Category: Business Winding Up Services
Written by Rivary Finan Hernawan on 05/09/2022
The author’s views are entirely their own and may not always reflect the views of Putranto Alliance.
Company liquidation is the process of closing down a business and distributing its assets. A firm is liquidated when its assets are sold, and any realized revenue is distributed to creditors and/or shareholders based on priority order. The process ends when the business has been finally liquidated, at which point it is deleted from registration and no longer has a legal existence.
Liquidation can be used to close both solvent (those that can pay their debts and/or have assets greater than liabilities) and insolvent businesses (bankrupt).
A company’s liquidation does not imply its failure. Companies liquidate for a variety of reasons, including the following:
When a business enters liquidation, it stops doing business, fires employees, and no longer exists as a legal entity. The director’s authority ends, and they won’t have access to company financial accounts anymore. For solvent companies, liquidation is a tax-effective option, especially for businesses with assets to sell and no obligations.
If you are insolvent (debt-ridden), a certified insolvency practitioner oversees the liquidation of your company’s assets, with the proceeds going to the company’s creditors. After being liquidated, the company will no longer exist. The firm will thereafter be removed from Companies House’s registration.
Liquidation refers to the company’s dissolution as a legal entity, which includes paying debts to creditors and distributing the remaining assets to the company’s shareholders.
Indonesian law compels businesses to appoint a liquidator for the closing period as soon as they announce their intention to close. When your business decides to cease operations, the liquidation procedure begins. Your remaining assets would have to be sold to pay off any outstanding debt that you might have. Since you don’t intend for your business to run again, you decide to go through with the liquidation procedure. The business may still file a lawsuit up to and including issuing an order of liquidation.
The Company Law No. 40 of 2007 must be followed while liquidating a company in Indonesia. The Board of Directors appoints liquidators. You must see a lawyer or legal advisor and hire a Notary to dissolve your company.
The three steps of the liquidation process in Indonesia are as follows:
Newspapers and the Indonesian State News (“BNRI”) are notified that the company is under liquidation. Then, the minister is notified to record this information in the company registration (notification to the minister is done by a notary through the Legal Entity Administration System). The dissolution’s legal justification, the bill-filing process, the bill-filing deadline, and the liquidator’s name and address are all explained in the notification. The liquidator also records the company assets and liabilities, including the names of creditors, their levels, and other things linked to the managerial actions in the liquidation process.
This second announcement requires the liquidator to inform the minister of the distribution strategy for the liquidated assets by publishing a notice in the newspapers and BNRI. The liquidator can settle after three months by selling assets that have already been valued using an impartial appraiser’s services, then distributing the assets to the creditors. The remaining balance from the liquidation must be returned to the shareholders should there is any leftover wealth.
The last stage is doing a GMOS on the accountability of the completed liquidation procedure. If the GMOS takes responsibility for the liquidation, a newspaper statement and a notification to the minister to notify the procedure has concluded are then made. A notary communicates to the Minister through Sisminbakum (Sistem Administrasi Badan Hukum), the Legal Entity Administration System. Following the announcement, the minister noted the company’s loss of its legal entity status and removed its name from the list of registered businesses. This action is followed by a notice in the State Gazette of the Republic of Indonesia until the company’s liquidation is finalized and announced in two newspapers and additional state media. The company is still regarded as active until that time. The liquidator must make the announcements. Until the report is completed, the liquidation is not considered effective.
The company liquidation procedure is regulated in articles 147-152 of the UU PT, as follows:
The liquidator notifies all creditors of the dissolution of the company within 30 (thirty) days from the dissolution date. The announcement of the dissolution shall be published in a newspaper and the news of the Republic of Indonesia, containing (Article 147 paragraph (2) of the Company Law):
In addition, the liquidator must notify the minister of the dissolution of the company. This action is done to mark the company in the company register as “under liquidation”. The notification of the dissolution of the company to the minister must be complemented with evidence (Article 147 paragraph (4) of the Company Law):
If the liquidator has not notified the creditors and the minister, the dissolution of the company does not apply to third parties. If the liquidator fails to notify, the liquidator is jointly liable with the company for the losses suffered by third parties (article 148 UU PT).
Then, suppose the liquidator estimates that the company’s debts are greater than the company’s assets. In that case, the liquidator must file for bankruptcy against the company unless the laws and regulations determine otherwise and all creditors whose identities and addresses are known to agree to the settlement outside bankruptcy (Article 149 paragraph (2) UU PT).
Creditors may file objections to the plan for the distribution of liquidation proceeds. At this stage, creditors are the ones who file objections (Article 149 paragraph (3) of the UU PT). The objection must be filed no later than 60 days from the date of the announcement in the newspapers and BNRI.
If the liquidator rejects the objection, the creditor may file a lawsuit in the district court. The lawsuit filing is done within 60 days, counted from the date of rejection (article 149 paragraph (4) UU PT).
A creditor who submits a claim within 60 (sixty) days from the announcement of the company’s dissolution and is subsequently rejected by the liquidator may file a lawsuit with the district court within 60 (sixty) days from the date of rejection. Conversely, creditors who have not submitted their claims may file a lawsuit through the district court within 2 (two) years of the announcement of the company’s dissolution (Article 150 paragraphs (1) and (2) of the Company Law).
According to Article 150 paragraph (3) of the UU PT, claims filed by creditors can be made if there are remaining assets of the liquidation proceeds reserved for shareholders. Suppose the remaining assets of the liquidation proceeds have been distributed to shareholders, and there are creditor claims. In that case, the district court shall order the liquidator to withdraw the remaining assets of the liquidation proceeds that have been distributed to shareholders (article 150 paragraph (4) UU PT). Shareholders are obliged to return the remaining assets of the liquidation proceeds in proportion to the amount received against the number of claims (article 150 paragraph (5) UU PT).
If the liquidator fails to perform their duties at the request of an interested party or the prosecutor’s office, the chairman of the district court may appoint a new liquidator. In addition to appointing a new liquidator, the chairman of the district court may also dismiss the previous liquidator. Before being dismissed, the liquidator will be summoned to be heard first.
The liquidator is responsible to the RUPS or the court that appointed him for the liquidation of the company (article 152 paragraph (1) UU PT). After the RUPS gives release and discharge to the liquidator or after the court accepts the responsibility of the liquidator appointed by it, the liquidator is obliged to notify the minister and announce the final result of the liquidation process in a newspaper (article 152, paragraph (3) UU PT). This also applies to the curator to be responsible to the supervisory judge for the liquidation of the company conducted and whose account has been accepted by the supervisory judge (Article 152 paragraph (2) jo. Article 152 paragraph (4) UU PT).
Then, the minister records the end of the company’s legal entity status and deletes the company’s name from the company register, and announces the end of the company’s legal entity status in the state news of the Republic of Indonesia (Article 152 paragraph (5) jo. Article 152 paragraph (8) UU PT).
The erasure of a corporation from the registrar is known as company dissolution. In short, dissolution refers to a business ceasing to exist legally or ceasing its operations. Dissolution is the initial stage of liquidation and can happen for several reasons.
Meanwhile, liquidation refers to a company’s complete closure. Any residual assets are sold, and the proceeds are split between the shareholders and the beneficiaries.
Liquidation is related to the dissolution of the company. As referred to in article 142 paragraph (2) of law number 40 of 2007 concerning limited liability companies (UU PT), the dissolution of the company must be followed by liquidation conducted by a liquidator or curator determined by the RUPS.
The closing of an established corporation or representative office must follow certain legal requirements. With our expertise, we can oversee the entire process of company liquidation for you in Indonesia, such as:
In Indonesia, announcements made during the liquidation process must include the following information:
The Company is not permitted to file any lawsuits during the liquidation process, except for lawsuits necessary for the liquidator’s administration of the process.
The GMOS may choose the President Director or any other party to serve as the liquidator. Companies usually choose attorneys to serve as liquidators to prevent any potential conflicts of interest; at the same time, the attorney also serves as a legal counselor.
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