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Posted date : Aug 09, 2012

HOW TO DISSOLVE COMPANY IN INDONESIA

 

The general principle on dissolution of Limited Liability Company is stipulated under Article 143 paragraph (1) of Law No. 40 of 2007 regarding Limited Liability Company (hereinafter referred to as “Company Law”), which provides that the dissolution of company does not automatically erase the legal status of the company. The legal status would be lost at the end of the liquidation process and accountability of liquidator has been accepted by the General Meeting of Shareholder or District Court.

Article 142 of Company Law elaborates that a company can be dissolute based on the following occurrence:

  1. Based on the resolution of General Meeting of Shareholder;
  2. Due to the termination of the company’s duration as stipulated in the articles of association.
  3. Based on the court order;
  4. Due to the revoked bankruptcy statement based on binding order of the commercial court, and the bankrupt assets of the company is not sufficient to pay the bankruptcy cost;
  5. Due to the condition that the bankrupt assets of the company has been declared in the condition of insolvency as regulated in the Law regarding Bankruptcy and the Suspension of Debt Payment; or
  6. Due to the revocation of the company’s business permit, so that the company is obliged to conduct liquidation in accordance with prevailing regulation.

 

Further elaboration on the conditions above are as follows:

(a) Dissolution based on the resolution of General Meeting of Shareholder

Article 144 of the Company Law provides that the General Meeting of Shareholder concerning dissolution can be held based on the proposal from the Board of Directors, Board of Commissioners or 1 (one) or more shareholder representing at least 1/10 (one-tenth) from the total number of shares with voting right. Moreover, the General Meeting of Shareholders’ resolution regarding the Company’s dissolution shall be valid if it is taken by mutual consensus or if it is approved by at least 3/4 (three-fourth) of the total shares issued with voting rights are present or represented, except articles of association stipulates a higher quorum and/or a provision regarding the adoption of resolution in the General Meeting of Shareholders.

(b) Dissolution based on Court Order

Article 146 of the Company Law provides that Dissolution based on District Court Order can be based on request from:

  • Prosecutor’s office, based on the reason that the Company has violated the public interest or the Company has committed an action that which violating the regulation;
  • relevant party, based on the reason that the deed of establishment is found to be defect;
  • Shareholders, Board of Directors, or the Board of Commissioners, based on the reason that it is no longer possible to run the Company.

It should be noted further that the in the event that the Court order determines that the Company shall be dissolute, the Court will then appoint a liquidator to handle the process of liquidation.

PROCEDURES AND MECHANISM OF DISSOLUTION OF THE COMPANY

1. Approval of the General Meeting of Shareholders

As explained above, dissolution requires a resolution from the General Meeting of Shareholders. In order to do so, Article 79 (2), Article 82 and Article 144 (1) of CompanyLaw provides thatthe Board of Directors, Board of Commissioners or 1 (one) or more shareholder of the Company who representing at least 1/10 (one-tenth) from the total number of shares with voting rightmay submit a request concerning dissolution and the appointment of liquidator(s)to General Meeting of Shareholders of the Company.

The General Meeting of Shareholders, in such agenda, is valid if it is attended by shareholders who representing at least ¾ (three-quarters) of shares with valid voting rights. In this vein, resolution of General Meeting of Shareholders is validly adoptedif such resolution is approved by at least ¾ (three-quarters) of the total votes legally cast at the General Meeting of Shareholders.This is clearly enshrined by Article 89 (1) of Company Law.

 

Pursuant toArticle 144 (3) of Company Law, dissolution process starts and effective since the date mentioned onthe General Meeting of Shareholders’resolution or if such resolutiondoesnot expressly statedthe date of dissolution process, the dissolution process is effectiveas of the date of the General Meeting of Shareholders’ resolution.

 2. Appointment of Liquidator

Dissolution shall be followed by liquidation process which is conducted by one or more liquidator(s). This is provided by Article 142 (2) point (a) of Company Law. If the General Meeting of Shareholdersdoes not appoint a liquidator,therefore in accordance withArticle 142 (3) of Company Law, the Board of Directorsof the Companyshall act as liquidator.

3.  Announcement of Liquidation

Pursuant toArticle 147 (1) of the Company Law, the liquidator within 30 (thirty) days since the effective date of the dissolution shall notify:

  1. All creditors concerning the dissolution by means of announcement of dissolution in a newspaper and State Gazette of the Republic of Indonesia; and
  2. the dissolution of the Company to Minister of Law and Human Rights (“MOLHR”) to be recorded in theCompany Registrythatthe Companyis in liquidation.

The announcement as provided abovemustat leastcontain:

  1. the reason and legal basis of dissolution;
  2. the liquidator’s name and address;
  3. the procedure for the submission of claims; and
  4. the period for submission of claims.

 

4. Submission of Creditors’ Claims

Article 147 (3) of Company Lawprovides that all creditors may submit their claims withina period of 60 (sixty) days calculated since the date of announcement.

 5. Settlement of Claims and Accounts Receivables

Based on Article 149 (1) of Company Law, the obligation of the liquidator in settlingthe assets of the Companyin liquidation process shall be as follows:

  1. recording and collecting the assets and debts of the Company;
  2. announcement in a newspaper and State Gazette of the Republic of Indonesia with regard to the plan ofdistribution of assets resulting from the liquidation of the Company;
  3. payment to all creditors;
  4. payment of the remainingassets resulting from the liquidation to theshareholders;
  5. other actions necessary in the settlement of assetsof the Company.

 

The Company Law is silent in regards tothe period of liquidation process as stated in Article 149 (1) of Company Law. However, Article 149 (3) of Company Law regulates that the period for creditors to submit an objection to the plan ofdistribution of assets is 60 (sixty) days from the announcement date.

6. General Meeting of Shareholdersconcerning Approval of Liquidator’s Duty and Effectiveness the liquidation of the Company

 

The General Meeting of Shareholdersconcerning approval of liquidator’s duty shall be convened after all steps above is already conductedand completed by the liquidator.In this vein,if the General Meeting of Shareholdersgrantsthe liquidator an acquittal and discharge, then according to Article 152 of the Company Law, the liquidator must report to the MOLHR and announce the final outcome onthe liquidation process in a newspaper at least 30 (thirty) days counting fromthe date of the General Meeting of Shareholderswhich approvingthe liquidator’s duty.Subsequently, MOLHR will register and delete the Company’sname from the Company Registry and will announce it in State Gazette of the Republic of Indonesia. The Company Law is silent concerning the period of such deletion and announcement process.

 

The estimated time frame on dissolution process

 

Based on the steps to above, we estimate that the dissolution processwill take at least 12(twelve) months from the date of approval of General Meeting of Shareholders.This is with the assumption that during suchperiod of time, all rights and obligations (i.e. claims and account receivables) of the Companyto third parties are settled.

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