1. Decision of General Meeting of Shareholders (“GMS”)
The Board of Directors ((“BOD”), the Board of Commissioners (“BOC”), or 1 (one) or more shareholders representing at least 1/10 (one-tenth) of the total shares with voting rights, may submit a proposal for the dissolution of the Company to the GMS.
The resolution of the GMS on the dissolution of the Company shall be valid if:
- Decision of GMS shall be made on the basis of deliberation to reach consensus; and
- at least ¾ ¾ (three-fourths) of the total number of shares with valid voting rights are present or represented in the GMS, and the resolution shall be valid if approved by at least ¾ (three-fourths) of the total votes cast, unless the articles of association provide a further requirements for adopting resolutions in the GMS.
The dissolution of the Company shall commence at the time stipulated in the resolution of the GMS.
2. expiration of the validity period of establishment stipulated in memorandum of association;
There are a few issues to be concerned with respect to the dissolution due to expiration of the validity period of establishment stipulated in memorandum of association, namely:
- The dissolution of a Company shall occur by law upon the expiration of the Company’s term of establishment as provided in the articles of association.
- Within at the latest 30 (thirty) days after the expiration of the Company’s term of establishment, the GMS must appoint a liquidator.
- The Board of Directors must not perform any new legal act on behalf of the Company after the expiration of the Company’s term of establishment as provided in the articles of association.
3. Stipulation of the court
The District court can dissolve the Company on the basis of:
1. application of prosecutor on account that the Company violates public interest or takes action violating legislation;
2. application of the interesting party based on reason that the deed of establishment contains legal defect;
3. application of shareholders, Board of Directors or Board of Commissioners on account that the Company is impossible to continue, includes among others:
- the Company has not undertaken business activities (non-active) for three years or more, which is proved by notification conveyed to the tax authority;
- if most of the addresses of the shareholders are unknown even though they have been summoned through advertisements in newspaper, so that the GMS cannot be convened;
- if the balance of share ownership in the Company of which the GMS is unable to issue legitimate decisions, e.g. 2 (two) shareholders respectively own 50% (fifty percent) of the shares; or
- the Company’s assets have been reduced such that the Company cannot continue its business activities with the existing assets.
The appointment of liquidator is also stipulated in the court’s stipulation.
4. revocation of bankruptcy on the basis of the legally fixed decision of the Court of Commerce, insufficiency of the bankrupt asset of the Company to pay bankruptcy cost.
With respect to this reason, the court of commerce simultaneously decides the dismissal of curator by observing the provision in the law regarding bankruptcy and postponement of the payment liabilities.
5. bankrupt asset of the Company already declared bankrupt in the state of insolvency as regulated in the law regarding bankruptcy and postponement of the payment of liabilities.
With respect to this reason, the liquidation process shall be conducted by receiver.
6. revocation of business license of the Company thus requiring the Company to liquidate in accordance with the provisions of legislation.
The revocation of the Company’s business license so that the Company is required to carry out its liquidation’ is a provision which will not enable the Company to continue its business in other fields after the business license is revoked, for instance, a banking business license, an insurance business license.
CONSEQUENCES OF DISSOLUTION OF THE COMPANY
In the event dissolution of the Company due to the reasons as aforesaid occurs, then:
- liquidator or curator must follow the process by liquidation; and
- the Company cannot take legal action unless otherwise required to settle all business of the Company in the framework of liquidation.
Based on the aforesaid, it can be concluded that the dissolution due to the reasons in section A above are different from the dissolution of a Company as the result of a merger or consolidation, which do not need to be followed by liquidation, the dissolution of a Company based while the dissolution due to Section A above must always be followed by liquidation.
It also can be inferred that, following the dissolution of a Company, the Company is prohibited from taking any legal action unless the action is required for liquidation process. If any action is undertaken after dissolution, the Company, the BOD and the BOC will be jointly and severally liable for that legal action.
Other consequences of dissolution of the Company, inter alia:
1. The dissolution of a Company shall not cause the Company to lose its legal entity status until the liquidation process has been completed and the discharging of the liquidator’s responsibilities has been acknowledged by the GMS or the court;
Note: Since the dissolved Company is still recognized as a legal entity, the Company can be declared bankrupt and the liquidator subsequently replaced by a receiver. The declaration of bankruptcy does not change the status of a Company already dissolved and therefore the Company must be liquidated.
2. As of its dissolution, each outgoing letter of the Company must bear the wording “in liquidation” after the Company’s name.
PROCESS OF DISSOLUTION OF THE COMPANY
As above mentioned, the dissolution of the Company shall be followed by liquidation process which conducted by liquidator or receiver (as the case may be). In the nutshell, the liquidation processes are as follows:
1. Notification to Creditor and Minister of Law and Human Rights (“MOLHR”)
At the latest 30 (thirty) 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: The 30 (thirty) day 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.
2. Creditor’s claims
Creditor may file their claims within the period 60 (sixty) days commencing from the announcement date concerning the dissolution of the Company in the Newspapers and the State Gazette of the Republic of Indonesia.
3. 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).
4. 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.
5. 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.
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.
DUTIES OF LIQUIDATOR IN THE LIQUIDATION PROCESS
In the nutshell, the provisions concerning authority and obligations of BOD are in effect mutatis mutandis for liquidators. Therefore, liquidators perform management of Company for interests of Company and in accordance with the intentions and purposes of Company. In other words, liquidators represent Company both within and outside of court.
With respect to liquidation process, liquidators have the following obligations:
- recording and collecting the assets and debts of the Company;
- publishing the plan for the distribution of assets resulting from the liquidation in the Newspapers and the State Gazette of the Republic of Indonesia;
- making payments to creditors;
- making payments from the remaining liquidation assets to the shareholders; and
- other acts required for the settlement of the assets.
- In the event that the liquidator estimates that the Company’s debts are greater than the Company’s assets, the liquidator is required to apply for the Company to be declared bankrupt, unless the prevailing laws and regulations provide otherwise, and all creditors whose identities and addresses are known, agree to settle outside of bankruptcy.
In the event that the liquidator is unable to perform his duties as aforesaid, at the request of the interested parties or at the request of the public prosecutor’s office, the chairman of the district court may appoint a new liquidator and discharge the previous liquidator. Such discharge of the liquidator shall be done after the relevant person has been summoned for a hearing.