Company Separation Agreement Template for Indonesia
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What is a Company Separation Agreement?
The Company Separation Agreement is a vital legal instrument used in Indonesian business restructuring scenarios where two or more business entities need to formally separate their operations, assets, and obligations. This document becomes necessary during corporate reorganizations, divestments, demergers, or the dissolution of joint ventures. It must comply with Indonesian corporate and labor laws, particularly Law No. 40 of 2007 on Limited Liability Companies and Law No. 13 of 2003 on Manpower. The agreement comprehensively addresses all aspects of the separation, including asset division, employee matters, intellectual property rights, financial settlements, and ongoing obligations between parties. It serves as both a roadmap for implementing the separation and a legally binding document that protects all parties' interests while ensuring regulatory compliance.
About the Company Separation Agreement
A Company Separation Agreement is a comprehensive legal document that formally dissolves business relationships between corporate entities in Indonesia. When your company needs to separate from subsidiaries, joint venture partners, or other business entities, this agreement provides the legal framework to divide assets, transfer employees, and settle obligations in compliance with Indonesian corporate law.
When do you need this document?
You need a Company Separation Agreement when your business undergoes restructuring that requires formal entity separation. This includes corporate demergers where a parent company spins off subsidiaries, dissolution of joint ventures between Indonesian and foreign partners, or divestment of business units to comply with regulatory requirements. The agreement is also essential when shareholders decide to separate their business interests, particularly in cases involving the Indonesian Investment Coordinating Board (BKPM) regulations or when foreign ownership limits require structural changes.
Key legal considerations
Several critical elements must be addressed in your separation agreement to ensure enforceability under Indonesian law. Asset division requires detailed valuation and clear transfer procedures, especially for intellectual property governed by Law No. 28 of 2014 on Copyright. Employee matters are particularly complex, as you must comply with Law No. 13 of 2003 on Manpower and the recent Omnibus Law (Law No. 11 of 2020) regarding severance payments and transfer procedures. Financial settlements must account for outstanding debts, shared liabilities, and ongoing contractual obligations. The agreement should also address confidentiality, non-compete clauses, and dispute resolution mechanisms that align with Indonesian commercial practices.
Legal requirements in Indonesia
Indonesian law mandates specific procedures for company separations that must be reflected in your agreement. Under Law No. 40 of 2007 on Limited Liability Companies, you must obtain approval from the Ministry of Law and Human Rights for structural changes and ensure proper notification to creditors and stakeholders. The separation timeline must comply with Government Regulation No. 35 of 2021 regarding employment procedures, particularly for employee transfers and terminations. All parties must be properly identified with Indonesian registration numbers, and authorized representatives must have valid power of attorney. The agreement requires notarization by an Indonesian Notary Public and may need BKPM approval if foreign investment is involved. Additionally, tax clearances and regulatory filings must be completed according to the specified timeline to ensure the separation's legal validity.
GOVERNING LAW
Applicable law
This Company Separation Agreement is drafted to comply with Indonesia law. Key legislation includes:
Law No. 40 of 2007 on Limited Liability Companies: Regulates corporate governance, business separation, company dissolution, and shareholder rights in Indonesian companies
Law No. 11 of 2020 on Job Creation (Omnibus Law): Recent comprehensive law affecting business operations, including changes to labor regulations and business licensing
Government Regulation No. 35 of 2021: Implementing regulation for fixed-term employment, outsourcing, severance pay, and termination procedures
Law No. 28 of 2014 on Copyright: Governs intellectual property rights protection during company separation, particularly regarding transfer of copyrighted materials
Law No. 37 of 2004 on Bankruptcy and Suspension of Debt Payment: Relevant for understanding insolvency proceedings and debt settlement during company separation
Law No. 36 of 2008 on Income Tax: Governs tax implications of asset transfers and business restructuring during company separation
Minister of Manpower Regulation No. 3 of 2021: Specific procedures for termination of employment relationships and calculation of severance payments
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