Liquidation is the process of managing and settling the assets and liabilities of a company whose handling is carried

out by the curator (if in the process of Bankruptcy Law) or liquidator (outside the scope of Bankruptcy Law) which at
the end of the settlement is used to pay debts from debitors to creditors.
According to Article 142 paragraph (1) of Law No. 40 of 2007 concerning Limited Liability Companies (“Law
40/2007”) The liquidation of a company itself can occur due to:
1. Based on the decision of the General Meeting of Shareholders (“GMS”);
2. Because the period of establishment stipulated in the Articles of Association has expired;
3. Based on a court order;
4. With the revocation of bankruptcy based on a decision of a commercial court that has permanent legal force, the
bankruptcy estate of the Company is not sufficient to pay the bankruptcy fees;
5. Because the Company's bankrupt assets which have been declared bankrupt are in a state of insolvency as
regulated in the Law on Bankruptcy and Suspension of Obligations for Payment of Debts; or
6. Due to the revocation of the Company's business license so that it requires the Company to conduct liquidation in
accordance with the provisions of the legislation.
In the event that the conditions for liquidation of the company have been met, the liquidation process begins with
the appointment of one or more liquidators. If no liquidator is specified in the liquidation process, the directors will
act as liquidators1. In practice, the appointed liquidators can be professionals who are experts in their fields (in the
sense of someone outside the company's management structure), but many of the liquidators appointed are
directors of the company. In carrying out their duties, the liquidator is given broad authority, including forming a
liquidator team and appointing other consultants to assist the liquidation process.
The liquidation procedure in Law 40/2007 is regulated in Articles 142 – 152 of Law 40/2007 in particular
Articles 147 to 152 of Law 40/07 which we will describe in 4 (four) steps:
Step 1
First General Meeting of Shareholders
To carry out the liquidation of the company, a General Meeting of Shareholders (GMS) must be held first. The GMS
to approve the liquidation of the Company can be held if at the meeting at least 3/4 (three quarters) of the total
shares with voting rights are present or represented at the GMS and the decision is valid if approved at least 3/4
(three quarters) of the total the votes cast, unless the Articles of Association specify a quorum of attendance and/or
provisions regarding the requirements for a larger GMS decision.
Every GMS, minutes of GMS must be drawn up and signed by the chairman of the meeting and at least 1 (one)
shareholder appointed from and by the GMS participants. However, if the minutes of the GMS are made with a
notarial deed, the signature as intended is not required.
Step 2
Announcement
Announce in newspapers and the State Gazette of the Republic of Indonesia ("BNRI") followed by notification to the
Minister to be recorded in the company register that the company is in liquidation (this notification to the Minister is
made by a Notary through the sisminbakum). The announcement explains the legal basis for liquidation, procedures
for filing bills, the period for filing bills as well as the names and addresses of liquidators. In line with that, the
liquidator also keeps records of the assets of the company (assets and liabilities) including recording the names of
creditors and their levels and other matters related to management actions in the liquidation process 2. It should be
remembered that in outgoing correspondence on behalf of the Company, the phrase “in liquidation” must be added
to the name of the company being liquidated (ex: PT A is in liquidation)3.
Step 3
Liquidation

1
Article 142 paragraph (3) of Law 40/2007
2
Article 147 of Law 40/2007
3
Article 143 paragraph (2) of Law 40/2007
Making announcements in newspapers and BNRI, in this second announcement the liquidator is also obliged to
notify the Minister of the plan for the distribution of assets resulting from the liquidation (this report is carried out
by the liquidator by notifying by registered letter to the relevant Minister) 4.
After 90 days of this second announcement have passed, the liquidator can make settlements by selling assets that
have previously been valued with the services of an independent appraiser, followed by distributing these assets to
their creditors on the principle of pari passu pro rata parte (vide 1131 jo. 1132 of the Civil Code). And in the event
that there is still remaining wealth from the liquidation proceeds, the remainder must be returned to the
shareholders5.
Step 4/Last Step
Expiration Of Legal Entity Status
Conduct a GMS regarding the accountability of the liquidation process that has been carried out 6. In the event that
the GMS accepts the accountability for the liquidation process that has been carried out, it will be followed by an
announcement to the newspaper which is then followed by a notification to the Minister that the liquidation process
has ended (this notification to the Minister is made by a Notary through the sisminbakum)7.
In the event that the announcement has been made, the Minister will record the end of the company's legal entity
status and delete the company's name from the list of companies followed by an announcement in the State Gazette
of the Republic of Indonesia8.
The procedures or stages of liquidation in the context of the GMS are as follows:

Shareholders conduct a GMS Announced in the

or sign a replacement
resolution stating that all
shareholders agree to carry
out the liquidation of the
company.
newspaper and submitted to
The last GMS to approve all the Ministry of Law and
liquidation results. Human Rights to obtain a
letter of revocation of legal
entity status.

The Ministry of Law and

Holding a second GMS to
Human Rights will issue a
approve the settlement
letter of acceptance that the
results which will later be
company has declared it will
included in the financial
dissolve itself and announce
balance sheet.
it in the newspapers.

Come to the tax office to file

Closing bank accounts
for revocation of NPWP and
owned by the company.
other tax documents.

So basically, in the case of the liquidation of the company based on the decision of the GMS, the liquidator is
determined by the GMS. In the event that the liquidator is not determined by the GMS, the Board of Directors will
act as the liquidator.
Can the company's liquidation process be canceled?

4
Article 149 paragraph (1) of Law 40/2007
5
Article 149 paragraph (1) letter d of Law 40/2007
6
Article 152 paragraph (1) of Law 40/2007
7
Article 152 paragraph (3) of Law 40/2007
8
Article 152 paragraph (5) in conjunction with Article 152 paragraph (8) of Law 40/2007
 If the basis for the liquidation of the company as stated in Article 142 paragraph (1) of Law 40/2007 is based
on a court order as the application of the shareholders, directors or board of commissioners based on the reason
that the company is not possible to proceed, there is no rule for revocation of application. However, in practice, the
application can be revoked before a decision is made by the court. Thus, if the application for the liquidation of the
company is submitted and is still in the trial process, in principle the application can be revoked at any time as long
as there is no decision from the court. On the other hand, if there is already a court decision regarding the
dissolution of the PT, then the effort that can be taken is to file extraordinary legal remedies, namely cassation or
reconsideration because in principle the decision is of the first and last level.
The Difference Between A Liquidation Company And A Bankrupt Company
There are 2 options in dissolving the company, namely bankruptcy and liquidation. For the difference
between companies experiencing bankruptcy and companies conducting liquidation can be seen in the following
table:

Liquidation Company Bankrupt Company

Definition With respect with winding up of affairs of
corporation, is process of reducing assets to
cash, discharging liabilities and dividing
surplus or loss. Occurs when a corporation
distributes its net assets to its shareholders
and ceases its legal existence.
Bankruptcy is a general confiscation of all
assets of the Bankrupt Debtor whose
management and settlement is carried out
by the curator under the supervision of
the Supervisory Judge.

Condition a. based on the decision of the GMS; A debtor who has two or more creditors
b. because the period of establishment and does not pay off at least one debt that
stipulated in the articles of association has matured and is collectible, is declared
has expired; bankrupt by a court decision, either at his
c. based on a court order; own request or at the request of one or
d. with the revocation of bankruptcy based more creditors.
on a decision of a commercial court that
has permanent legal force, the
bankruptcy estate of the Company is not
sufficient to pay the bankruptcy fees;
e. because the bankruptcy assets of the
Company which have been declared
bankrupt are in a state of insolvency as
regulated in the Law on Bankruptcy and
Suspension of Debt Payment Obligations;
or
f. due to the revocation of the Company's
business license so that it requires the
Company to conduct liquidation in
accordance with the provisions of the
legislation.

Cause Shareholder declare a dissolution of the Company declare a bankruptcy by court

Company by GMS resolution. decision.

From the table above, it can be concluded that the liquidation is carried out in the context of the dissolution
of the legal entity. Meanwhile, bankruptcy is not carried out in the context of the dissolution of the legal entity, and
does not result in the dissolution of the bankrupt legal entity. Selanjutnya dapat dilihat untuk kesimpulan dari akibat
yang akan terjadi antara likuidasi perusahaan dengan perusahaan pailit dalam tabel dibawah ini:
 Liquidation Company
 There is no provision that employees are creditors.
• Shareholders are still entitled to the remaining
assets resulting from liquidation.
• The company as a legal entity is dissolved when the
liquidation process is complete.
• The company's internal parties can still manage the
company (as a liquidator) if they do.
 Application for liquidation of the company can be
cancelled.
Bankrupt Company
 Companies that have been declared bankrupt are
no longer entitled to their assets.
 Must continue to pay employee salaries because
employees are preferred creditors.
 The company was taken over by an external party
(curator).
 During the bankruptcy proceedings are supervised
by the courts.
 The legal entity status is not dissolved even though
it is declared bankrupt/the bankruptcy process has
been completed.

Company Liquidation Proceeds

Law 40/2007 emphasizes that the dissolution process must pay attention to the interests of the parties,
especially the creditors of the company. The context of the creditor in the liquidation includes all parties who have
receivables against the company, which arise based on a valid legal cause. In general, the company's creditors and
the amount of their receivables are recorded in the company's financial statements. However, not all companies
have the same position or priority in terms of the distribution of assets resulting from liquidation.
There are other legal basis that usually serve as guidelines, namely the Civil Code and Law No. 37 of 2004
concerning Bankruptcy and Suspension of Debt Payment Obligations. These two laws stipulate 3 types of creditors:
(1) Preferred Creditors
Preferred creditors are creditors who are prioritized so that their receivables must be paid before other
receivables. For example: taxes payable, BPJS bills, rent costs, asset repair costs and labor wages.

(2) Separatist Creditors

Separatist creditors are creditors who have special rights in the form of asset guarantees from the company.
In general, separatist creditors are excluded from the list of liabilities for payment of liquidated assets
because they can sell the company's collateral assets to pay off their receivables.

(3) Concurrent Creditors

Concurrent creditors are creditors who generally do not have special rights under the laws and regulations
and do not have collateral for their receivables.
If all creditors receivables have been paid and there are remaining liquidated assets, once again, they must be paid
to the company's shareholders on a pro-rata basis. Based on the distribution of the types of creditors, the interests
of creditors and the rights of shareholders are accommodated and have clear legal certainty. In some cases, the
liquidating assets is only sufficient to pay the preferred creditors and separatist creditors. In such condition, the
principle of Pari Passu Prorata Parte applies, which means that the concurrent creditors will get their receivables
paid on a prorated basis from the total remaining liquidated assets divided by the percentage portion of the total
receivables from the concurrent creditors. Therefore, the concurrent creditors will still get a portion of their rights
according to their portion.
However, it is necessary to pay attention to the following article 149 Paragraph (2) of the Law 40/2007: In the event
that the liquidator estimates that the debt of the Company is greater than the assets of the Company, the liquidator
is obliged to file an application for bankruptcy of the Company, unless the laws and regulations provide otherwise,
and all creditors whose identities and addresses are known , agreeing to settle the settlement outside of bankruptcy.
The Liquidation Effect Of The Company On BOD, Shareholders And Employees
As explained in the description above, the company's liquidation effect on the BOD is to prepare and conduct the
GMS for the dissolution of the company and one of the company's liquidators (if the liquidation based on court
order). For Shareholders, the effect of the liquidation of the company is to get the liquidation assets of the company
on a pro rata basis after payment is made after the creditors above. Because basically, apart from accommodating
the interests of creditors, the liquidation process also protects the shareholders and management of the company.
Therefore, liquidation can be the best option in protecting the interests of the company's stakeholders. And for the
Company's employees, the liquidation effect of the company will trigger termination of employment (PHK).