On December 11 2015 the Indonesian Financial Services Authority (OJK) enacted Regulation 28/POJK.05/2015 concerning the Dissolution, Liquidation and Bankruptcy of Insurance Companies, Sharia Insurance Companies, Reinsurance Companies and Sharia Reinsurance Companies. The regulation was authorised by Articles 42(4), 44(3), 45(3) and 51(4) of Law 40/2014 concerning Insurance, which require the aforementioned processes to be governed by a specific regulation.

Dissolution and liquidation

'Dissolution' is the termination of an insurer's legal entity status following the revocation of its business licence, while 'liquidation' is the settlement of an insurer's assets and liabilities following its dissolution.

Under Article 142 of Law 40/2007 concerning Company Law, dissolution can occur:

  • following a general shareholders' meeting resolution;
  • on expiration of an insurer's term of incorporation, as stipulated in its articles of association;
  • following a court injunction;
  • if an insurer's assets are insufficient to remunerate costs following its bankruptcy by a binding Commercial Court decision;
  • if an insurer's assets are insolvent in accordance with Law 37/2004 regarding Bankruptcy and the Suspension of Debt Payment; and
  • following the revocation of an insurer's business licence, which results in its liquidation.

The dissolution of a company will not cause it to lose its legal entity status. Rather, this will occur when liquidation is duly completed and accepted at the general shareholders' meeting or by a court, after which the company cannot perform any legal action, except regarding the settlement of its assets with respect to the liquidation, if necessary.

Article 43 of Law 40/2014 and Article 2 of the regulation stipulate that, following the revocation of an insurer's business licence, its agents cannot:

  • assign, secure, encumber or utilise its assets; or
  • conduct any other action which may decrease the value of its total assets.

The following steps must be performed once a business licence has been revoked:

  • The board of directors must prepare and submit a closure balance sheet to the OJK within 15 calendar days.
  • A general shareholders' meeting must be called within 30 calendar days to resolve the dissolution and establish a liquidation team, which is subject to the OJK's approval.
  • The liquidation team must announce the dissolution in the State Gazette and at least two newspapers.
  • The words "dalam likuidasi" (ie, in liquidation) must be included in the insurer's name.
  • The liquidation team must calculate the liquidation costs.
  • The liquidation team must conduct an inventory of the insurer's assets and financial position as of the date on which the business licence was revoked by classifying the assets as 'troubled' and 'non-troubled' assets.
  • The liquidation team must prepare a temporary liquidation balance sheet.
  • A guarantee fund must be established in the interest of policyholders, insured parties, participants and any other party that is entitled to insurance benefits.
  • The liquidation team must announce the date of the insurer's final creditor payment in at least two newspapers.
  • The liquidation team must submit the final liquidation balance sheet and accountability report to the OJK and/or the general shareholders' meeting (depending on how the liquidation team is formed).

The liquidation team, which must comprise between two and five people, will be responsible for:

  • settling any matter regarding the insurer's dissolution, employment duties, assets and obligations;
  • reporting to the OJK;
  • answering to the OJK or general shareholders' meeting; and
  • performing other tasks during the liquidation process, as deemed necessary.

Liquidation proceedings cannot exceed two years from the date on which the liquidation team is formed, unless the OJK grants an extension.


'Bankruptcy' is the general confiscation of the assets of a debtor that has been declared bankrupt by a court. Under the Law 37/2004, a bankruptcy settlement must be conducted by a receiver under the supervision of a judge.

A creditor can submit a bankruptcy request to the OJK regarding an insurer that it believes meets Law 37/2004's requirements. The OJK will assess whether the insurer can be declared bankrupt and issue an approval or refusal no later than 30 calendar days from the date on which it receives the complete application. Following an approval, the OJK will apply for a declaration of bankruptcy from the Commercial Court.

Before a decision on the declaration of bankruptcy is announced, the OJK can submit an application to the Commercial Court for:

  • the confiscation of all or some of the insurer's assets; and
  • the appointment of a temporary receiver to supervise the insurer's:
    • management;
    • creditor payments; and
    • transferral or pledge of its assets.

If an insurer is declared bankrupt when it is in a state of insolvency and settlement, the provisions regarding the distribution of the assets of an insurer in liquidation will apply. If the settlement has been concluded and the bankruptcy process has ended, the OJK will revoke the insurer's business licence.


Failure to comply with the regulation may result in the OJK imposing the following penalties:

  • a written warning; and
  • a prohibition on becoming a shareholder (or equivalent) of:
    • a cooperative; and
    • an insurer's board of directors, board of commissioners or shariah supervisory board.

For further information on this topic please contact Cornel B Juniarto at Hermawan Juniarto by telephone (+62 21 2995 9057) or email (cbjuniarto@hermawanjuniarto.com). The Hermawan Juniarto website can be accessed at www.hermawanjuniarto.com.

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