Indonesia with its growing economy and a huge market is literary an archipelago of opportunities. Launching a new product, investing in one of the promising industries or doing business in import/export could be highly profitable under the condition that all the prerequisites are met.
Yet, not all entrepreneurs succeed with their business ideas and they find themselves facing the necessity of dissolution of their company.
The shareholders have indeed the right to close the company if they agree on and rightfully vote in favour of it. The dissolution proposal can be submitted not only by the Board of Directors or Board of Commissioners but even by shareholders who represent at least 1/10 of the total shares with voting right. In order to approve suggested dissolution the consensus of at least 3/4 of the total shares with voting right is needed.
A company can be forced to end its activity by a court order. There is a row of reasons that could lead the court to such a radical verdict. Violation the public interest, taking an action that contravenes current legislation, being inactive for more than three years or ending up in the bankruptcy are just a few of them. In this case, a liquidator responsible for the whole process would be appointed directly by the court.
The period of incorporation is usually not limited. However, in rare cases, it might have a certain validity, and a company must apply to renew it to continue in business activities. Failing to do this, leads to its dissolution once this period is over. The GMS is obliged to appoint a liquidator with 30 days period, and the management is not supposed to take any further legal actions.
In case the granted business license is revoked the company loses the legal base for its existence and must conduct liquidation. It happens mostly in specific and heavily regulated fields
Dissolution of a company in Indonesia is regulated by the article of 143 of Law No. 40 Year 2007. It is important to bear in mind that it does not pass out of existence by terminating its activities. It continues to be regarded a legal entity until the process of dissolution, which consists of a series of legal steps, is finished.
The main task in the process of closing down a business is to settle and clear the assets and liabilities – liquidation. In order to avoid any additional problems that may arise from incorrect dissolution, it is recommended to carry out the whole process carefully and with the help of experts.
To scrutinize the whole process of dissolving a business in Indonesia, we will have a look at the procedure for the most common company types – PT (Limited Liability) and its counterpart PT PMA intended for foreign investors. Termination of both forms come under the same guideline.
As previously mentioned there must be initiative either from inside the company (management, shareholders) or an authority intervention (court order).
The person who is going to handle the liquidation can be appointed directly by GMS or is chosen by the court depending on whether the liquidation is voluntary or compulsory.
The liquidator is supposed to inform about the dissolution of the company through the daily newspaper and also State Gazette of the Republic of Indonesia. The aim is to notify all creditors who can claim any potential debts as well as the Ministry of Law and Human Rights.
The announcement must be published within the 30-day period after the decision of dissolution was taken. The creditors may claim the outstanding amount during the 60 days following the issuance of notification in the newspaper.
The liquidator collects all the remaining assets the company still might have for unpaid goods or services and satisfies the creditors at the same time. Any potential surplus is divided among shareholders according to the proportion of their shares.
This step is accompanied by the a second announcement in newspaper that reveals the assets distribution plan that was approved beforehand by both the GMS and the Ministry of Law and Human rights.
The outcome of the liquidation is reported either to GMS or court. In addition, the tax office should be informed, so the company’s Tax Registration Number (NPWP) can be revoked.
The third and the final notice that the company does not exist anymore should be published in a newspaper.
It is vital to submit a confirmation about liquidation to the Company Registry of the Ministry of Trade at the same time to terminate the company registration certificate. PT PMA should also apply to Investment Coordinating Board (BKPM) to revoke its business or principal license.
Only by fulfilling the above-mentioned steps the company is considered as dissolved. The whole process may take approximately 8 – 10 months but in some cases even up to one year.
Representative Office (RO) is another widely used form of legal entity open to foreign citizens in Indonesia. Its activities are, however, limited to managerial support of the parent company located abroad or it serves as a first stage on the way towards establishing PT PMA in the future.
It must not carry any business activities in Indonesia on its own which means that, unlike the limited company, it does not go through the process of liquidation upon its dissolution and it is therefore simpler. Having said that, it is still necessary to follow required procedure once the management decides to close the RO down.
The steps that lead to the closure of Representative Office are as follows:
Investment Coordinating Board is asked to revoke the principal license of the RO.
Before the RO can be winded up, the government must be informed about leaving the official address of the office by termination of Domicile Letter.
A tax office will delete Tax Identification Number (NPWP) upon the request. This is a crucial step because RO will not be exempted from the tax reporting obligation unless the financial authority is officially notified that it has ceased to exist.
Company Registration should be terminated with the Ministry of Trade.
The time frame for dissolution of RO is between five months and one year.
As we outlined above, to dissolve a company in Indonesia is rather a complex task. In fact, it requires more effort than its registration. We cannot stress more the importance of liquidation that must be done properly to avoid further financial claims and legal disputes.
To make sure that the company will be closed down successfully and you will free yourself from all legal obligations, it is essential to put an experienced professional in charge of the whole process. Cekindo can take a role of the liquidator and provide you with all the necessary assistance.
We will help with the completion of the crucial documents, notification of authorities involved and announcements in newspaper and State Gazette. As a liquidator, Cekindo will take care of recording company’s properties according to the financial statement. We will also prepare the record of accumulation of wealth and debts to settle up with creditors or issue the article of dissolution that states the result and accountability of liquidation process.
Contact us for further details and tailor-made plan that will suit your company best.