At a certain point in doing business, some entrepreneurs may decide to cease operations for various reasons—be it economic conditions, shifts in business goals, or changes in partnership structure. Whatever the reason, dissolving a limited company must be done in compliance with legal procedures to avoid outstanding tax liabilities or future legal risks. This article explains the key steps and important considerations that company owners should be aware of to properly close a company according to the law.

Business Can’t Continue ? How to Properly Dissolve a Limited Company According to the Law

The dissolution of a limited company refers to the termination of its legal status as a juristic person through a formal legal process. This may occur voluntarily by resolution of the shareholders or as a result of a court order or legal requirement. Dissolution must be carried out in accordance with the Civil and Commercial Code to avoid future issues related to taxation, finances, or legal liabilities. The dissolution of a limited company may result from various reasons, such as:

• The company has accumulated losses, is facing severe financial difficulties, and can no longer continue its business operations.
• Partners are unable to agree on the business direction or face other issues stemming from personal relationships that prevent them from working together effectively.
• A desire to change the form of business operations or restructure into a partnership, etc. 
• The objectives or conditions stated in the company’s memorandum of association have been fulfilled or have come to an end.

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How many types of dissolution are there for a limited company?

The dissolution of a limited company can be carried out under two main types: Such as 

Voluntary Dissolution
This occurs when the company’s shareholders pass a resolution to dissolve the business without any external dispute or legal compulsion. It is a voluntary decision, typically made when the company no longer wishes to continue operationssuch as having no income, accumulated losses, or partners mutually agreeing to end the business. The key steps include:

• A special resolution must be passed at the shareholders’ meeting (with not less than ¾ of the votes of shareholders present at the meeting).
• Notify the registrar and appoint a liquidator to carry out the account settlement in accordance with the law.

Compulsory Dissolution (by court order or legal requirement)
This refers to cases where the company must be dissolved involuntarily, due to reasons mandated by law or a court order. Examples include the company failing to operate within the legally required timeframe, committing serious legal violations, or shareholders being unable to reach an agreement, leading the court to order the dissolution of the company.

Steps for Legally Dissolving a Limited Company

The dissolution of a limited company must follow a step-by-step process with the following details:

1. Hold a shareholders’ meeting and pass a special resolution

• The company must hold an extraordinary general meeting of shareholders and pass a special resolution (with at least ¾ of the votes of shareholders present and entitled to vote) to confirm the dissolution of the business.
• The resolution must be recorded in writing and used as supporting documentation when notifying the relevant authorities of the business dissolution.

2. Notify the registrar of the company’s dissolution

• Notification must be made within 14 days after the dissolution resolution. A written notice of the company’s dissolution must be submitted to the Department of Business Development, Ministry of Commerce.
• Required documents include Form BorJor.6, the shareholders' meeting resolution, a copy of the shareholder list, and the latest balance sheet.
• The company must publish a notice of dissolution in a newspaper and notify creditors, allowing them the opportunity to submit claims for any outstanding debts incurred during the course of business operations.

3. Appoint a liquidator

• A "liquidator" must be appointed to act on behalf of the company’s directors to settle debts, manage and dispose of assets, and distribute any remaining assets to the shareholders.
• The appointment of the liquidator must also be reported to the registrar, just like the notification of the company’s dissolution.

4. The liquidator proceeds with the liquidation process

• Prepare an asset and liability account and verify its accuracy.
• Clear assets, such as selling the company's assets to repay debts. 
• If there are outstanding debts, they must be properly settled.
• If there are remaining assets after settling debts, they will be distributed to shareholders according to their shareholding proportions.

5. Submit the liquidation balance sheet to the Department of Business Development

• The liquidator must prepare a closing balance sheet and submit it to the Department of Business Development to register the “completion of liquidation.”
• The process will be considered complete when the company receives a certificate confirming the completion of the liquidation.

Taxes and Duties to the Revenue Department

Even after the company has been dissolved, there are still tax obligations that must be fulfilled with the Revenue Department, as follows:

• • The final corporate income tax return (Form PND.50) must be filed within 150 days from the date of company dissolution.
  • Must file Value Added Tax (VAT) return (Form PP.30) and all other required tax forms completely.
  • If the company has a VAT registration number, it must also apply for cancellation of the VAT registration.

If these actions are not carried out properly, there may be a risk of fines or being subjected to a retrospective audit.

Precautions to Consider When Dissolvinga Company

• If a company is left registered for a long time without operating, it may incur tax liabilities or accumulated penalties. 
• **If there are creditors, they must be formally notified and given the opportunity to file claims. Although the law does not specify an exact deadline for claims, in practice, a minimum period of 30 days from the date of public announcement is usually provided to allow creditors time to prepare documents and assert their rights.**
• A written notice must be sent individually to each of the company’s creditors, inviting them to claim their debts or file a formal claim. Failure to provide such notice may lead to disputes or allow creditors to take legal action against the liquidator at a later stage.
• All documents must be retained for at least 5 years in accordance with accounting and tax laws.
• Advertising and notifying creditors should be done immediately after the resolution to dissolve the company and the appointment of the liquidator.
• Liquidation requires publishing a notice of company dissolution in a local newspaper at least once. 

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