Based on Article 1 number 1 of Law Number 37 of 2004 concerning Bankruptcy and Postponement of Debt Payment Obligations (“UU K-PKPU”), bankruptcy is a general seizure of all the assets of a bankrupt debtor whose administration and settlement are conducted by a curator under the supervision of a supervisory judge. To file for bankruptcy, there are requirements that must be met by the debtor, namely:
- There are two or more creditors; and
- There is one debt that has matured and is collectible.
Filing for bankruptcy against a debtor, in this case, a Company, does not always mean that the Company’s financial condition is not good, as long as the Company fails/is unable/refuses to pay debts exceeding the due date, the Company may be petitioned for bankruptcy by its creditors. The decision on the bankruptcy petition must be pronounced in court within a maximum of 60 (sixty) days after the date the bankruptcy petition is registered.
Before Being Declared Bankrupt, Debtors or Creditors Can Request PKPU
Referring to Article 224 paragraph (2) and paragraph (3) of the UU K-PKPU, bankrupt debtors as well as creditors can file for Suspension of Debt Payment Obligations (“PKPU”) with the aim of saving the continuity of business, in accordance with the principle of going concern. If a PKPU petition is filed by the Debtor, it is accompanied by a peace proposal plan submitted through the Commercial Court according to the legal domicile of the Debtor. There are two possibilities for the proposed peace plan submitted:
- If the proposed peace plan is accepted
Referring to Article 284 paragraph (1) of the UU K-PKPU, the accepted peace proposal plan, the Judge will approve the peace and bind all consenting creditors. The PKPU process ends when the approval of the peace has obtained final legal force.
- If the proposed peace plan is rejected
Based on Article 289 of the UU K-PKPU, a peace proposal plan rejected by creditors results in the debtor being declared bankrupt.
After a Company is declared bankrupt, the Judge appoints a curator who will manage and settle the bankrupt assets. Then, the curator will conduct a creditors’ meeting and debt reconciliation as well as sell the bankrupt assets of the bankrupt debtor to settle the debts of the bankrupt debtor.
Legal Implications of a Company Being Declared Bankrupt
The provisions in Article 21 and Article 24 paragraph (1) of the UU K-PKPU state that bankruptcy covers all the assets of the debtor at the time the bankruptcy declaration is pronounced as well as everything obtained during bankruptcy. Then, by law, the debtor loses the right to control and manage its assets included in the bankrupt estate, from the date the bankruptcy declaration is pronounced. With the bankruptcy of the Company, it means that the Company has been dissolved, but it does not automatically make its legal entity status disappear. However, the Company must cease all activities and cannot engage in transactions with other parties, except for liquidation.
The Bankruptcy of a Company Also Impacts Its Directors
According to Article 93 paragraph (1) letter a of Law Number 40 of 2007 concerning Limited Liability Companies, the directors of a company that has been declared bankrupt cannot be appointed as directors for a period of 5 (five) years.
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