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)