WHAT IS COMPANY LIQUIDATION?

As we all know, liquidation came from the word “liquid” which makes the word liquidation means a process to turn something solid into liquid. While in business, liquidation is a process where a company decided to cease its activities and selling its remaining assets to be administered for payment of the company obligation and the remaining amount to the shareholders of the company. So we can understand easier, liquidation means process to change the company assets into money for paying the company obligation to the related party.

Not all companies can run smoothly, there are some companies that can expand their business, but there are also a lot that decide to do liquidate their companies with reason such as::

1. The decisions of General Meeting of Shareholders;
2. Company’s period already expired based on Articles of Association;
3. Court decisions with a binding legal force; and
4. Merger or consolidation.
5. further info can be found on article 142 (1) Company L

If a company wants to liquidate their assets based on abovementioned reasons, they must follow the process of liquidation which will be conducted by Liquidator.

By doing its duty, Liquidator required to accomplish few things, included:

1. collect and list every company’s assets and debts. If Liquidator estimates the company’s debt is greater than it’s assets, the liquidator must apply for company bankruptcy;
2. Announcement in newspapers and State Gazette of Republic Indonesia about the plan to share assets from liquidation;
3. Payment to creditors;
4. Payment of the remaining assets from liquidation to the shareholders; and
5. Other actions that needs to be taken in settlement of the company assets.

As abovementioned, liquidation seems similar to bankruptcy. So, what it is that makes them different?

The difference between them could be seen in their main purpose. The main purpose of liquidation is to dissolve a company for reasons as mentioned above. While in general, bankruptcy was done if the company has 2 or more debts that are overdue and is collectible. Although under the Bankruptcy Law it is also possible for a company to apply for bankruptcy on it’s own request, it was also stated on Article 2 paragraph (1) of the Bankcruptcy Law.

THE PROCEDURE OF LIQUIDATION

if the announcement of the liquidation already published, then it means the company’s liquidation process has already finished. By the acceptance of the liquidator accountability report by the General Meeting of Shareholders or the District Court, then the company has already lost it’s status as a legal entity and no longer registered as a company.

If there are any question on what best for your companies related to this article, please contact us for further information.

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