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W&P Newsletter – Indonesian Bankruptcy and PKPU Alert – New Rules by the Supreme Court

To provide further technical guidance in administering cases of bankruptcy and suspension of debt payment, the Indonesian Supreme Court has just issued a revised Guideline on Bankruptcy and Suspension of Debt Payment Case Settlements  (“Guideline”).

Previously, the Guideline was enacted by virtue of the Chairman of the Supreme Court Decision No. 3/KMA/SK/I/2020 (“Decision 3/2020”). However, due to heavy critique towards some controversial rules introduced by Decision 3/2020, the Chairman of the Supreme Court came to a decision to revoke Decision 3/2020 and issued a revised Guideline on 29 April 2020: Decision  No. 109/KMA/SK/IV/2020 (“Decision 109/2020”).

The most controversial issue under Decision 3/2020 was the restriction of secured creditors from filing a petition for suspension of debt payment (or more commonly known as PKPU, short for Penundaan Kewajiban Pembayaran Utang), which is inconsistent with the Indonesian Bankruptcy Law. This restriction was then revoked by Decision 109/2020; hence allowing both secured and unsecured creditors to file for a PKPU petition.

Below are some major highlights of the revised Guideline:

    1. New Requirement to Submit List of Assets and Audited Financial Statements

The Guideline requires debtors to submit their list of assets and liabilities as well as financial statements to be audited by a public auditor when filing for a bankruptcy petition. The aim is to strengthen the evidentiary weight to prove existence of at least two creditors and at least one due and payable debt of the debtor. However, as this is not specifically required by the Indonesian Bankruptcy Law, it will be interesting to see whether the Commercial Court would reject a bankruptcy petition when a debtor fails to deliver these documents.

In line with the new rule mentioned above, the Guideline further determines that in bankruptcy cases, information on creditors obtained from the website of the Financial Service Authority—Otoritas Jasa Keuangan (“OJK”)—should not be considered as sufficient proof of the existence of the debtor’s creditors.

    2. Production of Documents for Bankruptcy and Suspension of Debt Payment

The Guideline explains that in bankruptcy and PKPU cases, there should be no demurrers (except for jurisdiction of the court), replies, rejoinders, interventions, nor counterclaims. As such, court documents submitted by the parties should only consist of petitions, statements of defence, evidence, or conclusions (as the case may be).

We believe this is an improvement by the Supreme Court as we would expect this to accelerate the proceeding process within the Commercial Court.

    3. Summons for the Second Creditor

In bankruptcy cases, the petitioner may request assistance from the Commercial Court to serve summons(es) to other creditor(s) to appear before the court and participate in the hearing to prove that the debtor has at least two creditors. Expenses of the summons(es) should be borne by the petitioner.

We believe this facilitation would be useful for the petitioner if it has no direct contact with the debtor’s other creditors.

    4. At Least Two Auctions

The Guideline strengthens and at the same time amends the general rule set by the Indonesian Bankruptcy Law on the bankrupt debtor’s assets liquidation by requiring the receiver to hold at least two public auctions (instead of only one public auction) before proceeding to private sale (subject to the Supervisory Judge’s approval).

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