It is not easy to start a business in Indonesia and you will face numerous challenges throughout your entrepreneurial journey. There are many companies that have expanded successfully, but there are also many that have failed and had to dissolve the company.
A distinction must be made between the representative office (RO) and the PMA in order to properly comprehend the method to be followed.
Indeed, a simple dissolution will suffice to stop the existence of a RO, however, to close down a PMA or PT Local, it will be necessary not only to dissolve the company, but also to go through what is known as liquidation.
What Governs the Striking Off of a Company in Indonesia?
Company dissolution in Indonesia is governed by the Indonesian Law No. 40 of 2007, Art. 143 paragraph 1. The law states that the company dissolution does not automatically erase the company at the conclusion of the liquidation process, but only after the accountability has been approved by the General Meeting of Shareholders (GMS) or the District Court. Article 142, on the other hand, states that businesses can only be declared bankrupt for the following reasons:
Process for Striking Off a Company in Indonesia
As previously stated, the Company’s dissolution in Indonesia will be followed by a liquidation process overseen by a liquidator or receiver (as the case may be). In a nutshell, the following are the liquidation procedures:
1. Notification to Creditor and Minister of Law and Human Rights (MoLHR)
At the latest 30 days as of the date of the dissolution of the Company, the liquidators must notify:
NOTE: The 30 days period is counted as from the date of:
- dissolution by the GMS if the company is dissolved by the GMS; or
- a legally binding court ruling if the company is dissolved based on a court ruling
If these conditions are not met, the dissolution will not be binding on third parties, and the liquidator will be equally and severally accountable with the Company for any losses suffered by third parties.
2. Creditor’s claims
Creditors have 60 days from the date of the notification of the Company’s dissolution in the newspapers and the State Gazette of the Republic of Indonesia to register their claims.
3. Reporting of the liquidation results
The liquidator must submit the outcomes of the liquidation to the GMS or the court (as applicable). This responsibility also applies to the receiver if the receiver is in charge of the liquidation process; in such instance, the receiver must report the liquidation outcomes to the supervising judge (hakim pengawas).
4. Announcement and notification concerning liquidation results
After the GMS, court, or supervisory judge ratifies the liquidation results (discharge and acquitted the liquidator, or the court accepts the accountability report of the liquidator appointed by it), a notification of the liquidation results must be sent to the MoLHR and published in the newspaper within 30 (thirty) days of the ratification of the liquidation results.
5. Recording of the expiration of the legal entity status of the Company
After the announcement in the press and communication to MOLHR regarding liquidation outcomes have been met, the Minister shall record the expiration of the Company’s legal entity status and delete the Company’s name from the Companies Registry.
6. Announcement of the expiration of the legal entity status of the Company
The Minister shall announce the expiration of the Company’s legal entity status in the State Gazette of the Republic of Indonesia.
Duration of Dissolution of a Company in Indonesia
Company strike off in Indonesia 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:
Closure of the Tax Card in Indonesia
When your company receives the initial clearance from the MoLHR, you must also complete the tax closure at the local tax authority.
Verification and tax audit are the only ways to close the tax card. It will cover the company’s tax liabilities, revisions, and any other things that are deemed relevant.
The auditing procedure can take up to a year to complete. It could take as little as 6 months, depending on how thoroughly you’ve followed your accounting and tax reporting procedures.
|No.||Description||No. of Working Days|
|1||Article of dissolution issued by the notary||2|
|4||Decree of dissolution by MoLHR||40|
|5||Revocation the Principle/Business License by BKPM||10|
|6||Revocation Tax ID number by tax office||180|
|7||Revocation Company Registration Certificate by PTSP||7|
Liquidate means a formal closing down by a liquidator when there are still assets and liabilities to be dealt with. Dissolving a company is where the business is struck off the register at Companies House because it is now inactive.
Once a company goes into liquidation, creditors holding personal guarantees will pursue the directors to pay the outstanding company debt. The creditors that will almost always have a personal guarantee include, a financing bank, a landlord, and any major suppliers.
If you have been doing business as a corporation or limited liability company, you need to officially dissolve your entity so that you are no longer liable for business taxes or filings in your state. Officially dissolving your business also puts creditors on notice that your entity can no longer incur business debts.
When you dissolve a limited company, whether through Members’ Voluntary Liquidation (MVL) or voluntary strike-off, any debts that are still owed must be repaid. Members’ Voluntary Liquidation is administered by a licensed insolvency practitioner (IP) who ensures that creditors are repaid in full.