RE-ORGANIZATION

Compiled to Fulfill the Duties of Marketing Management Courses

Lecturer: Prof. Dr. Isti Fadah, M.Si.

Authored By:

Izzah Mariami Sechimil (190810201004)

Redygta Meigy Maulana (190810201153)

DEPARTMENT OF MANAGEMENT
FACULTY OF ECONOMICS AND BUSINESS
UNIVERSITY OF JEMBER
2021
 CHAPTER I
INTRODUCTION

1.1 Issue Background

Company performance in an era of increasingly fierce business competition, each
company needs to evaluate its performance, and make a series of improvements, so that it
continues to grow and be competitive. These improvements will be carried out
continuously, so that the company's performance will increase and can continue to excel
in the competition, or at least remain sustainable. One of the strategies to improve and
maximize company performance is by restructuring.

1.2 Problem Formulation

Based on the research background that has been stated above, the problem can be
formulated as follows:
1. What is the definition of reorganization?
2. What are the differentiation of company reorganization?
3. What is the laws governing about reorganization?
4. What are the steps of reorganization?
5. What are the types of reorganization?
6. What are the reason the company reorganized?
7. How to surrender their assets?
1.3 Purpose
The purpose of discussing the problem formulation of this paper is to know more
clearly what is reorganization.
 CHAPTER II
DISCUSSION

A. Definition
Reorganization is an effort to keep the company alive by changing its capital
structure (remodeling the capital structure). In unsatisfactory economic and business
situations, companies are often forced to stick with what already exists. Reorganization in
the financial aspect was carried out to minimize financial burdens that remained in their
nature.
According to Drs. A. Abdurrachman, reorganization, in general, is an
arrangement or improvement regarding the capital structure of a company, usually which
includes the withdrawal of all unsettled securities, and their replacement with new
securities. In particular, is a recapitalization of a company that goes bankrupt, which
stipulates that shareholders, bondholders, and creditors agree to each other to surrender
their interests and demands, and form a new company to settle debts. the old company
debt and continue its business.
Companies do not always go according to plan, of course on the way a company
will definitely face difficulties. The difficulties that are quite disruptive to the smooth
running of the company are those related to the company's finances, both minor and also
more serious, namely not solvable. When it has entered the solvable stage, there are two
solutions to overcome it, namely liquidation or reorganization. Liquidation is chosen if
the liquidation value is greater than the company value if it is continued. Reorganization
is chosen if the company still shows good prospects.
From some of the information above, it can be concluded that reorganization is a
situation where the assets of a company experiencing financial difficulties are stated in
market value and the capital structure of the company is rearranged to reflect any changes
on the asset side. In reorganization, the company continues while in bankruptcy the
company is liquidated and disappeared.
B. Corporate Reorganization Differences
The definition of reorganization according to Indonesian bankruptcy law is PKPU which
is said to be in line with the establishment of Reorganization which is regulated by the
Bankruptcy Code of the United States of America (Bankruptcy Code). PKPU is regulated
in Chapter II, Article 212 - Article 279 of the Indonesian Bankruptcy Law, while
Reorganization is regulated in Chapter 11 U.S. Bankruptcy Code.
The Dictionary of Finance and Investment terms defines that Company
Reorganization is the restructuring of the company's finances in bankruptcy.
Reorganization of the company also means reorganizing the differentiated organizations:
 Juridical reorganization, occurs when there is a change in the form of the
company. For example, an individual company is changed to become a Limited
Liability Company (PT).
 Structural Reorganization, namely the rearrangement of the organizational
structure. For example, the functional organizational structure is transformed into
a line organizational structure.
 Financial reorganization, which is Capital Restucturing which involves a
complete change of the capital structure because the company has been or is very
likely to be insolvable. The purpose of financial organization is to restore the
company's capital. The capital structure was restructured because the company
experienced capital difficulties, so that it felt a new capital structure. sufficiently
feasible for the company's future operations.

C. Governing Law Regarding Company Reorganization

Law No. 7: The most precise resolution
If the owner's judgment of a company is that the decline is irreversible and the
company cannot be sold as a viable company, the best alternative for all parties may be
liquidation bankruptcy, which is also covered by Law no. 7 of the bankruptcy code. The
court appoints a trustee who will collect the company's property, turn it into cash, and
distribute the cash proportionally to creditors on a prorate basis in the shortest possible
time. because all assets are sold to pay off debts, the bankruptcy is liquidated thus
providing additional time for reorganization which cannot be done voluntarily. If
 organization cannot be carried out, then procedures are in accordance with Law No. 7
will enable the fair and regular dissolution of the business.

D. Steps for Company Reorganization

The steps for reorganization within the company are as follows:

1. Determining Company Value

Valuation that is often used, and one that includes simple, is to calculate the value of
the company based on the capitalization rate.
2. Determine the New Capital Structure
The capital structure aims to reduce fixed expenses (interest) so that companies can
operate more flexibly. To reduce these fixed expenses, the total debt is usually
reduced. If there is no hope that the company's operations will be successful, then
liquidation is the only possible alternative for the company.

The way to reorganize the company is as follows:

a) Make cost savings. Expenditures - unnecessary expenses, postponed or
canceled.
b) Selling assets that are not needed.
c) Unprofitable divisions (business units) are eliminated or merged.
d) Postpone expansion plans until the situation is judged favorable.
e) Make use of existing cash, do not increase debt (if it can be deducted from the
sale of unnecessary assets), and maintain liquidation. In the short term it is
possible to sacrifice profitability (profitability has to be negative).

E. Types of Company Reorganizations

Reorganization can be divided into 3 types, namely:
1. Reorganization of the portfolio / asset
Portfolio reorganization is an activity of compiling a company's portfolio so that
the company's performance is getting better. Included in the company's portfolio
 are every asset, business line, division, business unit or SBU (Strategic Business
Unit), or subsidiary.
2. Capital or financial reorganization.
Capital or financial reorganization is the rearrangement of the company's capital
composition so that financial performance becomes healthier. Company health
can be measured based on health ratios, which include: efficiency ratio,
effectiveness ratio, profitability ratio, liquidity ratio, asset turnover, leverage ratio
and market ratio. In addition, the level of health can be seen from the risk return
profile.
3. Reorganization of management / organization.
Management and organizational reorganization is a rearrangement of management
composition, organizational structure, division of labor, operational systems, and
other matters relating to managerial and organizational issues.

Basically every company can implement one type of reorganization at a time but
it can also reorganize as a whole because reorganization activities are interrelated. In
general, prior to reorganization, company management needs to conduct a comprehensive
assessment of all problems faced by the company, this step is commonly referred to as
due diligence or a company due diligence assessment. The results of this assessment are
very useful for reorganizing steps that need to be carried out based on the priority scale.

F. Reasons for the Company Reorganizing the Company

These reasons include the following:
 Legal issues / decentralization
Laws no.22 / 1999 and no.25 / 1999 have encouraged corporations to review ways
of working and evaluate the relationship between the head office and subsidiaries
that are scattered throughout the country. The desire of the local government to
share in the benefits of the companies in their respective regions requires the
company to review the extent to which authority needs to be given to the leaders
 of the subsidiaries so that they can decide for themselves if there are legal
problems in the regions.
 Legal issues / monopoly
Companies that have been on the black list of monopolies, and have been found
guilty by the Business Competition Supervisory Commission (KPPU) / court,
must restructure so that they are free from legal problems. For example, the
company has to release or break up divisions so that it is controlled by other
parties, or restrain the rate of products that enter the monopoly list so that
competitors can get a sufficient portion.
 Market demands
Consumers are spoiled by the increasing number of producers. Especially in the
era of free trade, producers from anywhere can come to Indonesia. This requires
companies to meet consumer demands which include convenience, speed,
conformity, and added value to consumers (added value). This demand can be
fulfilled if the company at least changes the way of working, the division of tasks,
and the system within the company in order to support the fulfillment of these
demands.
 Geographical Problems
Companies that are expanding into hard-to-reach areas need to give special
powers to the subsidiaries so that they can operate effectively. Likewise, if
expanding overseas, the corporation needs to consider the organizational system
and parent-subsidiary relationship so that overseas subsidiaries can work well.
 Changes in company conditions
Changes in company conditions often require management to change the climate
so that the company is more innovative and creates new products or ways of
working. This climate can be created when companies improve management and
organizational aspects, such as working conditions, incentive systems, and
performance management.
 Holding-subsidiary relationship
Small corporations can implement an operating holding system, where the parent
can enter into the operational decisions of the subsidiary. The bigger the size of
 the corporation, the holding needs to shift and act as a supporting holding, which
only makes important decisions in order to support the subsidiaries to perform
well. The larger the size of the corporation, the parent must be willing to act as an
investment holding, which does not participate in activities but merely acts as the
owner of the subsidiaries, injects equity and loans, and at the end of the year asks
the subsidiaries to account for their work and pay dividends.
 Trade Union Problems
The era of openness, which was followed by the emergence of labor laws, which
was constantly changing, encouraged workers to be more courageous in voicing
their interests.
 Improvement of corporate image
Corporations often change the company logo in order to create a new image, or
improve the image that has been attached to corporate stakeholders. For example,
several years ago, PT Garuda Indonesia changed its company logo so that the
corporate image would change.
 Management flexibility
Management often restructures itself so that ways of working are more agile,
making decisions faster, and improvements can be made more efficient. This
reorganization is usually related to changes in job descriptions, the authority of
each level of management to decide on expenses, the authority to manage
resources (including HR), and the form of the organization. PT Kimia Farma
reorganized the company by separating the pharmacy units so that management
became more agile and focused on operations.
 Shifting of ownership
Corporation founders usually decide to go public after the founder declares
himself old, unable to run the corporation as he used to. The simplest change is to
transfer some ownership to the children. But this method is often not enough.
 Better access to capital
PT Indosat sold some of its shares on the New York Stock Exchange (NYSE)
with the aim of widening access to capital. Thus, the company does not have to
 flood the JSE with shares every time it needs capital. As a result of this action the
ownership structure automatically changes.
Actually, company reorganization does not have to wait for the company
to decline, but it can be done every time, so that the company can compete and
grow. Under normal circumstances, companies need to make improvements and
improvements so that they can continue to excel in competition, or at least
survive.
The method of reorganization is taken if the company's financial
difficulties are expected to be corrected, because the company's prospects are
estimated to be still good. In other words, if the condition of the company cannot
be repaired, then liquidation must be taken.

G. Transfer of Assets in the Context of Reorganization

In the business world, reorganization activities are commonplace. There are many
forms of this reorganization, it can be by taking over a business, taking over ownership or
taking over property. The form of reorganization that is specifically regulated in the
Income Tax Law is due to the transfer of assets. Article 10 paragraph 3 of Law No. 7 of
1983 as last amended by Law number 36 of 2008 concerning Income Tax (PPh Law) is
the transfer of assets in the context of liquidation, merger, consolidation, expansion,
splitting or business takeover. In the elucidation of Article 10 paragraph (3), there is no
further information regarding the form and process of transactions of this type of
reorganization. What is of concern is that if there is a transfer of assets, the price that
becomes the basis for implementing tax regulations is the difference between the market
price of the transferred assets and the book value of the assets.
Reorganization in Law number 47 of 2007 concerning Limited Liability
Companies is merger, consolidation, acquisition and separation. In this law, there are no
terms of expansion and resolution. The definition of separation according to the Limited
Liability Company Law is a legal act committed by a company to separate a business
which results in all assets and liabilities of the company being transferred due to law to 2
(two) or more companies or part of the assets and liabilities of the Company being
transferred by law to 1 (one) Company or more.
 CHAPTER III

CLOSING

From some of the information above, it can be concluded that Reorganization is a change
in legal form, organizational structure and company capital.

Reorganization may only be carried out if there is sufficient confidence that after the
quasi-reorganization the company will be able to maintain its going concern status and develop
well. This can be achieved if the company, even though the deficit is due to past operations, still
has good prospects in the future. This prospect could arise from the development of new
products and markets, the entry of a new management group, or an improvement in economic
conditions that could boost operating results.

Reference

http://reswanda.dosen.narotama.ac.id/files/2011/08/RESTRUKTURISASI-REORG-
LIKUIDASI.doc

http://artikellepas18.blogspot.com/2018/01/makalah-manajemen-keuangan-merger-dan.html