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.
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:
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.
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.
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.
|No.||Legal Procedures Taken||Duration (Working Days)|
|1.||Article of dissolution issued by the notary.||2 Days|
|2.||Newspaper publicity||2 Days|
|3.||Liquidation process||60 Days|
|4.||Decree of dissolution by the Ministry of Law and Human Rights.||40 Days|
|5.||Termination of Principle License to BKPM||7 Days|
|6.||Termination of Tax ID to the tax office||180 Days|
|7.||Termination of Company Registration Certificate||7 Days|
|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:
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.