Merger and Acquisition of Limited Liability Company

When considering the terms "merger" and "acquisition" in limited liability company many individuals erroneously assume that these two processes are identical. However, in reality, both terms encompass distinct meanings and procedures. To avoid making incorrect assessments, it is essential to grasp the disparity between mergers and acquisitions.

Essentially, the terms "merger" and "acquisition" are both employed to describe the consolidation of two or more companies. Nevertheless, the approach to merging and the consequences for the combined entity vary. To gain a clearer comprehension of the distinction between mergers and acquisitions, let us provide a concise explanation of each term from several different perspectives.

Regarding mergers and acquisitions, under Article 1 of Law Number 40 of 2007 concerning Limited Liability Companies, as amended by Law Number 11 of 2020 concerning Job Creation ("UU PT"), they are known as 'merger' and 'acquisition' respectively.

Based on Article 1 Paragraph (9) of the UU PT, a “Merger” is a legal act performed by one company or more to merge themselves with another existing company which results in the assets and liabilities of the absorbed company become transferred due to law to the surviving company, and subsequently the legal entity status of the absorbed company become terminated due to law.

Meanwhile according to Article 1 Paragraph (11), an “Acquisition” is a legal act performed by a legal entity or an individual person to acquires shares in a company which results with the transfer of control over the said company.

Difference between Merger and Acquisition

In general, the distinction between Mergers and Acquisitions can be observed through their legal effects on the status of legal entities, assets and liabilities, and shareholders.

To facilitate the comparison of legal consequences arising from Mergers and Acquisitions, we will present them in tabular form as follows:

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