Under Article 1 number 9 of Law Number 40 of 2007 on Limited Liability Company (“Company Law”) merger means a legal action which is taken by one or more companies to merge with another existing company with the result that the assets and the liabilities of the merging company is transferred by the law to the surviving company and thereafter the merging companies’ status as legal entities is terminated by the law.
Company in order to perform a merger should pay attention to the interest of:
- The company, minority shareholders, the companies’ employee;
- Creditors and other business partner of the company;
- The public and a healthy business competition.
Board of Director from each company that will perform merger should prepare the draft of merger plan. The draft of the merger plan, which has obtained the approval from the Board of Commissioners from each company, is proposed to the General Meeting of Shareholder (“GMS”) of each company in order to obtain its approval. Under Article 123 paragraph (2) of Company Law, it regulates that the draft of merger plan should at least contain of:
1. the name and domicile of each company that will perform the merger;
2. the reasons and explanation from the Board of Directors of the companies that will perform the merger and the requirements of the merger;
3. the procedure for the valuation and conversion of shares in the merging company into shares of the surviving company;
4. the draft for any amendment of the articles of associations of the surviving company;
5. the financial report covering the last 3 (three) financial years from each of the company that will perform the merger;
6. the plans to continue or terminate the business activities of the company in the merger;
7. a proforma balance sheet of the surviving company in accordance with accounting principles which is generally applied in Indonesia;
8. the procedure of the settlement for the status, right, and obligations of the member of the Board of Directors, Board of Commissioners, and employee of the merging company;
9. method of settlement of the rights and obligation of the merging company against third parties;
10. the procedure of the settlement for the rights of shareholders who do not agree to the merge of the company;
11. names of the member of the Board of Directors and the Board of Commissioners and the salary, honorarium, and the allowances for the Board of Directors and the Board of Commissioners of the surviving company;
12. the estimation for the period of the implementation of the merge;
13. report about the condition, development and result which is achieved by each of the companies in the merger;
14. main activities of each company in the merger and the changes which are occurred in the current financial years;
15. the details of problems which arise during the current financial year which could affect the activities of the companies in the merger.
The Board of Directors of both companies in merger is obliged to announce the summary of the draft of merger plan in at least 1 (one) newspaper and announce it in writing to the employee of the company in the merger no later than 30 (thirty) days before the invitation to the GMS. The announcement must also contain information that the parties with interest may obtain the draft of merger plan in the company’s office as from the date of the announcement to the date on which the GMS will be held.
Creditor may propose an objection about the merger to the company no later than 14 (fourteen) days after the announcement. If after period of 14 (fourteen) days after the announcement the creditor does not file an objection, then the creditor is considered to approve the merger. If the objection which is proposed by the creditor until the date of the GMS cannot be settled by the Board of Director, then the objection should be delivered in the GMS in order to get a settlement. As long as the objection does not reach a settlement, the merger cannot be performed.
The GMS resolution on merger is valid if it is taken according to the provision under Article 87 paragraph (1) and Article 89 of Company Law. Merger plan which has been approved by the GMS is poured into Deed of Merger, which is made before the Notary and in Indonesia language. The copy of the Deed of the Merger of the Company is attached to the Minister as an announcement to the Minister about the amendment of article of association and to obtain the approval from the Minister related to the merger of the company. In the event of merger of company is not followed with the amendment of article of association, the copy of the Deed of Merger must be delivered to the Minister to be recorded in the Company Register.
Under Article 133 of Company Law, it is regulated that Board of Directors of the company in merger is obliged to announce the result of merger in 1 (one) newspaper or more in a period of not later than 30 (thirty) days from the effective date of the merger.