How to close a company in Indonesia

All successful companies are alike; each unsuccessful company is unsuccessful in its own way.

In fact, there are three distinct states a non-operational company in Indonesia can have: dormant, dissolved, or liquidated. Each state has its specific objectives.

 In this article, we’ll explain them and address common misconceptions.

Understanding the differences between dormant, dissolved, and liquidated companies

First, a company in Indonesia doesn’t automatically become dormant just because it stops operating. You are still required to meet all the reporting requirements of active companies until you are granted dormant, dissolved, or liquidated status.

This is also the biggest appeal to take formal action and not let inactive companies run by themselves – a company has compliance requirements regardless of whether it’s doing business or not.

Let’s look at each of the three states of the closed-down company.

Applying for a “dormant” status in Indonesia

Unlike dissolved and liquidated companies, dormant companies are closed temporarily and can be reactivated.

This makes them a good alternative to keeping the company as active, since dormant companies have lower reporting requirements.

Common reasons to become a dormant company in Indonesia

• Future Projects: If you anticipate potential future business opportunities or projects, you may keep the company dormant to facilitate a quicker restart rather than repeat the formation process.
• Maintaining Brand or Trademark: A dormant company can retain control over its brand name, trademarks, and other intellectual property, which can be valuable assets if you plan to resume business activities in the future.
• Holding Assets: The company may hold assets that don’t generate revenue and which do not require active business operations.
• Market Presence: Maintaining a dormant status can preserve the company’s presence in the market, which can be beneficial for maintaining relationships with customers or suppliers when the business environment improves.
• Cost Considerations: Sometimes, the cost and process of dissolving a company, especially if there are significant liabilities, can be more complicated and expensive than keeping it dormant.

Requirements to become a dormant company

A company is eligible to become dormant if it meets the following requirements:

• The company has no outstanding tax liabilities;
• The company has had no transactions in the past two years.

The process involves two steps:

1. Applying for the “non-effective” taxpayer status;
2. Submission of the Business Identification Number/ NIB cancellation.

Dissolving a company

Dissolution is essentially a temporary stage where the company prepares for liquidation. It’s important to remember that a dissolved company is still listed in the company registry.

The process of dissolving a company in Indonesia

1. General Meeting of Shareholders: Hold a General Meeting of Shareholders to approve the decision to dissolve the company.
2. Announcement in Newspaper: Within 30 days of the General Meeting of Shareholders, announce the dissolution decision in a newspaper.
3. Notarial Deed and Notice of Dissolution: Obtain a Notarial Deed of Dissolution and a Notice Letter issued by the Ministry of Law and Human Rights confirming the dissolution.
4. Application for Taxpayer Deregistration: Submit an application to cancel the company’s registration as a Resident Taxpayer.
5. Cancellation of Business Identification Number and Licenses: Apply to cancel your Business Identification Number (NIB) and other Commercial Licenses.

Read more about dissolving a company in Indonesia.

Liquidating a company

After completing the dissolution process, the company distributes its remaining assets to creditors. Often, if a company is insolvent, the courts will determine the allocation of assets among creditors.

For solvent companies, any remaining assets are then disbursed to shareholders.

The process of liquidating a company in Indonesia

1. Second Newspaper Announcement: Publish a second announcement in a newspaper detailing the company’s intention to proceed with asset liquidation, which will commence after the settlement of all debts.
2. Liquidation Financial Report: Prepare a financial report by the liquidator that outlines the liquidation process.
3. General Meeting of Shareholders (GMS): Convene a GMS with an agenda focusing on the liquidator’s final report and the Financial Statement results.
4. Third Newspaper Announcement: Make a third announcement in a newspaper to publicize the Liquidation Report.
5. Notarial Deed of Liquidation: Issue a Notarial Deed of Liquidation no later than 30 days following the Liquidation GMS mentioned above.
6. Notice of Liquidation Status: Obtain a Notice Letter from the Ministry of Law and Human Rights (MOLHR) regarding the company’s Liquidation Status. The company’s name and legal status are formally removed from the registry at this stage.

The importance of closing a company

We started this article by paraphrasing Tolstoy. Let us end it with a quote from the Napoleonic Wars – It is better to have a horrible ending than to have horrors without end.

At Emerhub, we primarily work with companies that operate in multiple markets. Sometimes, those businesses fail, or the resources are better deployed elsewhere.

Starting a company in Indonesia is easy. Dissolving one is a lengthy and expensive process. In many cases, when a company comes to us for dissolution, the right course of action would have been not to incorporate at all—use employer of record for hiring, importer of record for importing, etc. Consider your alternatives before setting up a company.

Marlissa Lahi, Founder, Emerhub

Keeping a non-functional company active is an unnecessary administrative burden. If you have temporarily halted your operations, let us help you make it dormant. If the business is closed down for good, we’ll navigate through the dissolution and eventual liquidation process.

We can also assist you with employee termination or company restructuring to avoid the need for closing.

Fill out the form below to discuss the best options for your situation.