The coronavirus pandemic is causing serious financial distress for businesses around the world, and many companies are simply unable to continue due to the effects on trade of lockdown and other measures put in place to protect our health.
A shortage of cash is always a huge issue for businesses, even under normal trading conditions, and can quickly cause cash insolvency as it becomes impossible to pay bills when they fall due.
Unlike the laws in other countries which allow company having financial problems to be dormant and resume the activity later on after the company’s financial situation gets better, Indonesian law stipulates that the dormant status is chosen as a transition period to a liquidation.
If your option for your business is liquidating your company or manufacture, here is what you need to know about Indonesian liquidation law dan process.
Pursuant to Company Law, the Company shall be dissolved by several matters and one of which is liquidation according to shareholder’s decision in General Meeting of Shareholders.
The Board of Directors (“BOD”), Board of Commissioners (“BOC”) or one or more shareholders representing at least 1/10 of the total shares with voting rights could propose liquidation of a company to the shareholders. Then the shareholders will hold the General Meeting of Shareholders (“GMS“) to decide the approval of such liquidation. If the majority of the shareholders decide to approve the liquidation, then in the same GMS, the shareholders must appoint a Liquidator who will lead the liquidation process.
A. Company In Liquidation Process
During the liquidation process, the Company may not take any legal actions except for the purposes of the liquidation process which is conducted by the Liquidator. The GMS may appoint the President Director or any party to be the Liquidator. In common practices, companies often appoint lawyer to act as liquidator to avoid any conflict of interest, the lawyer in the the same time also acts as a legal consultant. BP Lawyers is experienced in assisting our clients on liquidation cases. On which we were acted as a legal consultant also as a Liquidator of our clients’ companies.
B. Liquidator obligations
No more than 30 days since the Company is dissolved by the GMS , the Liquidator is required to take the following actions:
1. Notify creditors regarding the dissolution of the Company by announcing the Company’s dissolution in daily newspapers and the State Gazette of the Republic of Indonesia ( “BNRI”) ( “The First Announcement“); and
2. Notify the Minister of Law and Human Rights (“Minister”) to record the liquidation process of the Company in Company Register.
The announcement in daily newspaper and the State Gazette must contain the following information:
1. The dissolution of the Company and the Legal Basis of such dissolution;
2. The name and address of the Liquidator;
3. The procedure for submitting claims; and
4. The deadline for submitting claims.
If the Liquidator does not not make any announcement neither in newspaper nor in the State Gazette, the Company’s dissolution cannot take into effect to third parties. Moreover, the Liquidator shall be jointly and severally responsible with the Company for any losses suffered by third parties.
Creditors must submit claims within 60 days after the date of The First Announcement. For those creditors who have not submitted the claims during the liquidation process, they may submit the claims through District Court within 2 years after The First Announcement. Please be noted that the claims can be approved if there are residual assets resulting from the process that are allocated for the shareholders.
A Liquidator has responsibility to settle the Company’s assets. For that purpose the Liquidator must take the following actions:
1. Recording and collecting the Company’s assets and debts;
2. Announce in the daily newspaper and the State Gazette regarding the assets distribution plan resulting from the liquidation;( “The Second Announcement“);
3. Paying the creditors;
4. Paying the remaining assets resulting from the liquidation to the shareholders and
5. Other necessary actions that need to take in order to settle the assets of the Company
If the Liquidator estimates that the Company’s debts is exceeding its assets, the liquidator must file a bankruptcy petition over the Company. However, it is possible under the prevailing laws and regulation that all creditors agree to conduct the settlement outside the bankruptcy process.
After the liquidation steps has been completed, the GMS will release and discharge the Liquidator from his rights and obligation. Then, no more than 30 days since the date of GMS accepts the responsibility report of the Liquidator, the Liquidator must notify the Minister and make final announcement in daily newspaper containing the result of the liquidation process (“The Third Announcement”). The Minister will announce the termination of the Company’ legal entity status in the State Gazette and delete the company’s name from the register of companies.
