Law Number 37 of 2004 on the Bankruptcy and Delay of Debt Payment Obligations (PKPU) carries a principle called “going concern”. This term is commonly used in the field of accounting related to the financial statements  of a company (entity) made by public accountants.

Experts generally agree that the state of going concern in business practices is used as a parameter in estimating an entity’s ability to maintain its business activities for a certain period of time. This provision also allows the continuation or maintaining of a Debtor’s company based on the proposal submitted by a Creditor or a Curator as stipulated in Article 179 Paragraph 1 of Law No. 37 of 2004 on PKPU.

In fact, based on Law No. 37 of 2004 on PKPU, bankruptcy is a condition in which the property of a company is declared in a public confiscation whose management and enforcement becomes the authority of the Curator or Heritage Center (BHP) or individuals appointed by the court, under the supervision of a Supervisory Judge.

In other words, bankruptcy is an attempt to overcome the problems that arise if the Debtor’s property is not enough to pay all obligations to the Creditors by providing a fair, balanced, useful settlement, and providing guarantees of legal certainty for the Creditors.

Michael C. Dennis in his article “The Going Concern and The Auditor’s Opinion Letter” puts forward 9 indicators for accountants not to give going concern opinions if the following conditions are found;

  1. negative cash flow;
  2. significant losses;
  3. serious decline in sales and demand;
  4. inability to pay debts to separatist creditors;
  5. violation of the loan agreement agreement;
  6. there are major payment before maturity that must be settled
  7. mass returns of products occur;
  8. tax liens borne by the company;
  9. lawsuits, particularly personal injury lawsuits, filed against the company

Unlike the provisions of Article 180 paragraph 1 of Law 37 of 2004 on PKPU,  a Curator does not need experts to assess whether the Debtor’s business can still be continued or not. The existence of a going concern  proposal submitted by the Curator or Creditor only requires approval from creditors who represent more than half of the total amount of receivables recognized and received temporarily, which are not guaranteed collateral rights to the treasury.

Reports of the Creditors meeting with the approval of the going concern proposal  can be seen by the parties who are concentrated in the Clerkship section of the Court after 7 days of the Creditors meeting.

In practice, a request for going concern can be submitted by the Debtor on the subjective consideration of the Debtor taking into account the feasibility of his business. This effort is made so that the Debtor can pay his debts to creditors.

Going concern in the bankruptcy process is basically done as an effort to maintain and/or increase bankruptcy property, especially assets owned by debtors. This is done so that the value of the Debtor’s assets can increase or not experience depreciation especially if many of the Debtor’s assets are assets with special purposes.

Special purpose assets are the dominant assets at the time the company operates, such as production machines. Such special purpose  assets depend on the function of these machines.

Going concern efforts are carried out so that Debtor assets continue to function properly and to increase in value. If the Supervisory Judge states that the proceeds from the going concern  of the Bankruptcy Debtor have enough cash, then the Curator is ordered to distribute it to all Creditors on the basis of pari passu pro rata parte principle.  This principle emphasizes about the distribution of Debtor assets to pay off debts to Creditors in a more just manner in accordance with the proportion..  The explanation of Article 176 Letter a of Law 37 of 2004 on PKPU explains that the definition of  “pro rata” is payment according to the small amount of receivables of each Creditor.

When does going concern end? The law does not regulate the period of implementation of going concerns. However, if it turns out that the continuation of the Debtor company actually harms the bankruptcy property, going concern can be stopped at the request of creditors or curators and on the order of the Supervisory Judge  in accordance to Article 183 Paragraph 1 of Law 37/2004 on PKPU.

With the termination of going concern, the process of insolvency enforcement (in this case sales) was resumed by the Curator. The proceeds of the sale will be distributed to the Creditors by containing details of receipts and expenses including curator’s wages and the amount received by each Creditor in accordance with the nature of their receivables  based on Article 189 Paragraph 2 of Law 37/2004 on PKPU.

Author / Contributor:

 Caesar Aidil Fitri, S.H., CLA

Senior Associate


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Phone    : +62-21 799 7973 / +62-21 799 7975