TAXES
LAW
7
The Reduction of Capital in a PT
Luther LLP in collaboration
with Maqdir Ismail & Partners
C
apital reduction means the reduction of authorized capital,
issued capital and paid-up capital. According to the Company
Law, a capital reduction can be reached by way of redemption
of shares or a reduction of the nominal value of shares. If there are
different classes of shares, the resolution on capital reduction may
only be adopted by a general meeting of shareholders (“GMS”) if it
is approved by all shareholders within the class or classes of shares
whose rights are adversely affected by that resolution.
A reduction of nominal value can be executed with or without
payment being made to the shareholders. If no payment is made
to shareholders, the reduction of the nominal value must be done
proportionately for all classes of shares.
Redemption of shares can be conducted by way of: (a) a share
buyback; or (b) redeeming shares which are redeemable as provided
in the articles of association.
In case the articles of association of a company do not define
redeemable shares, the company cannot elect the shares
redemption method. If a share buyback is envisaged, the company
will be required to comply with the provisions on share buyback in
the Company Law as follows: (a) the share buyback must not result
in the net asset value of the company becoming smaller than the
paid up capital plus the mandatory reserves; (b) the nominal value
of the shares repurchased and the value of any share pledge or
fiduciary security over shares which are held by the company and/
or by other companies whose shares are owned directly or indirectly
by the company must not exceed 10% of the paid-up capital of the
company; (c) the repurchased shares are not entitled to receive
dividends and cannot be used to vote at a GMS of the company.
The capital reduction must be approved by the GMS or a circular
resolution in lieu of a GMS in accordance with the articles of
Luther LLP is one of the largest continental European lawfirms in
Singapore. With our further lawfirms in Yangon and Shanghai as well
as our corporate services offices in Kuala Lumpur, Delhi-Gurgaon,
Shanghai and Singapore, we offer a comprehensive range of services
to our clients. In Indonesia we have formed a strong collaboration with
Maqdir Ismail & Partners in order to service our clients in their ventures
in this interesting market. Maqdir Ismail & Partners are highly regarded
for their expertise particularly in litigation, corporate law as well as in
mergers and acquisitions.
Luther LLP
4 Battery Road
Bank of China Building #25-01
Singapore 049908
Phone : +65 640 88000
Fax : +65 640 88001
Email
:
Maqdir Ismail & Partners
Jl. Latuharhary No. 6A
Menteng, Jakarta Pusat 10310
Indonesia
Phone: : +62 21 3911191
Fax:
: +62 21 3147502
Email:
:
Zuhesti Prihadini
Senior Associate
+62 21 3911191
Company Law
association of the company. Within 7 days after the GMS approves
the capital reduction the board of directors must notify all creditors
of the company accordingly. The announcement must be made in at
least 1daily newspaper in the Indonesian languagehavingnationwide
circulation. Creditors of the company may raise objections to the
proposed capital reduction by submitting written objections to the
company within 60 days after the announcement. The company
will have 30 days from the date of receipt of an objection to give a
response to the objection in writing.
A capital reduction is one of the amendments to the articles of
association of a company that must be approved by the MOLHR.
According to theCompany Law, theMOLHRwill only approve a capital
reduction if: (a) no written objection is received from the company’s
creditors; (b) any objections raised by creditors have been settled by
the company; or (c) any objections filed by creditors at the relevant
District Court have been rejected by the District Court by virtue of a
final and binding court decision. For a foreign investment (“PMA”)
company, after the approval from MOLHR is obtained, the company
must also obtain approval of the capital reduction from the Capital
Investment Coordinating Board (“BKPM”).
