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

Indonesia is an attractive country for expats and businesses due to the myriad of business opportunities found in Indonesia. Although many investors have incorporated a company in Indonesia, the reality is that not all of them are successful.

There are many reasons why companies may proceed with closure, which are:

In such circumstances, for either Indonesian companies or companies based elsewhere, it is best for a company to be either temporarily or permanently dissolved.

However, in certain instances, a company in Indonesia may be forcibly closed. This forced closure is conducted by various authorities, some of which act directly towards the company’s closure while others act indirectly. Despite this difference, all authorities involved play a role in the forced closure of an Indonesian company.

As we all know, a court ruling is extremely final and strict, thus the court plays the most direct role with regard to the forced closure of any company in Indonesia. Evidently it is due to the fact that court decisions and verdicts have a direct impact on the company itself.

An example of a reason why the court authorities may choose to enforce the closure of a company in Indonesia is possibly due to 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.

Several other authorities are indirectly involved when an Indonesian company is required to be closed for any reason. These authorities include:

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.

• This government body accepts and approves all proposals for the dissolution of any company in Indonesia and once the dissolution has been approved, the Ministry will issue a decree of dissolution.

• 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.

• 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. 

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

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