The accelerated and continuous economic growth in Indonesia has led to an increasing number of debt problems that occur between business actors. Uncollectible receivables often cause serious problems that interfere with a company’s performance. The ordinary civil lawsuit mechanism cannot adequately address the need for a fast and effective legal remedy for debt settlement in Indonesia. Therefore, the Law Number 37 of 2004 on Bankruptcy Proceedings and the Suspension of Debt Payment Obligations (“Bankruptcy and PKPU Law”) is the answer to an effective and efficient debt collection legal mechanism.
Furthermore, the requirements for a legal subject or business entity to be declared in a state of PKPU or Bankruptcy by the Commercial Court are regulated in Article 2 paragraph (1), Article 222 paragraphs (1), (2), (3) and Article 8 paragraph (4) of Bankruptcy and PKPU Law.
Article 2 paragraph (1)
“Debtors with two or more Creditors and who failed to pay off at least one debt which is due and collectible, shall be declared bankrupt with a Court decision, either at their own request or at the request of one or more of their creditors.”
Article 222
- “Suspension of Debt Payment Obligations shall be proposed by Debtors with more than 1 (one) Creditor or by Creditors.”
- “Debtors who are unable or estimate to be unable to continue paying their debts which are due and collectible, may request a suspension of debt payment obligations, with the intention of submitting a reconciliation plan which includes an offer to pay part or all of the debts to Creditors.”
- “Creditors who estimate that a Debtors are unable to continue paying their debts which are due and collectible, may request that the Debtors be given a suspension of debt payment obligations, in order to allow the Debtors to propose a composition plan which includes an offer to pay part or all of their debts to their Creditors.”
Article 8 paragraph (4)
“The application for bankruptcy declaration shall be granted if there is a fact or condition which prove in a simple way that the requirements to be declared bankrupt as referred to in Article 2 paragraph (1) have been fulfilled.”
In the elucidation of Article 8 paragraph (4) of the Bankruptcy and PKPU Law, it is stated that what is meant by facts or circumstances that are proven simply is the existence of the fact of two or more Creditors and the fact of a debt that is due and has not been paid. Meanwhile, a dispute regarding the amount of debt between the bankruptcy petitioner and the respondent does not prevent the issuance of a bankruptcy declaration verdict.
In practice, the simple requirement as mentioned above is not as simple as it is written in Bankruptcy and PKPU Law. A deep understanding of the technical aspects of such “simple” proof is required, both when filing a PKPU and/or Bankruptcy petition as well as during the company’s business activities are running, so that if another party does not carry out its obligations to the client, the existing documents may become strong evidence in order to realize the certainty of rights protection through PKPU and/or Bankruptcy legal remedies.
Furthermore, several types of business entities and industries that are specifically regulated, for example for Bank, the party that can file for Bankruptcy and PKPU is Bank Indonesia (Central Bank of Indonesia). Meanwhile, for Securities Companies, Clearing and Guarantee Institutions, Central Depository and Settlement, Insurance and Reinsurance Companies, the party that can file for Bankruptcy and PKPU is the Financial Services Authority (OJK). As well as other business entities that are specifically regulated. Understanding this specificity of legal subject is very important when preparing a Bankruptcy and PKPU case, or when taking them into considerations in drafting commercial contracts.
Every company must anticipate the accumulation of uncollectible debt values that can interfere with the company’s performance. We, SW Counselors at Law, consist of experienced Advocates & Receivers, and Administrator for Bankruptcy registered in Minister of Law and Human Rights, a member of the Indonesian Association of Receivers & Administrators (AKPI).
For legal services from SW Counselors at Law, please contact:
Kristian Lukas Simanjuntak, S.H., M.H., LL.M.
Partner
T. (+6221) 2222-0200
Yonathan Banjarnahor, S.H.
Senior Associate
T. (+6221) 2222-0200
E. yonathan.banjarnahor@shinewing.id
