Company Closure

The dissolution or closure of a company under Indonesian law means the process of removing the existence of a company’s legal status as a legal entity. It means that with the removal of the legal entity status of the company, all activities along with the existence of the company under the law will be over.

The process of establishment and closure of a company must be carried out legally. Company closure is regulated in the Law of Limited Liability Company No. 40 of 2007 article 142 sub-article (1) concerning termination of activities, liquidation, and termination of the company’s status as a legal entity.

In order to close a company in Indonesia, you must go through a liquidation process.

Liquidation, in other words the clearing and settlement of company assets and liabilities, is the only way to remove the legal existence of any active and inactive businesses in Indonesia.

Who can be a liquidator during the process of company’s dissolution? Legal consultants, lawyers, or Board of Directors.

Specifically for the dissolution of Foreign Investment Company (Penanaman Modal Asing, PMA), it refers to Regulation of Investment Coordinating Board (Badan Koordinasi Penanaman Modal, BKPM) No. 3 of 2012 concerning procedures for investment control and implementation. The process for the dissolution of local Limited Liability Company (Perseroan Terbatas, PT) and PT PMA is almost similar, with the exception that PMA is required to apply for revocation of business license from Investment Coordinating Board (BKPM).

In general, the reasons for closing a company are due to the following:

According to Article 142 sub-article (1) of Law Number 40 of 2007 concerning Limited Liability Companies (“UUPT”), stating that the termination of a company shall be due to the followings:

1. Based on the decision of the General Meeting of Shareholders (“GMS”);
2. Because the period of establishment stipulated in the articles of association has expired;
3. Based on a court order;
4. Due to the revocation of bankruptcy based on a decision of a commercial court that has permanent legal force, the bankrupt assets of the company is not sufficient to pay the bankruptcy costs;
5. Because the bankrupt assets of the company that has been declared bankrupt are in a state of insolvency, as regulated in the Law on Bankruptcy and Suspension of Debt Payment Obligations; or
6. Due to the revocation of the company’s business license, so that it requires the company to conduct liquidation in accordance with the laws and regulations.

A company’s dissolution based on the resolution of the GMS is proposed by the Board of Directors, the Board of Commissioners or 1 (one) shareholder or more representing at least 1/10 (one tenth) of the total shares with voting rights. The resolution of the GMS regarding the dissolution of the company shall be valid if it is taken based on deliberation to reach consensus and/or attended by at least (three quarters) of the total shares with voting rights present or represented at the GMS and approved by at least (three quarters) of the total votes issued.

In the event that the dissolution of the company occurs based on the resolution of the GMS, the period of establishment stipulated in the articles of association has expired or due to the revocation of bankruptcy based on the decision of the commercial court, the GMS does not appoint any liquidator, the Board of Directors shall act as liquidator. The dissolution of the company must be followed by liquidation carried out by a liquidator or curator; and the company cannot take any legal action, except in terms of settling all company affairs in relation to the liquidation. Then, if it turns out that the members of the Board of Directors, the Board of Commissioners and the Company violate such regulation, they may be subject to legal responsibility jointly and severally.

Subsequently, in Article 142 sub-article (2) of Law Number 40 of 2007, it indicates that the dissolution of the Company shall:

1. Be followed by a liquidation carried out by a liquidator or curator,
2. Then, the Company cannot take any legal action, unless it is necessary to settle all company affairs in the context of liquidation.

In general, the process of dissolving a company will take between 1 and 1.5 years to complete.

For the company’s dissolution occurring due to a revocation of bankruptcy, the commercial court may at the same time decide to dismiss the curator in accordance with the provisions of the Law on Bankruptcy and Suspension of Debt Payment Obligations.

The District Court may dissolve the company for the following reasons:

1. Upon petition of the prosecutor based on the reason that the company violates the public interest or the company commits an act that violates the laws and regulations;
2. Upon petition of the interested party based on the reasons for the existence of a legal defect in the deed of establishment;
3. Upon petition of the shareholders, the Board of Directors or the Board of Commissioners based on the reason that the company cannot be continued.

The liquidator has the obligation to notify all creditors with regards to the dissolution of the company by announcing the dissolution of the company in the Newspapers and State Gazette of the Republic of Indonesia within a period of no later than 30 (thirty) days from the date of dissolution of the company. The notification to the creditor contains:

1. matters regarding the dissolution of the company and its legal basis;
2. name and address of the liquidator;
3. procedures for filing invoices; and
4. time period for filing invoices.

To the extent the notification of the dissolution of the company is not carried out in accordance with Article 147 of the Law of Limited Liability Company, the dissolution of the company shall not apply to third parties and the dissolution of the company shall not result in the company losing its legal entity status until the liquidation is competed and the liability of the liquidator is accepted by the GMS or the court. As a result of the dissolution of the company, every letter issued by the company shall include the word “in the process of liquidation” after the company’s name.