Bankruptcy law is insufficiently detailed: Lawyer

JAKARTA (JP): The new bankruptcy law, which comes into effect tomorrow, is insufficiently detailed, especially regarding the management of assets of companies declared bankrupt, a senior lawyer said yesterday.

The chairman of the newly established Bankruptcy Litigation Lawyers Club (BLLC), Hotman Paris, said the law, for example, did not explain who would be responsible for the expenses of the receivers appointed by the commercial court to manage the assets of the bankrupt companies.

Citing an example a hypothetical case of a bankrupt firm in Jakarta with assets in Jayapura, Irian Jaya, he said that a receiver or curator would have to go to Jayapura to calculate and manage the firm's assets.

"But who is going to finance his trip to Irian Jaya for this purpose," he told reporters following the BLLC's launch.

BLLC is an association of lawyers, mostly based in Jakarta, formed to help Indonesian debtors deal with their creditors in the commercial courts.

The insolvency law stipulates that a court-appointed receiver has to manage the assets of debtors declared bankrupt by the commercial court and to ensure that funds raised from the sale of these assets are distributed equally among unsecured creditors.

And a court-appointed administrator has to assist the directors of the debt-ridden company to manage their assets and restructure their debts in debt payment suspension cases.

Hotman also said the new insolvency laws failed to accommodate the interest of the country's small ventures in settling their debt problems with their creditors.

Small ventures

"The law should protect a small company even with a debt of around Rp 2 million but it fails to mention that," he said pointing out that this should become a matter of importance for the office of Supreme Court.

He admitted most lawyers in Indonesian were not yet familiar with the new law.

"This law is still new. So lawyers, accountants and government officials have to spend more time learning about it," he said.

Hotman also said that the country's accredited lawyers would have to prove their competence and expertise in the insolvency law quickly because the legislation is expected to be pivotal in restoring foreign investors' confidence in the country's battered economy.

He said that the previous bankruptcy law, which was an antiquated relic of the Dutch colonial administration dating to 1905, lacked an adequate framework to settle the problem of mounting unpaid debts because its complexity discouraged creditors from taking legal action.

"Only a few cases have been settled in the court using the old bankruptcy law," he said.

The new law will allow companies to call on a 270-day suspension of payment period, during which time they could work with receivers to develop a plan or a composition, including an offer to pay creditors in full or in part.

The new law also stipulates that commercial courts must complete bankruptcy cases within 30 days of when they are filed. A further 30 days is then allowed for an appeal.

"Small companies should be given equal opportunity to settle the debt problems within a short period of time," Hotman asserted. (aly)