How to Strike Off a Company
At Paul Hype Page and Co, this is the hardest process for us to see. From company incorporation to maintaining their accounts, we want ALL our clients to do well. However, if there comes a need to this process in any unforeseen circumstances, a company dissolution also known as a company strike off must be done.
Starting a business is never easy. Along your journey, you will be going through a lot of obstacles. Some of them are predicted but the others are not. There are so many companies which succeeded with their expansion but there are also many of them who failed. And some of them even cannot avoid the worse scenario a business could possibly face, a dissolution.
To fully understand the procedure to be followed, a distinction must be made between the representative office (RO) and the PMA.
Indeed, to end the existence of a RO, a simple dissolution will be needed, while to close down a PMA or PT Local, it will be needed not only to dissolute the company, but also, previously to that, to go through what is called liquidation. Put simply, liquidation refers to the cessation of a company’s operations and the sale of its assets to pay outstanding debts to creditors. The company will be dissolute and cease to exist following the completion of the liquidation process.
The dissolution of a company breakdown is stipulated under Indonesia’s Law No. 40 of 2007, Art 143 paragraph 1, which states that the dissolution does not automatically erase the company at the end of the liquidation process, but after the accountability has been approved by the General Meeting of Shareholders (GMS) or District Court will the company be dissolute completely. On the other hand, on the article 142 stipulates that companies may only be dissolute by the following reasons:
- Bankrupts assets of the company declared in condition of insolvency
- Due to revoked bankruptcy statement based on mandatory order of the commercial art
- Bankrupt assets of company are not sufficient to pay bankruptcy cost
- Termination of company duration as agreed in the article of association
- Resolution of GMS
- Compulsory closure pursuant to a court order. Note that this can happen due to bankruptcy, but not always
- Revocation of company’s licenses and permits, forcing the company to conduct liquidation
As mentioned above, the dissolution of the Company shall be followed by liquidation process which is conducted by a liquidator or receiver (as the case may be). In the nutshell, the liquidation processes are as follows:
- 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:
- all creditors of the dissolution of the Company by announcing the dissolution of the Company in the Newspapers and the State Gazette of the Republic of Indonesia; and
- the MoLHR of the dissolution of the Company for it to be recorded in the Company register that the Company is in liquidation.
*note that 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.
Failure to comply with these requirements will mean that the dissolution is not binding on third parties and that the liquidator is jointly and severally liable with the Company for losses incurred by third parties.
- Creditor’s claims
Creditor may file their claims within the period 60 days commencing from the announcement date concerning the dissolution of the Company in the Newspapers and the State Gazette of the Republic of Indonesia.
- Reporting of the liquidation results
Liquidator shall report the liquidation results to the GMS or the court (as applicable). This obligation also applicable to the receiver, if the liquidation process is conducted by receiver, in this case the receiver shall report the liquidation results to supervisory judge (hakim pengawas).
- Announcement and notification concerning liquidation results
After the GMS or court or supervisory judge ratify the liquidation results (discharge and acquitted the liquidator or after the court accepts the accountability report of the liquidator appointed by it), then a notification of the liquidation results must be sent to the MoLHR and announced in a newspaper within 30 (thirty) days from the date of the ratification of the liquidation results.
- Recording of the expiration of the legal entity status of the Company
The Minister shall record the expiration of the Company’s legal entity status and remove the Company’s name from the Companies Registry, after the announcement in a newspaper and notification to MOLHR concerning liquidation results have been met.
- 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.
Essential to notice: closure of the tax card
When your company gets the first approval from the MoLHR, you also need to proceed to the closure of the tax at the local tax authority.
The tax card is closed only by verification and tax audit. It will be carried out on the company’s tax liabilities, revision and other matters as deemed necessary.
The audit process itself can even go up to one year. However, it can also take only 6 months, depending on how well you have complied with your accounting and tax reporting.
The time frame for company dissolution is as follows:
- PMA or PT Local
|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 the Tax ID Number by tax office||180|
|7||Revocation Company Registration Certificate by PTSP||7|
Total Period (result can be varied) = 8-10 months (can be up to 12 months)
- Representative Office
|1||Revocation the RO License by BKPM||10|
|2||Revocation the Tax ID Number by tax office||180|
|3||Revocation Company Registration Certificate by PTSP||7|
Total Period (result can be varied) = 6-8 months
In general, the process of registering a company requires less time to complete compared to the dissolution of a company. From the approval of the GMS, the whole process of liquidation takes approximately 12 months until the company is not considered as a legal entity and will be released from any legal existence and tax obligations.