Are any Authorities Allowed to Force the Closure of an Indonesian Company?

In certain circumstances, it is best for a company to be either temporarily or permanently closed. Such is the case for both Indonesian companies and companies based elsewhere. There are several reasons as to why a company could be closed. These range from financial troubles to the decision of shareholders of the company to the expiration of the company’s incorporation period. However, in certain instances, a company in Indonesia may be forcibly closed. This forced closure is conducted by various authorities. Some of these authorities act directly towards the company’s closure; others act indirectly. Despite this difference, all authorities involved play a role in the forced closure of an Indonesian company.

Role of the Court in an Indonesian Company’s Closure

The court plays the most direct role with regard to the forced closure of any company in Indonesia. This is due to the fact that court decisions and verdicts often have a direct impact on the company itself. The court authorities might choose to enforce the closure of a company in Indonesia due to a failure to comply with the country’s corporate laws. Such non-compliance may include the legal defect of the company’s deed of establishment as well as any attempt to operate a company which has not been active for three years or longer. The court may also require a company to be closed if the company has become bankrupt and the assets which are currently owned by the company are insufficient to cover all remaining debts which would thus allow the company to no longer be bankrupt.

Authorities Indirectly Involved in the Closure of an Indonesian Company

Several other authorities are indirectly involved when an Indonesian company is required to be closed for any reason. These authorities include the Ministry of Law and Human Rights, the Indonesian Investment Coordinating Board (BKPM), and any tax office. Although none of these entities are allowed to enforce the closure of an Indonesian company in the same way as that of the court, they ensure that the forced closure of an Indonesian company is completed with as few problems as possible.

The Ministry of Law and Human Rights accepts and approves all proposals for the dissolution of any company in Indonesia. Once the dissolution has been approved, the Ministry will issue a decree of dissolution. The BKPM is also involved in the closure of an Indonesian company. All Indonesian companies which are to be closed must settle all licensing requirements with the BKPM. Either the company itself or any parties connected to the company may make an application to the BKPM for the revocation of the operational status of the company. All principal licenses and business licenses which are still active are also to be revoked by the BKPM at this time. In due time, the Deputy of Control of Investment Implementation who works for the BKPM will issue a statement of revocation. Tax offices are also involved in the closure of a company. The tax office will revoke the tax identification number (NPWP) of the company which is to be closed. Once this has been completed, the company will be released from all obligations to taxation in Indonesia.

As an aside, many people who pay taxes in Indonesia sometimes struggle with understanding the true extent of their tax obligations. If you find such to be the case for you or your company, you can always contact us at Paul Hype Page & Co. Our experienced and knowledgeable tax experts will assist you in understanding all the tax obligations required of you. We will even work with you in order for you to save money on your tax bill while still remaining within Indonesia’s legal boundaries.

After every part of the dissolution process has been completed, the Indonesian company in question will be officially closed. This is true regardless of whether the closure of the company was forced or voluntary.

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