Although Indonesia is a conducive place for investment and establishing a company,in terms of markets, resources, and investment climate, some companies are not fortunate enough to reap good profits and run their businesses smoothly in this country.
Therefore, 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 to 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. In accordance with 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 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, with the exception of a PMA’s obligation to revoke its business license from the BKPM.
Several reasons can lead to dissolution
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, in accordance with Act number 40 of 2007, there are several reasons that can lead to dissolution, such as:
- 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
- The expiration of the term of incorporation as stated in the articles of association
- Revocation of the business license, particularly for companies with specific licenses
- Based on a court decision, because of any non-compliance with the law, including legal defect of deed of establishment and operation of a company that has been inactive for three years.
- 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.
- When the business license of the PT. PMA is revoked so that the company has to be liquidated.
Process of dissolution
Proposed dissolution of a company should be done legally and, in accordance with 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.
Pursuant to Act Number 40 of 2007, the steps of the liquidation process would be as follows:
- 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 billing submission period.
- Registering the proposed dissolution with the Ministry of Law and Human Rights (MoLHR), within 30 days after the dissolution was effectively conducted.
- 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
- Reporting final result of liquidation to the GMS or court to be ratified.
- Reporting the ratified liquidation to the MoLHR and announcing it in a newspaper within 30 days of the date of the ratification.
- MoLHR records the expiry of legal status of the company and deletes the company’s name, then MoLHR will announce the termination of legal status of the company in the state gazette.
In accordance with BKPM regulation number 3 of 2012, for a PMA it is a 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 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. Based on the dissolution application, the Deputy of Control of Investment Implementation on behalf of the BKPM will issue a revocation statement within 7 working days.
The Time Frame for Company Dissolution
Due to the complicated procedure to dissolve a company in Indonesia, we will show you the time frame needed to fulfill all the requirements of company dissolution under the article of 143 of Law No. 40 Year 2007.
||Legal Procedures Taken
||Duration (Working Days)
||Article of dissolution issued by the notary.
||Decree of dissolution by the Ministry of Law and Human Rights.
||Termination of Principle License to BKPM
||Termination of Tax ID to the tax office
||Termination of Company Registration Certificate
||TOTAL PERIOD (Result can be varied):
||8-10 months (may be up to 1 year)
Cekindo could act as a liquidator to assist liquidation process of a company who would like to be dissolved in Indonesia. The process and role of liquidator will be as follows:
- Announcement in newspaper and State Gazette regarding company dissolution and liquidator information.
- Notification to Ministry of Law and Human Rights by notary.
- Recording company’s properties based on company’s financial statement.
- If there will be claims from creditor within 60 days, then liquidator will record and accumulate the wealth and debt of company.
- In the step of assets settlement, there will be announcement in newspaper and State Gazette regarding distribution plan of proceeds of liquidation.
- Issuance of article of dissolution, stating the result and accountability of liquidation process in resolution of shareholders, to also give release and discharge of liquidator.
- Issuance of decree of dissolution from Ministry of Law and Human Rights.
- If there will not be any claims from creditor within 60 days, the process will continue directly to issuance of result and accountability of liquidation process will be issued in resolution of shareholders or circular resolution, to also give release and discharge of liquidator.
Duration: 5-6 months
After complying with the liquidation process and receiving the BKPM’s revocation, company is officially terminated. It is no longer a legal entity and will dismiss from any legal existence an obligation to taxation. Generally, dissolution process takes longer than the time spent in registering the company. Check our Complete Service Overview for more information about the duration.
Dissolving your company will likely happen at a complex stage of business and Cekindo can provide you with complete assistance in conducting all the steps in the dissolution process from the newspaper announcement through completion. Contact us for further assistance.
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