A Guide to Closing a Company in Indonesia

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. This may lead to some wondering how to close a company in Indonesia.

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 made based on 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 made this decision.

Dissolution means the business operations come to an 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 the 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 is explicitly subject to BKPM Regulation number 3 of 2012 regarding procedures for investment control and implementation. Therefore, the dissolution process for local PT and PT PMA are almost the same, except for a PMA’s obligation to revoke its business license from the BKPM.

Potential Reasons for Dissolution

Company dissolution does not always result from business failure, including insufficient resources, poor management, unstable economic conditions, or unprofitability. Often the decision to dissolve comes while 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 incorporation as 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 bankruptcy cost.
6. When the business license of a PT. PMA is revoked, so its company has to be liquidated.

Process of Dissolving a Company in Indonesia

The proposed dissolution of a company should be done legally, and for 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 company’s management structure) that the court or GMS appoints.

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 repeal of a limited liability company and the fundamental law, the name and address of the liquidator, the procedures for submitting 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. The liquidator registers the company’s assets and settlement obligations to creditors. The petition is open to interested parties if the liquidator doesn’t perform the duties.
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 company’s legal status and deletes the company’s name. MoLHR will announce the termination of the company’s legal status in the state gazette.

Following BKPM regulation number 3 of 2012, for a PMA, settling any obligations to BKPM regarding licenses is mandatory. 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 license (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.

Based on the dissolution application, the Deputy of Control of Investment Implementation will issue a revocation statement on behalf of the BKPM within seven 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 article 143 of Law No. 40 from the Year 2007.

Liquidation Services to Dissolve a Company in Indonesia

InCorp Indonesia could act as a liquidator to assist the liquidation process of a company that would like to be dissolved in Indonesia. The process and role of the liquidator will be as follows:

• An announcement in the newspaper and State Gazette regarding company dissolution and liquidator information.
• Notification to the Ministry of Law and Human Rights by a notary.
• Recording the company’s properties based on the company’s financial statement.
• If there are claims from creditors within 60 days, then the liquidator will record and accumulate the wealth and debt of the company.
• In the step of assets settlement, there will be an announcement in the newspaper and State Gazette regarding the distribution plan of liquidation proceeds.
• Issuance of an article of dissolution, stating the result and accountability of the liquidation process in the resolution of shareholders, and also to give release and discharge of liquidator.
• Issuance of Decree of dissolution from Ministry of Law and Human Rights.
• Suppose there are no claims from the creditor within 60 days. In that case, the process will continue directly to the issuance of the result, and accountability of the liquidation process will be issued in the resolution of shareholders or circular resolution, also to give release and discharge of liquidator.

Duration: 5-6 months

After complying with the liquidation process and receiving the BKPM’s revocation, the company is officially terminated. Accordingly, it is no longer a legal entity and will dismiss from any legal existence an obligation to taxation.

Generally, the dissolution process takes longer than the time spent 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. InCorp Indonesia (formerly Cekindo) can assist you in conducting all the steps in the dissolution process, from the newspaper announcement through completion. Easily dissolve a company in Indonesia with us.