| |


Insolvency Test Concerning The Bankruptcy Law Bill

The Bill (Rancangan Undang- Undang or “ RUU ”) on Bankruptcy and Suspension of Debt Payments (the “ Bankruptcy Law “) is recently urged to be included in the 2020-2024 National Legislation Program (Program Legislasi Nasional or “ Prolegnas ”) by several legal practitioners. This is because the revision of Law Number 37 of 2004 is an indicator of the country’s seriousness in improving the ease of investment in Indonesia. There are at least 16 points of improvement in the law which were formulated in the 2018 academic paper. Among these points, several points are related to the problem of the insolvency test in the bankruptcy procedure law. Therefore, this article is intended to provide an outline and overview of the application of the insolvency test and the elements of the law that are connected specifically with the points of bankruptcy requirements and simple verification.


Points for Discussion of the Bankruptcy Law Bill

There are 16 recommendations for the revision of the Bankruptcy laws. The recommendation has been included in the academic paper in the new Bankruptcy Law Bill.

1. Bankruptcy Requirements

In Article 2 paragraph 1 of Law No. 37 of 2004 on Bankruptcy Law, there are changes, namely the addition of 2 (two) Creditors with two maturing debts and a minimum value that can be submitted for bankruptcy applications.

2. Simple Verification

Removing the “must” provision in the provisions of Article 8 paragraph 4 on Bankruptcy Law to provide space for judges to judge not only formally but also materially. Besides, it is necessary to have a liquidity test examination of the Bankrupt Debtor.

3. Automatic Stay

The automatic stay will take effect from the time the application for bankruptcy is received by the Chief Justice. In an automatic stay, the debtor can manage the property but is not allowed to transfer it to another party, and the creditor is not allowed to take legal action against the property unless the creditor holds the guarantee/ security.

4. Financial Services Authority ( Otoritas Jasa Keuangan or “OJK”) as the applicant for Bankruptcy

The OJK’s authority to become an applicant for bankruptcy of financial institutions such as banks, securities companies, stock exchanges, clearing and guarantee institutions, depository and settlement institutions, insurance companies, reinsurance companies, and pension fund companies.

5. Bankruptcy application against BUMN

Addition of a separate article governing the bankruptcy of BUMN, which could be requested to the Commercial Court by the Minister of Finance related to the interests of many people’s lives.

6. The Registrar’s authority in examining applications based on Article 6 paragraph (3) and 224 paragraph (6) of Bankruptcy Law

Confirming the Registrar’s authority to ensure the formal requirements for registration of bankruptcy applications. This is to prevent applications that are not formally in accordance with Article 2 paragraph (3), paragraph (4), and paragraph (5) of the Bankruptcy Law.

7. A copy of the court decision

A copy of the court decision must be submitted by electronic mail to the Curator, Petitioner, and Respondent through the court information system on the day and date when the judgment is declared before the trial is open to the public.

8. The deadline for the execution of the guarantee by the separatist creditor

Article 59 paragraph (1) of the Bankruptcy Law is amended by increasing the sales time from 2 (two) months to 4 (four) months.

9. Curator / Management Profession: institution, supervision, and implementation of duties

  • Article 70 paragraph (2) of the Bankruptcy Law is adjusted to the oath of office of Curator. After being registered, the Curator is required to take an oath of office before the Minister of Law and Human Rights prior to starting the profession. This aims to ensure the development and improvement of the professionalism of curators.
  • Article 74 of the Bankruptcy Law is added with the provision of administrative sanctions in the form of warnings, summons, and replacements of curators by the Supervisory Judge regarding the obligation of the Curator to submit a report to the Supervisory Judge on the state of bankruptcy assets every 3 (three) months.
  • Article 69 of the Bankruptcy Law is added with provisions for administrative sanctions in the form of warnings, summons, and replacements of curators by the supervisory judge regarding transparency obligations by curators in managing/clearing bankruptcy assets.
  • Article 167 paragraph (2) of the Bankruptcy Law is adjusted to the procedure of payment of fees for curator services. Payment for Curator services is made after the Curator submits the report and returns all objects, money, and documents with valid evidence after reconciliation.

10. Bankruptcy Confiscation against criminal confiscation

Article 31 paragraph (2) of the Bankruptcy Law needs to be amended, that all confiscations that have been taken must be nullified and the Supervisory Judge must order the removal if necessary, except for confiscation in the interest of a criminal procedure.

11. Ranking of Wages and Worker’s Rights in Creditor Structure

Addition of Article 39, which states (i) workers’ wages are prioritized for payment of all types of claims and other creditors, including from separatist creditors and state tax claims, and (ii) other workers’ rights are paid in advance of all types of claims and other creditors that include state tax receipts unless the Debtor has a separatist Creditor.

12. Renvoi and other Lawsuits

Article 68 of the Bankruptcy Law is added with a paragraph that specifies the period for filing an objection (appeal) and how long the objection must be decided in the renvoi procedure.

13. Agency Forced Provisions

Adding the provisions of Article 95 of the Bankruptcy Law with a request to detain the bankrupt Debtor if the request is based on the reason that the bankrupt debtor intentionally does not fulfill obligations such as (i) leaving his domicile without permission (ii) not appearing before the Supervisory Judge, Curator, and Creditors when called to give information (iii) not personally attending the accounts receivable matching meeting.

14. Bankruptcy publication

Additions regarding the bankruptcy and Suspension of Debt Payments announcements which are carried out by the Minister of Law and Human Rights and the Supreme Court through an electronic system, with the Minister of Law and Human Rights as the organizer of the electronic system. The announcement is valid and legally binding based on statutory provisions.

15. Application for Suspension of Debt Payments Obligation (Penundaan Kewajiban Pembayaran Utang or “PKPU’) by Creditors

The amendment to the Bankruptcy Law removes the provisions regarding the rights of Creditors to apply for PKPU in Article 222 paragraph (3) of the Bankruptcy Law. Thus, only Debtors can apply for PKPU .

 16. Bankruptcy Across National Borders

Adding provisions regarding the management and/or the settlement of bankruptcy assets outside the territory of the Republic of Indonesia that it can be carried out based on a reciprocal relationship (reciprocal) or an international agreement.


Bankruptcy Requirements

Indonesian business law expert, Sutan Remy Sjahdeini stated that if the requirements stipulated by the Bankruptcy Law are very loose, Debtors who are unable to pay their debts can easily be declared bankrupt by the Court, which in turn makes the country’s economic and business system vulnerable to collapse. The requirements for bankruptcy as referred to in the Bankruptcy Law also received the attention of the Constitutional Court in several decisions, namely in Decisions Number 071 / PUU-II / 2004 and Number 001-002 / PUU-III / 2005 stating that the legislators were negligent in formulating Article 2 paragraph (1) in the absence of the “unable to pay” requirement. As a result, Creditors can easily apply for a bankruptcy statement without first having to prove that the company is in a state of incapacity.

Read more: logical consequences and a domino effect of the application of bankruptcy requirements Insolvency Test Concerning The Bankruptcy Law Bill (part 2)


ADCO Law earns the trust to represent clients from multinational companies to emerging entities across a wide range of industries to achieve their business objectives in Indonesia.

By combining commercial sensibilities and legal expertise, ADCO as a Law Firm Jakarta assists the clients to structure, organize and implement their business ventures and investments, including structuring, financing, and securing investments as well as establishing new foreign companies in Indonesia. Should you have more queries regarding this matter, please do not hesitate to contact us.

Dendi Adisuryo

Liza Mashita

@2020 ADCO Law. All rights reserved.
This publication has been prepared for general informational purposes only to provide clients with information on recent legal developments and is not intended as legal advice or opinion.