Background

Definition of Liquidation according to Kamus Besar Bahasa Indonesia is “the winding up of Company as a legal entities that includes the payment of obligation to all creditors and distribution of remaining assets to the shareholders (Company)”. The main purpose of liquidation is to perform any legal action and settlement of Company’s assets which is wound upThe steps of liquidation shall be performed when a Company is wound upin which the winding up company is not as result of merger and amalgamationThe company that has been declared to be wound up may not perform a legal action, unless it is required to settle all the company’s assets in the event of liquidation.

Steps of Liquidation

In the event of Company is wound up as stated in Article 142 paragraph (1) Law Number 40 of 2007 on Limited Liability Companies (“Company Law”), then Article 142 paragraph (2) subparagraph a of Company Law determines that after the Company is wound up because of reasons which is regulated in Article 142 paragraph (1) of Company Law shall be followed by a liquidation performed by liquidator or receiver.

The following are the steps of a liquidation of the Company, as stipulated in Article 147 until Article 152 of Company Law:

1. The Announcement and Notification of the Company’s Winding Up

As from the date of the Company is wound up, within a period of not more than 30 (thirty) days, the liquidator shall notify all creditors of the winding up of the Company by means of an announcement of the Company’s winding up in a Newspaper and the State Gazette of the Republic of Indonesia. Then, the liquidator shall also notify the winding up of company to the minister to be recorded in the register of companies that the company is in liquidation (Article 147 paragraph (1) of Company Law).

Furthermore, the liquidator notifies the creditor in the Newspaper and the State Gazette of the Republic of Indonesia. As mentioned above, it shall contain the winding up of the Company and its legal basis; the liquidator’s name and address and the procedure for submission of claims. The period for submission of claims is 60 (sixty) days as from the date of the winding up of the Company’s announcement. Regarding to the notification of winding up of company to the Minister, the liquidator shall attach the notification with the legal basis for the winding up of the company and the notification to the creditors in a newspaper and the State Gazette of the Republic of Indonesia (Article 147 paragraph (2), (3) and( 4) of Company Law).

If the notification to creditors and the Minister has not been yet given, the winding up of the Company will not been applied to third parties. If the liquidator fails to make the notification, liquidator shall be jointly and severally liable with the Company for any losses suffered by third parties. (Article 148 paragraph (1) and (2) of Company Law).

2. The Recording and Division of the Company’s Assets

Moreover, according to Article 149 paragraph (1) of Company Law, a liquidator’s obligations in settling a Company’s assets in the liquidation process shall cover the implementation of:

  1. Recording and Collection of the Company’s assets and debts.
  2. Announcement in a Newspaper and the State Gazette of the Republic of Indonesia regarding the plan for division of the assets resulting from the liquidation.
  3. Payment to the creditors.
  4. Payment of the remainder of the assets resulting from the liquidation to shareholders.
  5. Other action necessary in implementing the settlement of assets.

Then, in the event that a liquidator estimates that a Company’s debts will be higher than the Company’s assets, the liquidator shall submit a petition for the bankruptcy of the Company, unless legislative regulations determine otherwise and all creditors whose identity and address are known shall approve any settlement outside bankruptcy. (Article 149 paragraph (2) of Company Law)

3. The Creditor’s Objection

Creditor may submit an objection to the plan of distribution of assets resulting from the liquidation within a period of not more than 60 (sixty) days as from the date of the winding up of Company announcement. If the objection’s submission is rejected by the liquidator, the creditor may file a claim through the District Court within a period of not more than 60 (sixty) days as from the date of the rejection (Article 149 paragraph (3) and (4) of Company Law).

Next, the creditors who submit invoice within the period, which are then rejected by the liquidator may file a claim through the District Court within a period of not more than 60 (sixty) days as from the date of rejection, otherwise creditor who have not yet submitted their invoice may submit it through the District Court within a period of 2 (two) years as from the date the winding up of the Company is announced (Article 150 Paragraph (1) and (2)). The Invoice which is submitted by the creditors may be made where there are any remaining assets resulting from the liquidation have divided among shareholders (Article 150 paragraph (3), (4) and (5) of Company Law).

If the liquidator does not perform its obligations as regulated, then at the petition of interested parties or at the petition of the public prosecutors’ office, the Chief Judge of the District Court may appoint a new liquidator and dismiss the previous liquidator. The dismissal of the liquidator is performed after he is summoned so that his testimony can be heard. (Article 151 paragraph (1) and (2) of Company Law)

4. The Accountability of Liquidator

Liquidators shall be accountable to the General Meeting of Shareholders (“GMS”) or the court appointing them for the liquidation of the Company they carried out and receiver shall be accountable to the supervisory judge for the liquidation of the Company they carried out (Article 152 paragraph (1) of Company Law).

5. The Announcement Steps of Completion of Liquidation

Further, liquidator should inform the Minister and announce the final outcome of the liquidation process in the Newspaper after the GMS releases and discharges the liquidator or after the court accepts the accountability of the liquidator which has appointed. The provision shall also apply to receiver whose accountability has been accepted by the supervisory judge (Article 152 paragraph (3) and (4) of Company Law)

The Minister shall record the expiry of a Company’s status as a legal entity and the company’s name is deleted from the registry of Companies after the provisions contemplated in Article 152 paragraph (3) and (4) have been fulfilled. The provision shall also apply to the expiry of a Company’s status as a legal entity due to a Merger, Consolidation, or Demerger (Article 152 paragraph (5) and (6) of Company Law)

Then, the notification and announcement contemplated in Article 152 paragraphs (3) and (4) of Company Law shall be made within no more than (30) thirty days as from the date when the liquidator’s or receiver’s accountability is accepted by the GMS, court or supervisory judge (Article 152 paragraph (7) of Company Law).

The steps of liquidation are deemed to be completed at the time when Minister announces the expiry of the Company’s status as a legal entity in the State Gazette of the Republic of Indonesia.

Sofie Widyana P.