Bankruptcy Law ushers in new era

Bankruptcy Law ushers in new era

JAKARTA (JP): The recently enacted Bankruptcy Law marks a
fundamental change in the country's commercial legal system,
lawyers said here yesterday.

"This is a breakthrough, a new era for creditors since many of
them have suffered losses due to debtors who failed to service
their debts," Hotman Paris Hutapea of the Makarim & Tiara S. law
firm said on the sidelines of a law seminar.

"Just imagine, in a matter of 60 days the directors or
shareholders of a company can lose control over the assets and
management of their company if they lose an appeal to the Supreme
Court," he said.

The Bankruptcy Law requires the soon-to-be-established
Commercial Court to settle a petition for bankruptcy within 30
days of its filing.

A further appeal can be made to the Supreme Court and it must
be settled within 30 days.

Hutapea said many debtors had in the past refused or delayed
meetings with their creditors after being summoned to settle
their unpaid debts.

Now, if a debtor does not respond to the summons within 30
days, the court can order the confiscation of the debtor's
business or assets, he said.

If the debtor is a holding company, creditor are entitled to
all its subsidiaries.

Hutapea said creditors could file against debtors who failed
to pay the interest on their debts.

President Soeharto enacted the law on April 22. The law will
come into effect in August, not July as reported earlier in this
newspaper.

The law replaces the old bankruptcy code, based on the 1905
Dutch Insolvency Ordinance, which was considered opaque and
antiquated.

Many companies with high unpaid debts as a result of the
economic turmoil are now technically bankrupt but they continue
to exist, at least in name, because the complexity of the old
ordinance discouraged creditors from taking legal action.

Under the new law, a creditor or the prosecutor's office can
petition a court for a ruling to declare a debtor bankrupt.

In the case of debtor banks, the petition must come from Bank
Indonesia, the central bank, while for publicly listed companies
it must come from the Capital Market Supervisory Agency
(Bapepam).

Hutapea said when the law comes into effect, it would create
jobs for lawyers, receivers, and companies which specialize in
taking over indebted companies.

He said there would be many foreign companies which would be
interested in taking over local firms with good assets.

Denny Kailimang of the Lontoh & Kailimang law firm pointed out
several loopholes in the new law, especially with respect to
banking and publicly listed companies.

Denny said yesterday Bank Indonesia was less likely to
petition a court for a ruling to declare a debtor bankrupt
because the current Banking Law says a bank can only be closed or
liquidated and cannot declare bankruptcy.

But a debtor bank could petition the court for a postponement
for debt repayment, he said.

If the court overturned this petition, the bank is legally
bankrupt, although the new law does not say that banks can
declare bankruptcy.

Denny said the Bankruptcy Law also did not protect the rights
of minority shareholders in the decision of debtor companies.

"The new law does not mention what would happen if the
minority shareholders feel they suffered damages due to the
decision of the debtors regarding the debt settlement dispute."
(das)