Dissolution of a company is an extremely undesirable outcome for any business owner. However, it is one which sometimes has to happen. There are several reasons why a company in Indonesia might be dissolved. These reasons for dissolution will be detailed in the following article.
Companies in Indonesia
Indonesia is located in the Asia–Pacific region, one of the world’s best regions in which to start a new business. Starting and operating a business in Indonesia is becoming simpler and more accessible to the general public all the time. According to a report published by the World Bank, Indonesia is above average in ease of starting and doing business (Doing Business Report, World Bank report 2019). Indonesia ranked 73rd with regard to ease of doing business among 190 economies. There were 567 listed companies in the Indonesian stock market (Jakarta Stock Exchange – JSX) and their cumulative market capital was 7,400 trillion rupiah (US$479.42 billion). The market is divided into companies owned by two types of investors: local and international. The JSX has 48.67% of its investments made by local investors, whereas the foreign investments in the stock exchange are 51.33% of the total investments. The figures show that investing in Indonesia is easy due to the country’s low interest rate, low inflation rate, low tax rate, effective human resources, high technology, cheap labor, and many investment opportunities.
If you intend to invest in any Indonesian company, we at Paul Hype Page & Co are willing to assist you. Our financial experts understand all the complexities of business and finance in Indonesia. Thus, you can be assured that the investment advice you will receive from them will be accurate and unable to be questioned.
Starting a new business is not difficult, but running the business operation can be a major challenge. Every year countless businesses across Indonesia start, but 30% of new business shut their business operations within the first two years and only 50% of businesses are still in operation after five years After 10 years, only 37% are still conducting business operations. These figures can be improved through strategic planning, funding, and training. Business owners who do so will soon find that their business in Indonesia will be very successful and profitable.
Reasons for Dissolving a Company
An economy grows because of the businesses in it. Without healthy businesses, an economy cannot thrive. All successful economies are backed by various businesses of all types and sizes. Behind the successful economies there are small and medium enterprises (SMEs), corporations, and private companies which all utilize resources effectively and create jobs that lead to the generation of income that can be invested or spent locally. Developed countries have grown because they care about the SMEs, private companies, and corporations as they are the soul of the economy. Companies and their effects on a country’s economy have to be kept in mind while making any economic decisions that affect them, whether directly or indirectly. As Indonesia is one of the fastest-growing economies in the Asia–Pacific region, it ought to support foreign investors by promoting the welfare of its companies.
Many people plan to start companies in Indonesia. If you are one such person, we at Paul Hype Page & Co can assist you. We have a team of dedicated incorporation experts who have deep knowledge about the entire incorporation process in Indonesia. We will work with you and guide you through every step of the process which will ultimately result in the incorporation of your new Indonesian company.
Indonesia welcomes foreign investors and also appreciates local investors, but sometimes circumstances arise that force a business to shut off its business operations because of illegal activities or insolvency in the business operation. This means that the company has to strike off the business operations from the country and liquidate the business. The dissolving of a firm can either be voluntary or non-voluntary. The voluntary dissolution of a firm takes place when owners, partners, or investors choose to close the business operations. There can be various reasons for this: the firm has not been making profits, there has been mismanagement of business operations, there is low cash flow, there has been noncompliance with mandates, company liabilities have become excessive, or there is a partnership disagreement. The non-voluntary dissolution of company is defined by the law in Article 142. Article 142 of the Company Law of Indonesia defines the reasons and purposes that lead to the dissolving of an organization, company, or business (Company Law of Indonesia, 2007).
- Article 142(1) defines company dissolution as being based on the resolution of a general meeting of shareholders (GMS) in which members can resolve to liquidate the PT
- Termination of the establishment period as mentioned in the Articles of Association
- Court decision to liquidate the PT in case the PT’s bankruptcy assets are insufficient to settle bankruptcy costs
- Bankruptcy assets of a PT declared bankrupt are to be placed in a state of insolvency as provided
- Revocation of the business license of the PT
Dissolution of a Partnership
Indonesia is a place in which many foreigners may invest. The country welcomes all foreign investments. When foreigners think of investing in Indonesia, they will usually register a business as a partnership firm. Most of the businesses can run for a long time, but there are also some unfortunate incidents that can happen and cause the dissolution of the partnership, either voluntarily or non-voluntarily. Dissolution of a partnership is different from the dissolution of a firm. Dissolution of a firm involves a company’s closing of business operations. However, dissolution of a partnership is a change in the agreement of partners. The reasons for the dissolution of partnership are the following:
- Disagreements over the existing profit–sharing ratio; partners may prefer to change the ratio
- Addition of new partners to the business, which will dissolve the previous partnership agreement
- Demise of existing partner or partners
- Transferring of partnership from one owner to another partner
- Insolvency of partner
- Expiration of agreement
Process of Company Dissolution
Although Indonesia is a good location for business and business facilities for investors in terms of resources, funding, and market, some of the businesses have to end their business operations because of the reasons defined in Article 142(1) Company Law Indonesia 2007. As per the Company Law, the company has to follow the legal proceedings for the dissolving of the company. The following is the process for the dissolution of a company:
- Dissolution Proposal
- Appointment of a liquidator
- Announcement of dissolution
- Dissolution approval from the Minister of Law and Human Rights (MoLHR)
- Announcement of asset division
- General Meeting of Shareholders on the division of assets
- Approval from the Minister of Law and Human Rights (MoLHR)
- Completion of the liquidation process
Duration of Dissolution of a Company in Indonesia
Indonesia welcomes new startups and makes it easy to register a business. Registering a business is easy but continuing business operations is difficult. Dissolving the business requires the following of standard processes for the dissolution of a company. It may start after approval in a general meeting of shareholders or by a court order. The condition of the approval is either approval of 10% of the shareholders of the company who agree to dissolve the company or appointment of the liquidator(s). The process includes only working days and takes approximately six to eight months if the process runs smoothly. If such is not the case, it could take from 11 to 12 months. The following is the standard amount of time taken to complete each step:
- Issuance of the article of dissolution takes two days at the notary office
- Publishing of news in a newspaper to inform the stakeholders takes two days
- After news publication, the liquidation process takes around 60 days
- Decree of dissolution by the MoLHR takes around 40 days
- Revocation of the Principle/Business License by the Indonesia Investment Coordinating Board (BKPM – Badan Koordinasi Penanaman Modal) takes 10 days.
- Revocation of Tax ID number at a tax office. This step takes almost 180 days.
- Revocation of Company Registration Certificate by PTSP takes seven days.
Registration of business is easy in Indonesia however, dissolving a company in Indonesia is not easy for businesses, corporations, or companies because there are certain standard steps defined in Article 42 of the Company Law of Indonesia that need to be followed by every dissolving firm. There are no differences between companies in different industries in this regard.
The three government agencies that have power to register or dissolve a foreign company are the following:
- Foreign Representative Office (Kantor Perwakilan Perusahaan Asing)
- Foreign Trade Representative Office (Perwakilan Perusahaan Perdagangan Asing)
- Foreign Construction Services Representative Office
A dissolved company can be revived. If the company is dissolved via a court order or the dissolution of a partnership, the dissolved business can be restored by sending an application to the court to register a business but it should be pursuant to the provision of the Indonesian Companies Act 2007. For the restoration of a partnership, one can send an application to the registrar’s office.
Paul Hype Page & Co – OSS service provider and Asean Chartered Accountant.
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Our Firm Goal is to assist Foreigner and Foreign Companies to set up business in Asean.
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