Company Restructuring in Indonesia: Merger, Share Transfer, and More Strategic Options

In a market environment that never stops shifting, company restructuring in Indonesia is no longer a last resort for businesses in distress. Growing companies pursue it too: to sharpen their focus, optimise ownership structures, or prepare for the next phase of expansion. What separates successful outcomes from failed ones is not company size. It is the quality of preparation across three dimensions: legal, tax, and employment.

What Is Company Restructuring and When Is It Needed?

At its core, company restructuring is a significant modification to a company’s legal, ownership, operational, or financial structure. In Indonesia, this process is governed by a multi-layered regulatory framework, spanning from Law (Undang-Undang Perseroan Terbatas or UUPT) Number 40 of 2007 on Limited Liability Companies to the sweeping changes introduced by the Job Creation Law (Undang-Undang Cipta Kerja or Omnibus Law), enacted as Law Number 6 of 2023.

Three conditions most commonly drive companies to pursue restructuring:

• Market expansion and consolidation: Combining entities to strengthen competitive positioning.
• Operational efficiency: Eliminating functional duplication and streamlining cost structures.
• Financial pressure: Reorganising debt or capital structures before conditions deteriorate further.

The Omnibus Law introduced a meaningful shift. Administrative processes became more streamlined, yet regulatory scrutiny from the Financial Services Authority (Otoritas Jasa Keuangan or OJK) and the Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha or KPPU) has grown sharper. Regulatory flexibility on one end demands stricter compliance on the other.

4 Primary Mechanisms of Company Restructuring in Indonesia

Merger 

A merger is the combination of one company into another existing company. All assets and liabilities of the merging company transfer by operation of law, and that company is dissolved without going through a liquidation process.

Mergers are most appropriate when two entities seek to consolidate market strength, eliminate operational redundancies, or improve bargaining power with partners and suppliers. From a regulatory standpoint, a merger resolution must be approved at a General Meeting of Shareholders (Rapat Umum Pemegang Saham or RUPS) with a minimum quorum of three-quarters of shares carrying voting rights.

Consolidation 

Unlike a merger, consolidation involves two or more companies combining to establish an entirely new entity. Both original companies are dissolved by operation of law, and the newly formed company assumes all of their rights and obligations.

This mechanism is commonly used in state-owned enterprise (Badan Usaha Milik Negara or BUMN) sectoral restructuring, where multiple business units are folded into a single new holding company to improve efficiency and global competitiveness.

Acquisition and Share Transfer

An acquisition, often referred to as a share transfer in the context of a change of control, is a legal act whereby another party takes over a company’s shares to the extent that control is transferred. The target company continues to exist as a separate legal entity, but its strategic direction is now determined by the acquiring party.

Control is generally defined as ownership of more than 50 percent of shares with voting rights. A critical point that is frequently overlooked: if the combined asset value or combined sales of the parties exceed certain thresholds, the company is obligated to notify the KPPU within 30 working days of the transaction becoming legally effective.

Separation or Spin-off

A separation occurs when some or all of a company’s assets and liabilities are transferred to a new entity. There are two types: a full separation (pemisahan murni), in which the original company is dissolved, and a spin-off (pemisahan tidak murni), in which the original company continues to operate while a portion of its assets is separated into a new entity.

A highly relevant example is the separation of the IndiHome business segment from PT Telkom Indonesia into Telkomsel, executed as part of a Fixed-Mobile Convergence strategy. This reflects a growing trend of spin-offs across the telecommunications and technology sectors, allowing each entity to sharpen its operational focus.

Legal Implications Every Executive Must Understand

Every restructuring action in Indonesia must follow a strict sequence of formal procedures. Failure to comply can result in the entire transaction being voided through litigation. The most critical points are as follows.

• Article 126 of the UUPT requires that every restructuring action give due consideration to the interests of minority shareholders, employees, and creditors. This is not a formality. Non-compliance can result in claims for damages.
• The restructuring RUPS requires a higher quorum than an ordinary general meeting: a minimum of three-quarters of shares must be present, and a resolution is valid only if supported by three-quarters of the votes cast.
• A mandatory public announcement must be published in a national newspaper at least 30 days before the RUPS, providing creditors with a 14-day window to submit written objections.

KPPU oversight: Post-merger notification to the KPPU is mandatory within 30 working days if the combined asset value or combined sales of the parties exceed the following thresholds:

The late notification penalty reaches IDR 1 billion per day. The IDR 15 billion fine imposed on TikTok for its acquisition of Tokopedia serves as a concrete reminder of how seriously the KPPU enforces this rule.

Tax Considerations: Book Value Treatment and the Business Purpose Test

Without proper tax planning, restructuring can trigger a significant income tax (Pajak Penghasilan or PPh) liability because asset transfers are assessed at fair market value. This is where book value treatment (fasilitas nilai buku) becomes strategically important.

Under book value treatment, the transferring company is not required to recognise a gain at the time of the transaction. The tax obligation is deferred until the asset is disposed of in the future. This facility is governed by Minister of Finance Regulation (Peraturan Menteri Keuangan) Number 1 of 2026, which expands access for state-owned enterprises and companies preparing for an Initial Public Offering.

To qualify under the Business Purpose Test administered by the Directorate General of Taxes (Direktorat Jenderal Pajak or DJP), companies must satisfy three primary conditions:

• The receiving party must continue the transferred business operations for a minimum of 4 years following the effective date, reduced from the previous requirement of 5 years.
• Fixed assets received may not be sold or transferred within the first 2 years, unless there is a compelling operational efficiency rationale.
• The transfer must not take the form of a standard cash transaction or conventional sale and purchase arrangement.

Weak documentation of business synergies is sufficient grounds for the DJP to revoke book value treatment retroactively, together with administrative penalties. This risk should not be underestimated.

Employee Rights During Restructuring

The Omnibus Law simplified termination of employment (Pemutusan Hubungan Kerja or PHK) procedures, but this does not reduce employer obligations. Severance pay remains mandatory under Government Regulation (Peraturan Pemerintah) Number 35 of 2021, and the applicable multiplier depends heavily on the reason for termination:

Early transparency with employees is not simply an ethical consideration. Unanticipated resistance from labour unions has the potential to stall an entire restructuring process.

Need Guidance on Company Restructuring in Indonesia?

The complexity of restructuring does not reside in any single aspect. The most significant problems arise when legal, tax, and employment matters are handled in isolation, without one party holding a view of the complete picture.

XPND serves not as a consultant that delivers recommendations on paper and steps away, but as an execution partner that accompanies the entire process from initiation to completion. There are three areas where XPND delivers measurable value:

• Discreet execution: XPND facilitates negotiations with key creditors and stakeholders before formal proceedings begin, allowing transactions to progress without triggering market panic.
• Cost-efficient structuring: From tax structuring using book value treatment under PMK 1/2026 to severance liability modelling under PP 35/2021, XPND ensures acquisition economics remain realistic from a cash flow perspective.
• Regulatory fast track: XPND manages post-merger KPPU notifications, OJK compliance for publicly listed companies, and the identification of applicable exemptions that accelerate timelines without compromising legal certainty.

The XPND team brings backgrounds from Big-4 consulting firms and state-owned enterprises, with offices across Jakarta, Surabaya, Semarang, Batam, and Bali. An initial consultation is available at no cost and can be arranged within 24 hours.

Start Your Company Restructuring Process with XPND