Liquidation is the process of dissolving a limited liability company, accompanied by the sale of its assets to meet their outstanding payment obligations, and distribute the remaining balance to all shareholders. Law No. 40 of 2007 concerning Limited Liability Companies (“Company Law”) stipulates that the company liquidation can be caused by:
- Resolution of General Meeting of Shareholders (“GMS”). The GMS is a company organ other than the Board of Directors, and Board of Commissioners. Based on Article 142 paragraph (1) letter (a) of the Company Law, the GMS has the authority to decide the dissolution of the company.
- The tenure of the company ends. The Articles of Association of the company may set a time limit for the establishment of the company. It is possible that the company has established it for 30 years, 75 years, or the limit is not determined. In the event that there is a time limit, and if that time period has lapsed, the company dissolution will immediately occur due to the law.
- Dissolution based on court order. Certain parties who have the rights or legal standing can submit a request to determine the company dissolution to the court. The interested parties are not only shareholders, Board of Directors and Board of Commissioners. Pursuant to Article 146 paragraph (1) of the Company Law, the prosecutor can submit a request for a court order if the company violates any public interest or commits any act that violates statutory regulations.
- The company’s assets are not sufficient to pay bankruptcy costs. The insufficient bankrupt assets to be realized to pay the bankruptcy costs for curator services, based on Article 142 paragraph (1) of the Company Law, may have implications for the revocation of the decision on the bankruptcy declaration at the suggestion of the Supervisory Judge (Hakim Pengawas). In such a case, the company’s dissolution will also occur.
- The assets of the company that have been declared bankrupt are in a state of insolvency. After the bankruptcy resolution has been filed, the bankruptcy is in a state of insolvency (staat van faillissement, state of bankruptcy). From that moment, the company has been dissolved in accordance with Article 142 paragraph (1) letter (e) of the Company Law.
- The company’s business license is revoked so that it requires the company to carry out liquidation in accordance with the applicable regulations. According to Article 142 paragraph (1) letter (f) of the Company Law, the revocation of the company’s business license will also have an impact on the company’s dissolution, if the revoked license is the only type of business license owned by the company.