Indonesia’s markets, resources, and investment environment may be appealing for investment and establishment of a company. However, in the end, not all companies harvest great benefits and maintain their operations easily.
Consequently, shutting or dissolving a company is the answer to manage complicated circumstances. To dissolve a company, a long legal process should be done according to the Indonesian Company Law. This article provides some information with respect to the dissolution of a company.
Dissolution of a company means dissolving the company’s operations as well as legal existence. In Indonesia, everything from incorporation to dissolution of the company have to be settled legally. Limited Liability Company Act number 40 of 2007 segment 142 covers matters including wrapping up activities, liquidation and expiry of status of a company as a legal entity. BKPM Regulation number 3 of 2012 regarding procedures for investment control and implementation specifically relates to dissolution of a PMA. The dissolution process for PT Local and PT PMA are similar, except for the obligation of a PMA to revoke its license from the BKPM.
Reasons for dissolution
Business failure, including inadequate assets, poor management, unstable economic conditions or unprofitability, is not always the reason for dissolution. Frequently the dissolution is decided while the business is growing. As per Act number 40 of 2007, there are a few reasons that can prompt dissolution, for example:
- A valid resolution of a General Meeting of Shareholders (GMS) through mutual consensus with at least three-quarters of voting shares in favour 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
Dissolution of a company should be done in a legal way and, according to reasons listed above, it is mandatory to conduct liquidation. Liquidation is the process of clearing and settling the assets and liabilities of a company for debt service payment from the debtor to the creditors. It is carried out by a liquidator or a receiver. The liquidator may be the Board of Directors (BoD) or professionals (outside of the management of the company) that are appointed by the court or GMS.
As per Act Number 40 of 2007, the process of the liquidation is as the following:
- 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.
BKPM Regulation number 3 of 2012 states that PMA is required to settle any obligations to BKPM relating to licenses. For this situation, the PMA itself or related parties can apply to the BKPM for the withdrawal of the enlisted PMA, principal license or business licenses (IU/IUT).
With the dissolution application, the company must attach the conclusive result from GMS, records of deed of establishment and its revision, records of termination from MoLHR (for limited liability company), records of taxation ID number, most recent LKPM and the Power of Attorney of selected liquidator. Based on the application, the Deputy of Control of Investment Implementation on behalf of the BKPM will issue a revocation statement within 7 working days.
Timeframe for company dissolution
|No.||Legal Procedures Taken||Duration (Working Days)|
|1.||Article of dissolution issued by the notary.||3 Days|
|2.||Newspaper publicity||2 Days|
|3.||Liquidation process||50 Days|
|4.||Decree of dissolution by the Ministry of Law and Human Rights.||50 Days|
|5.||Termination of Principle License to BKPM||10 Days|
|6.||Termination of Tax ID to the tax office||180 Days|
|7.||Termination of Company Registration Certificate||10 Days|
|TOTAL PERIOD (Result can be varied):||Approximately 8 months|
How MAM Corporate Solutions can help?
MAM Solutions can help with the liquidation in Indonesia. The process and roles of liquidator are:
- 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.
After the liquidation process and accepting the BKPM’s revocation, a company is officially dissolved.
The process of dissolution may take longer than the process of registration. MAM Corporate Solutions can help you with the complex process of dissolution of a company.
Contact MAM Corporate Solutions
If you are in need of assistance in business liquidation, you can contact our expert anytime by Clicking here or provide below as much detail about your inquiry as possible to receive the most relevant response.