Even though Indonesia is actively courting foreign businesses with streamlined regulations and a growing economy, there might come a time when, due to unforeseen circumstances or a change in business strategy, you will need to close your company.
This process, known as company dissolution, requires following specific steps and regulations to ensure a smooth and legally compliant conclusion of your operations in Indonesia.
Common Reasons for Company Dissolution
Company dissolution is the legal process of terminating a company’s business operations. This entails officially ending the company’s existence as a legal entity, resulting in the cessation of all its business activities.
While bankruptcy (when the companies cannot pay debts with their assets) is a prevalent cause of company dissolution, several other factors can contribute to this decision, such as:
1. Expiration of business license: If a company fails to renew its business license, it may face dissolution.
2. End of incorporation period: Some companies are incorporated for a specified duration. Upon reaching the end of this period without an extension, dissolution may be necessary.
3. License revocation: If a company’s business license is revoked by the authorities due to non-compliance or violations, dissolution may be mandated.
4. Inactive Business: Companies that have been inactive for an extended period, typically exceeding three years, may be subject to dissolution.
5. Legal infractions: If a company engages in illegal activities or breaches legal regulations, it may face dissolution as a consequence.
6. Voluntary dissolution: In certain cases, shareholders or company owners may voluntarily decide to dissolve the company due to various reasons, such as changes in business strategy, financial constraints, or internal disputes.
Essential Documents for Company Dissolution
Dissolving a company shouldn’t be taken lightly. It’s crucial to understand the legal implications involved, which translate into gathering and submitting the necessary documents, which serve as proof that the dissolution process is being followed according to regulations.
To dissolve a limited liability company (PT) in Indonesia, you’ll need to have the following documents on hand:
1. Deed of Establishment (Akta pendirian perusahaan): This is your company’s incorporation certificate, including any recent amendments.
2. Decree of Minister of Law and Human Rights (SK Kemenkumham): This is a document issued by the Ministry of Law and Human Rights, containing any updates about the companies.
3. Copies of ID cards (KTP) for company management: This includes IDs of the shareholders, directors, and commissioners.
4. Tax-related documents: Copies of tax identification number/NPWP of directors and company’s monthly and annual tax reports.
5. Minutes of Shareholders’ Meeting (RUPS): This document records the decisions made during a shareholder meeting regarding the dissolution.
6. Letter of Domicile: This document confirms the official address of your company.
7. Business License (SIUP): You’ll need a copy of your company’s business license.
The Steps Involved in Company Dissolution
Dissolving a company in Indonesia involves a process called liquidation. This means settling all your company’s financial obligations/debts and distributing any remaining assets. The process applies to both active and inactive businesses.
You can appoint a legal consultant, a lawyer, or your company’s Board of Directors as the liquidator. This person will be responsible for making public announcements in national newspapers about your intention to dissolve the company. Failing to do this can prevent the company from being officially recognized as dissolved.
The entire dissolution process can take anywhere from one to one and a half years. Here’s a simplified breakdown of the steps involved, based on Indonesia’s Undang-Undang No 40/2007 on Limited Liabilities Companies:
— Step 1 (5 working days): Notary issues the first Article of Dissolution.
— Step 2 (3 working days): First announcement in a national newspaper.
— Step 3 (60 working days): Ministry of Law and Human Rights approval.
— Step 4 (30 working days): Cancel business identity /licenses (NIB and SIUP) through the OSS system.
— Steps 5 & 6 (180 working days each): Revoke taxpayer ID (NPWP) and tax certificate registration.
— Step 7 (5 working days): Notary issues the second Article of Dissolution.
— Step 8 (3 working days): Second announcement in a national newspaper.
— Step 9 (30 working days): Ministry of Law and Human Rights approval (again).
— Step 10 (3 working days): Third and final announcement in a national newspaper.
Total approximate length of time to dissolve a company in Indonesia is 1-1.5 years. However, this is just a general guideline and the actual time may vary depending on the specific circumstances of the company.
Simplify Your Exit with Seven Stones Indonesia
Being in foreign country dealing with legal aspects, constantly changing laws and local authority processes is certainly overwhelming. Besides setting up business, it turns out shutting the company down is also complicated and takes a long time.
At Seven Stones Indonesia, we get the challenges foreign businesses face when entering or exiting the Indonesian market. We can guide you through the maze of company dissolution, making sure all legal requirements are met efficiently and effectively. Contact us today to find out how we can help you make customized business solutions.
