Getting business loans from creditors is a common practice in business. A company does this to increase its business capital or to maintain its business afloat.
Despite the loan support, the company’s business may still not be able to grow as expected or continue to suffer financial problems. Under these conditions, the company will have to face increasing debt burden. Usually, the company will make efforts to pay off its debts.
Law No. 37/2004 on Bankruptcy and Suspension of Debt Payment Obligations (PKPU) offers a solution to such problem.
If the debt is due and the company is unable to fulfill its obligations, it is able to apply for a PKPU or a bankruptcy. The application of a PKPU or a bankruptcy can be submitted voluntarily by the company or by one of its creditors.
Bankruptcy is a debt settlement process through a litigation process in the Commercial Court. Bankruptcy status takes effect after a judge of the Commercial Court issues the bankruptcy decision. In that particular decision, the court appoints one or more receivers in charge of managing and settling all assets of the bankrupt debtor.
Article 1 Paragraph 1 of Law No. 37/2004 stipulates that bankruptcy is a general confiscation of all assets of a bankrupt debtor, whose management and settlement is carried out by receiver/receivers under a supervisory judge as regulated by law.
Bankruptcy is subject to termination, which can be done through several alternatives based on Law No. 37 of 2004, namely:
A debtor declared bankrupt by the Commercial Court has the right to submit a reconciliation plan to creditors. The settlement plan is submitted by the debtor no later than eight days before a meeting for accounts receivable reconciliation, which will be discussed with the creditors after the verification of the accounts receivable.
This process is regulated in Article 144 to Article 177 of Law No. 37/2004. Article 144 of the law states:
“Bankrupt debtors have the right to offer a settlement to all creditors”.
The reconciliation plan will be accepted if it is approved by half of the number of creditors present at the meeting, which must be attended by at least 2/3 of the number of concurrent creditors through a voting mechanism. If the reconciliation plan is rejected or unaccepted, or the settlement plan is rejected based on a final and binding legal decision, then the bankrupt debtor’s assets is in a state of insolvency in accordance with Article 178 paragraph 1 of Law No. 37/004.
If the reconciliation or settlement plan is rejected, the bankrupt debtor cannot offer such moves again in the bankruptcy process. This also applies to debtors declared bankrupt as a result of the reconciliation plan that was rejected during the PKPU period. This process is upheld by the Circular Letter of the Supreme Court No. 5/ 2021, in the section on the formulation of the Special Civil Code, number 2 letter a, which stipulates;
“Debtors who are declared bankrupt as a result of the reconciliation plan, which is rejected by the creditors as referred to in the provisions of Article 289 of the Bankruptcy Law & PKPU, are not allowed to submit the reconciliation plan again”.
The Supreme Court clearly disapproves bankrupt debtors due to the rejection of the reconciliation plan to re-submit another reconciliation plan.
- Settlement of Bankrupt Debtor’s Assets
The explanation section of Article 57 of Law No. 37/2004 stipulates that insolvency is a condition of a debtor who is no longer able to pay. In a bankruptcy case, insolvency occurs if no reconciliation plan is offered or the reconciliation plan is not approved by the creditors.
Following the insolvency, the Receiver/Receivers can take action of the settlement of bankrupt debtor’s assets, namely;
- conducting auctions of all bankrupt debtor’s assets and collect bankrupt debtor’s receivables that may be in the hands of a third party, where the sale of the bankrupt debtor’s assets may be carried out under the table as long as it is approved by the supervisory judge;
- continuing the management of the bankrupt debtor ‘s company if it is deemed profitable or adding to the bankrupt debtor’s assets, but the management must obtain the approval of the supervisory judge;
- creating a distribution list containing the amount of money received and issued during the bankruptcy process, the names of creditors and the amount of approved claims, the payment to be made against these claims;
- distributing the entire bankrupt debtor’s assets that have been auctioned or cashed in.
If all bankrupt debtor’s assets have been sold, or all creditors have received their receivables as agreed, the bankruptcy is declared over.
- Bankruptcy Decision Overturned by An Appeal Court
Article 196 paragraph 1 of Law No. 37/2004 stipulates that the receiver/receivers or any creditor may file an appeal against a court decision. The appeal can be done through a cassation or a judicial review.
This effort can be taken if there are parties who are not satisfied with the results of a lower court’s decisions. If the bankruptcy decision is canceled by an appeal court, either through a cassation and/or judicial review, the bankruptcy terminates.
- Revocation of the Supervisory Judge’s Recommendation
The supervisory judge is tasked with supervising the management and settlement of bankrupt debtor’s assets by the receiver/receivers. In the case of revocation of bankruptcy at the recommendation of the supervisory judge, Article 66 of Law No. 37/2004 states that the court is obliged to hear the opinion of the supervisory judge before making a decision regarding the management and settlement of bankrupt debtor’s assets.
If the supervisory judge considers that the financial condition and assets of the bankrupt debtor are not sufficient to pay the costs of the bankruptcy of the company, the Commercial Court – based on the supervisory judge’s recommendation – may revoke the bankruptcy in accordance with Article 18 paragraph 1 of Law No. 37/2004.
Prior to ordering the termination of the bankruptcy, the Commercial Court determines the bankruptcy fees and receiver/receivers fees charged to the debtor. The payment must made before the payment of others debts that are not secured by collateral.
The decision for the revocation of the bankruptcy declaration shall be announced by the court clerk in the State Gazette of the Republic of Indonesia in two daily newspapers, at the very least. The decision to revoke the declaration of bankruptcy can be appealed for cassation and/or judicial review.
Author / Contributor:
|Dita Nadya Chaidir, S.H. M.H.|
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