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Mechanism and Procedure of Sale and Purchase of Assets under Law Number 40 of 2007

Mechanism and Procedure of Sale and Purchase of Assets under Law Number 40 of 2007

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Sales Of Assets Of The Company Presentation Transcript

  • 1. Sales of Assets of the CompanyMechanism and Procedure of Sale and Purchaseof Assets under Law Number 40 of 2007Eddy Leks, S.H., ACIArb
  • 2. Assets Vs SharesAssets Shares• Only purchase the assets of the • Can purchase some of the shares company, can be specific, some of or all of the shares of the the assets, or all of the assets company• All the liabilities by the company • All the rights and liabilities will rests on the company and will not be assigned to the new be taken over by the purchaser shareholder• The transaction is between the • The transaction is between the selling company and the buyer selling shareholder and the buyer• Mechanism of purchase is simpler • Mechanism of purchase is not simple www.lekslawyer.com
  • 3. Plan for Acquisition• Negotiation• Agree on commercial and legal terms• Prepare an agreement for the sale and purchase of assets• Signing of agreement between seller and buyer• Agreement can be a direct sale and purchase agreement or a conditional sale and purchase agreement www.lekslawyer.com
  • 4. Plan for Acqusition – Cont’d• Agreement with due diligence clause. The prospective buyer has the right to perform a due diligence prior to the purchase of the assets of the company.• Agreement without due diligence clause. The prospective buyer does not have the right to perform a due diligence prior to the purchase of the assets of the company. www.lekslawyer.com
  • 5. Agreement with Due Diligence• There are certain period to perform a due diligence• For assets, the due diligence shall consist on the examination of ownership of assets and its registration, licenses of assets, compliance in relation to the operational of assets i.e. environment, agreement between the seller with the third party that has interest or is related with the assets e.g. agreement with the bank to know whether the assets have been pledged, agreement with the suppliers, agreement with the lessees, insurance, tax obligations in relation to the assets, and litigation search. A lawyer must also review company’s Articles of Association www.lekslawyer.com
  • 6. Agreement with Due Diligence –Cont’d • The due diligence result will be submitted to the prospective purchaser to be reviewed. The issues found based on the due diligence report must be rectified by the seller (unless agreed otherwise, if the purchase is on “as is where is” basis) • If it is not rectified, then the prospective buyer may deduct the payment of the assets as the value of rectification list, as set out in the conditional sale and purchase agreement www.lekslawyer.com
  • 7. Agreement without Due Diligence• The prospective buyer obtains the full representations and warranties from the seller in terms of the assets• If any discrepancies found in the future, then the buyer can file a claim on breach of contract or on unlawful act to the seller or even file a criminal report www.lekslawyer.com
  • 8. Due Diligence vs Without Due DiligenceDue Diligence Without Due Diligence• The prospective buyer • The prospective buyer is aware on the only takes what has condition of assets been represented by• Less risky the seller• Takes time • High risk• More expensive • Fast • Cheaper www.lekslawyer.com
  • 9. Article 102 paragraph (1) of Company Law Board of Directors shall seek GMS approval for: • Assignment of Company assets; or • Making security for debt Company assets; which constitute more than 50% of Companies’ net assets in 1 (one) or more separate or inter-related transactions. Elucidation: “Company assets” means all moveable and immovable tangible and intangible goods belonging to the Company. “In 1 (one) or more separate or inter-related transactions” means one or more transactions which cumulatively result in the passing of the 50% threshold. The evaluation of more than 50% of net assets shall be based on the book value according to the most recent balance sheet ratified by the GMS. www.lekslawyer.com
  • 10. Article 102 paragraph (2)The transactions contemplated in paragraph (1) letter aare transactions assigning Company net assets whichoccur in a period of 1 (one) financial year or a longerperiod provided for in the Company’s articles ofassociation.Elucidation:Unlike transactions for the assignment of assets,transactions securing Company assets for debts ascontemplated in paragraph (1) letter b are not limited intime but attention must be given to the amount ofCompany assets still secured within a particular period. www.lekslawyer.com
  • 11. Article 102 paragraph (3)The provisions of paragraph (1) shall not apply toactions assigning or using as security Companyassets as operation of the Company’s business inaccordance with its articles of association.Elucidation:“Actions assigning or using as security Companyassets” means for example the sale of houses by areal estate business, the sale of interbank negotiableinstruments and the sale of inventory by distributionor trading companies. www.lekslawyer.com
  • 12. Article 102 paragraph (4)The legal actions contemplated in paragraph (1)which do not have GMS approval shall still bind theCompany in so far as the other party in the legalaction are acting in good faith. www.lekslawyer.com
  • 13. Article 102 paragraph (5)The provisions on quorum and/or provisionsconcerning adoption of GMS resolutionscontemplated in Article 89 shall apply mutatismutandis to GMS resolutions for approving theactions of the Board of Directors contemplated inparagraph (1). www.lekslawyer.com
  • 14. Article 89GMS to approve mergers, consolidations, acquisitions,or demergers, to file applications for the Company to bedeclared bankrupt or extensions of its period ofincorporation, and to wind up the Company may only beheld if in the meeting at least ¾ of the total number ofshares with voting rights are present or represented in theGMS and the resolutions shall be lawful if approved byat least ¾ of the number of votes cast, unless the articlesof association specify a quorum to be present and/orprovisions concerning the requirements for adoption ofGMS resolutions which are higher. www.lekslawyer.com
  • 15. How to know that the GMS is legitimate? • The procedure is right according to the company law and its articles of association • The minutes of GMS is signed by the Chairman and at least one shareholder appointed by and from GMS’ participants • If the minutes is made by the Notary, then the signing by the Chairman and one shareholder is not required • If the resolutions are made in lieu of meeting, then all shareholders must approve them in writing www.lekslawyer.com
  • 16. Shareholders’ Resolutions in lieu ofmeeting (Circular) Article 91Shareholders may also adopt binding resolutions outside GMSprovided that all shareholders with voting rights approve them inwriting by signing the proposal concerned.Elucidation:“Adopt resolutions outside GMS” means what is known in practiceas circular resolutions. Such resolutions shall be adopted without aGMS being held physically, but the resolutions shall be adopted bymeans of sending in writing the proposal to be resolved upon to allshareholders and the proposal shall be approved in writing by all ofthe shareholders.“Binding resolutions” means resolutions which have the same legalforce as GMS resolutions. www.lekslawyer.com
  • 17. Good Faith - What is Good Faith?According to Black’s Law Dictionary, good faithmeans a state of mind consisting in:• Honesty in belief or purpose;• Faithfulness to one’s duty or obligation;• Observance of reasonable commercial standards of fair dealing in a given trade or business, or• Absence of intent to defraud or to seek unconscionable advantage. www.lekslawyer.com
  • 18. Good Faith – Cont’d• What is the legal consequence if the buyer who acquired the asset did not do in good faith?• Then, it means that the exception of Article 102 paragraph (4) does not apply• Meaning, the selling of assets is against the law i.e. Company law• Consequence, the transaction is null and void (vide Article 1335 jo. 1337 Indonesian Civil Code) www.lekslawyer.com
  • 19. Article 1335 and 1337 IndonesianCivil Code Article 1335An agreement without any reason, or that has beenmade on a false or forbidden reason, shall have noeffect. Article 1337A cause is forbidden, if it is forbidden by the law, orif in contrary to good morals or public order. www.lekslawyer.com
  • 20. Things to Examine before Completion • Approval to the Company to sell the assets in accordance with the company law and its AOA i.e. GMS, BOD resolutions, BOC approval • Approval from the government instances e.g. BPN approval for the transfer of land more than 5000m2 • Compliance in relation to the certain sector e.g. Hotel, hospital, etc • Compliance in relation to company’s business activity and company’s asset licenses • Asset licenses www.lekslawyer.com
  • 21. Completion or Closing• Completion of due diligence• Full payment of purchase price• Hand over of assets together with its related legal documents including licenses www.lekslawyer.com
  • 22. THANK YOU www.lekslawyer.com