Govt laments court's verdict on Prudential<\/p>\n
Urip Hudiono and Rendi A. Witular, The Jakarta Post, Jakarta<\/p>\n
The Ministry of Finance criticized the bankruptcy ruling against
\nsolvent PT Prudential Life Assurance, saying it could further
\nharm the country's investment climate.<\/p>\n
The Director General of Financial Institutions at the ministry
\nDarmin Nasution said on Monday that the case should serve as a
\nwake up call to speed up the revision of the \"flawed\" Bankruptcy
\nLaw.<\/p>\n
\"The (Prudential) case has created uncertainty in the
\ncountry's business climate,\" Darmin told reporters, adding that
\nhis office, which oversees the insurance industry, would urge the
\nHouse of Representatives to immediately amend the Bankruptcy Law
\nafter a number of solvent companies had become victims.<\/p>\n
Darmin said that the ministry had proposed an amendment of the
\nlaw in May last year, under which the ministry would have the
\nfinal say before dissolving an insurance company --like those of
\nthe central bank when dealing with banks.<\/p>\n
\"Prudential is financially fit, and by logic it does not
\ndeserve to be dissolved... The verdict was obviously decided
\nusing legalistic technicalities and terms that don't equate with
\nreality. The judges did not take into account the company's
\nfinancial standing,\" he argued.<\/p>\n
Prudential had a 255 percent Risk Based Capital (RBC) rate
\nlast year, well above the minimum requirement of 100 percent.
\nThe higher the RBC ratio, the healthier the insurance firm is.<\/p>\n
Prudential is 94.5 percent owned by UK-based insurance company
\nPrudential Assurance Company Ltd., with the remaining shares held
\nby local firm PT Sasana Dwi Paramitra.<\/p>\n
The Central Jakarta Commercial Court declared Prudential
\nbankrupt on Friday after former Prudential agent, Malaysian Lee
\nBoo Siong, filed a bankruptcy suit with the court against the
\ncompany on April 7, accusing the company of failure to pay him
\nbonuses amounting to some Rp 366 billion (US$44 million).<\/p>\n
Prudential has appealed to the Supreme Court over the ruling.<\/p>\n
The company on Monday temporarily shut down its offices
\nthroughout Indonesia following the court ruling.<\/p>\n
Prudential spokesperson Nini Sumohandoyo said that the company
\nfor the time being could not pay any maturing claims until a
\nfinal and binding ruling had been issued by the Supreme Court.<\/p>\n
Nini, however, said that the company was fully committed to
\nprotecting the interests of policyholders.<\/p>\n
Siong's local lawyer Lucas said that until a final verdict is
\nissued by the Supreme Court, Prudential will be run by a receiver
\n(holding company), who will freeze the company's assets
\ntemporarily.<\/p>\n
\"If the Supreme Court upholds the bankruptcy ruling,
\nPrudential will be liquidated and its assets distributed to
\nPrudential's creditors, who include policyholders,\" said Lucas.<\/p>\n
Critics have said that the logic of Bankruptcy Law No. 4\/1998
\nwas weak because a company that does not repay even one of its
\ndebts could be declared bankrupt by the Commercial Court
\nregardless of whether it was solvent or not.<\/p>\n
The concept of the existing Bankruptcy Law was inspired by
\nDutch law expert Jerry Hoffe together with the International
\nMonetary Fund in 1998 with the purpose of forcing recalcitrant
\nlocal debtors to repay their debts to foreign creditors.<\/p>\n
In 2002, the commercial court declared solvent insurance firm
\nPT Asuransi Jiwa Manulife Indonesia, a unit of Canada's Manulife
\nFinancial Corp., bankrupt in a legal battle against its former
\nlocal shareholder. The Supreme Court, however, overturned the
\nverdict following protest from various parties including the
\nCanadian government.
\n-- Photo on Page 13<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/govt-laments-courts-verdict-on-prudential-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}