Article 163 paragraph (1) Law number 13 of 2003 on Manpower (Labor Law), states “The employer may terminate the employment of his or her employees in the event of change in the status of the company[…]”. The Labor Law does not clearly specify what is considered a “change of status” of a PT or PT PMA. In this column we further discuss the change of status of companies in Indonesia, to clarify which events justify termination of employees based on the above article 163(1) of the Labor Law.
Constitutional Court Decision
According to the Constitutional Court Decision No. 117/PUU-X/2012 - which reviewed Article 163 paragraph (1) Labor Law - the outline of the statement of the Government side on “change of status” was:
Corporate Action with or without an agreement of GMS (General Meeting of Shareholders) which causes a change of legal form or legal status of a company which includes but not limited to:
- Change of legal form from “non-legal entity” to “legal entity”.
- Company Split including one of a limited liability company (split off or spin off in accordance with Article 135 of the Law No. 40 of 2007 or split up.
- Acquisition of asset, which involves the transfer of personnel related to that asset.
- Change of Capitalization Status such as Domestic Investment Company (PMDN), Foreign Investment Company (PMA), or investment or divestment or going public or going private.
Change of Status Cases
In line with above explanation from the Constitutional Court, we will discuss now several events and determine whether or not they are considered change of status:
a. Only name of the company changed
Change in status of the company is a corporate action resulting change of legal form or legal status of the Company. In case only name of the company is changed, there is no such corporate action resulting change of legal form or legal status of the company. It means, if only name of the company changed, it is not included as “change in the status” in Article 163 paragraph (1) because there is no change in legal form or legal status occurred.
b. Only the largest shareholder changed
The change of majority shareholder itself does not change the legal form or legal status of the company, unless there is any specific element which causes a change in the legal form or legal status such as change from PMDN to PMA due to such change of majority shareholder. However, the change of majority shareholder can be considered as “change in the ownership” in Article 163 (1) of the Labor Law
This column is provided by PNB Law Firm Jakarta