.
5. Based on a court’s verdict regarding company bankruptcy, if the remaining assets of the bankrupt company are not enough to pay the cost of bankruptcy.
6. When the business license of a PT. PMA is revokedso that its company has to be liquidated.

Process of Dissolving a Company in Indonesia

The proposed dissolution of a company should be done legally and, under several reasons listed above, it is compulsory to conduct liquidation. Liquidation is the process of clearing and settling the assets and liabilities of a company that is carried out by the liquidator or receiver, which is used for debt service payments from the debtor to the creditors.

The liquidator might be the Board of Directors (BoD) or professional people/consultants who are experts in their field (someone outside of the management structure of the company) that are appointed by the court or GMS.

According to Act Number 40 of 2007, the steps of the liquidation process would be as follows:

1. Announcement of dissolution by the liquidator in a newspaper and the state gazette of the Republic of Indonesia. This announcement contains information regarding the dissolution of a limited liability company and the basic law, the name and address of the liquidator, the procedures for the submission of bills, and the billing submission period.
2. Registering the proposed dissolution with the Ministry of Law and Human Rights (MoLHR), within 30 days after the dissolution was effectively conducted.
3. Liquidator registers company’s assets and settlement obligations to creditors. In case the liquidator doesn’t perform the obligations, the petition is open to interested parties.
4. Reporting the final result of liquidation to the GMS or court to be ratified.
5. Reporting the ratified liquidation to the MoLHR and announcing it in a newspaper within 30 days of the date of the ratification.
6. MoLHR records the expiry of the legal status of the company and deletes the company’s name, then MoLHR will announce the termination of the legal status of the company in the state gazette.

Following BKPM regulation number 3 of 2012, for a PMA it is mandatory to settle any obligations to BKPM regarding licenses. In this case, the PMA itself or related parties can apply to the BKPM for the revocation of the registered PMA, principal license, or business licenses (IU/IUT).

The company must enclose with the application the final result from GMS, records of the deed of establishment and its amendment, records of termination from MoLHR (for limited liability company), records of taxation identification number, latest LKPM, and the Power of Attorney of appointed liquidator.

Disclaimer:

The information provided here is based on our long experience. The process or requirement may vary depending on the specific facts and conditions. Besides, the law and regulations in Indonesia subject to frequent changes. Please contact us as your consultant to get an up to date information and accurate advice. More Information click here and You can also follow our social media accounts to see the latest information posts. please click on the following links: Facebook, Instagram, Linkedin, and Twitter.