Govt to unveil new bankruptcy law today

JAKARTA (JP): The government will announce today regulations to amend the bankruptcy law and improve the legal infrastructure for business in the country, Minister of Justice Muladi said yesterday.

Muladi told reporters here that a government Perpu (regulation in lieu of a law) would be announced by the State Secretariat and would serve until a new bankruptcy law was established and enacted. The move was taken because of the urgent need to address the problem of bankruptcies.

"We finalized the draft during a meeting on Monday night at the office of the Coordinating Minister for Economy, Finance and Industry/Chairman of the National Development Planning Board," Muladi said.

He said the government had consulted with the International Monetary Fund (IMF) during the drafting process.

"We had to be quick because of the critical condition of the country's economy," he added.

Today is the deadline for the enactment of a new bankruptcy law under the terms of the latest economic reform package brokered by the IMF earlier this month.

The package also promises to enact an antimonopoly law, establish a special bankruptcy court and introduce regulations to cover the winding up of companies, mergers and acquisitions.

Indonesia's current bankruptcy code is considered to be too opaque and irrelevant to the modern business world. It is based on the 1905 insolvency ordinances enacted by Dutch colonial authorities.

Radius Prawiro, chairman of the Corporate Foreign Debt Settlement Team, said recently that a new bankruptcy code would expedite the liquidation of insolvent companies and help resolve the problem of the private sector's US$68 billion of offshore debt burden.

Muladi also said earlier this month that the rights of creditors and debtors would be equally protected by an effective bankruptcy law.

Analysts noted the country's economic turmoil had forced many companies into technical bankruptcy but present procedures for declaring bankruptcy were so complicated that parties involved were reluctant to become involved with the legal process.

Foreign creditors lining up to foreclose on the assets of their debtors have complained about the antiquated and badly drafted bankruptcy procedures that make it nearly impossible for them to take legal action.

Muladi said the country's legal system would be capable of coping with the new bankruptcy law once a commercial court had been established. Initially, one commercial court will be established in each of Jakarta's five mayoralties.

Muladi said the Perpu will not be directly enacted because Ministry of Justice officials still need more time to prepare those who will administer the law.

"We need 120 days to train judges and staff," Muladi said, adding that at least five judges would be placed in each commercial court.

Muladi said the government would submit the Perpu to be deliberated by the House of Representatives next month.

Muladi met with all factions of the House of Representatives last week to discuss the new regulations.

None of the legislators present disagreed with the new proposals, but they did ask for further explanation.

In an effort to cope with the rapid legal developments, Muladi yesterday formed a team of 12 legal experts to advise the ministry.

Led by criminal law expert Romly Atmasasmita, the team consists of Barda N. Arief, Yusril Ihza Mahendra, Erman Radjaguguk, Sutan Remy Syahdeini, Maria S.W. Sumardjono, Etty R. Agoes, Jusuf Anwar, Talib Puspokusumo, B.M. Kuncoroyakti, M.T. Arifin and Sigid Edi Utomo.

"The team has direct access to me and will give advice on legal issues," Muladi said. (byg)