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After greater than two years because the first case of Covid-19 was formally declared to have occurred in Indonesia, the Indonesian authorities’s efforts to manage the outbreak have succeeded in boosting nationwide financial progress.
By way of its press launch, the Coordinating Ministry of Financial Affairs has introduced that the nationwide financial progress in 2021 reveals rising improvement, as will be noticed by the expansion fee of Indonesia’s GDP per capita, which elevated to IDR 62.2 million ($4,124), greater than the pre-pandemic GDP per capita of IDR 59.3 million in 2019 (see Press Convention of Ministry of Coordinating for Financial Affairs of the Republic of Indonesia No: HM.4.6/56/SET.M.EKON.3/2/2022 relating to Nationwide financial progress in 2021 provides a optimistic sign to the financial prospects in 2022 on February 8 2022).
In 2022, GDP progress continues to extend, as proven by 5.07% progress within the manufacturing trade sector as the most important contributor to the GDP. Different main sectors additionally grew considerably, particularly the transportation and warehousing sectors which recorded the very best progress of 15.79%.
Varied different sectors equivalent to well being providers and knowledge and communications additionally present sturdy progress (see Authorities Regulation No. 23 of 2020 relating to Implementation of the Nationwide Financial Restoration Programme in Framework Supporting State Monetary Coverage for Administration of the Corona Virus Pandemic Illness 2019 (Covid-19) and/or Dealing with Harmful Threats to the Nationwide Economic system and/or Monetary System Stability and Saving the Nationwide Economic system, as amended partially by Authorities Regulation No. 43 of 2020).
Whereas the nationwide financial state of affairs has grown in a optimistic path, the federal government nonetheless maintains its insurance policies to anticipate any circumstances which may be detrimental to financial progress. One instance is the Nationwide Financial Restoration or Pemulihan Ekonomi Nasional (PEN) programme that has been applied since 2020.
The PEN programme supplies help to enterprise actors, by mechanisms equivalent to tax incentives, curiosity subsidies, working capital credit score ensures, and many others. (see Authorities Regulation No. 23 of 2020 relating to Implementation of the Nationwide Financial Restoration Program in Framework Supporting State Monetary Coverage for Administration of the Corona Virus Pandemic Illness 2019 (Covid-19) and/or Dealing with Harmful Threats to the Nationwide Economic system and/or Monetary System Stability and Saving the Nationwide Economic system, as amended partially by Authorities Regulation No. 43 of 2020) with the purpose to guard, keep, and enhance the financial capability of enterprise actors in operating their companies, particularly in the course of the Covid-19 outbreak.
Amidst the Covid-19 pandemic, the variety of restructuring circumstances for financially troubled debtors in Indonesia is rising. The case monitoring system or Sistem Informasi Penelusuran Perkara (SIPP) of the industrial courts in Indonesia recorded 636 suspension of debt fee obligation (Penundaan Kewajiban Pembayaran Utang or PKPU) circumstances in 2020, which was a big improve in comparison with solely 433 circumstances in 2019.
Given the rising variety of circumstances and to additional implement the PKPU and chapter practices underneath Legislation No. 37 of 2004 on Chapter and Suspension of Cost Obligation (Chapter Legislation), the Supreme Courtroom issued Chief of Supreme Courtroom Decree No. 109/KMA/SK/IV 2020 on Implementation of the Guidebook for Chapter and Suspension of Debt Cost Case (SC Decree No. 109/2020). Essential points which have been corroborated by SC Decree No. 109/2020 embody, amongst different issues, the authority of the Monetary Providers Authority or Otoritas Jasa Keuangan (OJK) to file a PKPU/chapter petition in opposition to monetary establishments, and digital submission of PKPU/chapter petitions.
In 2020, the Supreme Courtroom issued Round Letter No. 1 of 2020 on Conduct Pointers in the course of the Interval of Stopping the Unfold of Corona Virus Illness-19 (SC Round Letter No. 1/2020), that enables judges to postpone the examination of a case which in nature is restricted by a sure timeframe. In consequence, there are a variety of examinations of PKPU/chapter circumstances which have been postponed because of the rising variety of Covid-19 circumstances.
On the finish of December 2021, the Constitutional Courtroom issued determination No. 23/PUU-XIX/2021 relating to judicial evaluate of Chapter Legislation, which dominated {that a} PKPU determination could also be topic to cassation if it issues a PKPU software initiated by the creditor and issues the rejection of the composition plan submitted by the debtor. This determination is taken into account a monumental replace to PKPU practices given the Chapter Legislation doesn’t present any authorized treatment to a PKPU determination.
Whereas common company restructuring actions are largely regulated by the Indonesian firm legislation, banking legislation and different legal guidelines and laws relying on the trade the corporate is engaged in, the Chapter Legislation supplies the important thing authorized framework for restructuring because it pertains to insolvency/chapter.
As a common overview, the Chapter Legislation regulates two sorts of authorized actions, being PKPU and chapter. PKPU is actually a court-mandated restructuring course of apart from the obtainable out-of-court restructuring course of which may be agreed mutually between the contracting events.
Below PKPU, the debtor can have the chance to current a settlement plan for debt restructuring. If the settlement plan is rejected by the collectors, the debtor shall be declared bankrupt (Article 289 of Chapter Legislation). Alternatively, if the settlement plan is accepted by the collectors, it will likely be strengthened by advantage of a court-ratified settlement settlement (Article 284 of Chapter Legislation). But, if the debtor fails to carry out its obligations underneath the settlement plan, the creditor could request cancellation of the settlement the place the debtor shall be declared bankrupt and endure the chapter course of (Article 291 of Chapter Legislation).
Below the Chapter Legislation, a debtor will be declared as underneath PKPU/bankrupt by the Business Courtroom based mostly on a chapter petition filed both by the debtor itself, or by a number of of its collectors if the debtor (i) has two or extra collectors; and (ii) doesn’t repay in full at the least one debt that’s due and payable (PKPU/chapter circumstances) (Article 2 paragraph (1) of Chapter Legislation).
These low bar triggers current one of many important points that contribute to the rising variety of PKPU/chapter circumstances as collectors could simply file a PKPU/chapter petition in opposition to debtors. One other contributing motive is that collectors are inclined to keep away from the out-of-court debt restructuring course of, as it could takes appreciable time and efforts to barter privately. A court-mandated restructuring could present extra strain and certainty given the restricted restructuring timeframe and is supervised by the administrator and the supervisory decide.
Amongst different latest courtroom selections, there’s case No. 578 Okay/Pdt.Sus-Pailit/2021 between the Ministry of Finance, the Directorate Normal of Tax of the South Sumatera Space and Bangka Belitung Islands cq Palembang Tax Workplace in opposition to the Workforce of Receiver of PT Tinindo Inter Nusa (underneath chapter), which is taken into account a landmark determination in response to the Supreme Courtroom annual report of 2021. Pursuant to this determination, the Supreme Courtroom affirms that the renvoi process, a process to problem the record of briefly admitted claims and the record of contested claims, should be settled previous to the ratification of the settlement plan.
When it comes to course of, the PKPU/chapter proceedings can solely be initiated in opposition to a debtor. In a transaction which entails a number of debtors together with intragroup debtors, a separate PKPU/chapter continuing ought to be commenced in opposition to every involved debtor, the place the proceedings shall be carried out individually.
In a PKPU/chapter continuing, if the judges think about that the PKPU/chapter circumstances have been met, the judges will render a choice to declare that the debtor is underneath PKPU/chapter and appoint supervisory judges along with the administrator (for PKPU) or the receiver (for chapter) to oversee the PKPU/chapter course of (Article 15 jo. Article 225 of Chapter Legislation). Solely after the judges render such a choice will the PKPU/chapter course of be legally commenced.
The variety of restructuring circumstances for financially troubled debtors in Indonesia is rising
Any such courtroom determination won’t routinely terminate the present contract between the events. Nonetheless, underneath established practices, it’s common for a contract to offer termination rights if a celebration has been declared as underneath PKPU/chapter by a courtroom determination. One other factor to notice is that except the debtor has been declared bankrupt, the debtor can’t be pressured to pay their money owed within the PKPU course of (Article 242 paragraph (1) of Chapter Legislation). All execution actions, together with execution of the safety, which have been initiated within the context of paying off money owed, should be suspended (Article 242 paragraph (2) of Chapter Legislation).
In a PKPU case, if the collectors’ voting doesn’t meet the minimal threshold, the debtor shall be declared bankrupt and shall endure the chapter course of (Article 289 of Chapter Legislation). If the courtroom decides to grant the PKPU determination, the directors which can be appointed by the courtroom will handle the debtor’s property with the debtor (Article 225 paragraph (2) & (3) of Chapter Legislation). Actions that are deemed to have an impact upon the debtor’s property could solely be carried out upon approval from the directors (Article 240 paragraph (1) of Chapter Legislation).
As for the chapter case, if the collectors’ voting doesn’t meet the minimal threshold, the debtor shall be getting into an insolvency state (Article 178 of Chapter Legislation), the place the receiver will promote the debtor’s property and distribute the proceeds to the collectors based mostly on their precedence. A receiver shall be appointed as soon as the courtroom has determined to grant the chapter petition and declared the debtor bankrupt (Article 15 of Chapter Legislation). The receiver will assume the debtor’s board of administrators’ energy and authority to handle the debtor’s property (Article 69 of Chapter Legislation) because the debtor will lose such energy and authority as soon as it has been declared bankrupt.
Within the PKPU/chapter course of, collectors could submit their claims by offering the underlying paperwork for such claims to the administrator(s)/receiver(s) (Article 115 of Chapter Legislation). Within the declare verification assembly, the Supervisory Choose will announce the record of briefly admitted claims and the record of contested claims (Article 124 paragraph (1) of Chapter Legislation).
Each the debtor and the collectors can have the precise to problem such these lists, and the dispute shall be examined and determined in a separate courtroom listening to (renvoi process) (Article 127 of Chapter Legislation). Accordingly, the courtroom will present minutes of the declare verification assembly, and the admitted declare stipulated within the minutes shall be remaining and binding (Article 126 paragraph (5) jo. Article 205 of Chapter Legislation), save for any renvoi process.
Indonesian legislation recognises the precept of actio pauliana, which implies the creditor or receiver within the chapter course of could request a cancellation of the debtor’s authorized actions involving its property which may be detrimental to the creditor’s rights earlier than the chapter determination was rendered (Article 41 paragraph (1) of Chapter Legislation). The cancellation can solely be granted if it may be confirmed that on the time the authorized motion was taken, the debtor and another social gathering knew that the authorized motion can be detrimental to the creditor (Article 41 paragraph (2) of Chapter Legislation). Any authorized motion that was dedicated based mostly on the settlement and/or the legislation is exempted from this cancellation (Article 41 paragraph (3) of Chapter Legislation).
The Chapter Legislation recognises three sorts of collectors, particularly secured, most popular and unsecured collectors, based mostly on the safety they possessed and the regulatory precedence underneath the legislation. For instance, pursuant to Constitutional Courtroom Determination 67/PUU-XI/2013 and Legislation No. 13 of 2003 on Labour, as amended by Legislation No. 11 of 2020 on Job Creation, collectors’ claims within the type of unpaid salaries for workers will precede these of another collectors, together with secured collectors and taxes.
It’s price noting that in some particular industries, a PKPU/chapter petition can’t be filed by any collectors given sure regulatory establishments have their very own set of laws for restructuring. As an illustration, any chapter petition in opposition to monetary establishment debtors equivalent to financial institution, insurance coverage, securities, inventory change, clearing and custodian establishments, can solely be filed by the OJK (Chief of Supreme Courtroom Decree No. 109/KMA/SK/IV 2020 on Implementation of the Guidebook for Chapter and Suspension of Debt Cost Case; Article 6 and Article 55 of Legislation No. 21 of 2011 on Monetary Service Authority/Otoritas Jasa Keuangan jo. Article 2 paragraph (3) & (4) of Chapter Legislation).
Along with OJK’s authorities in respect of monetary establishments, different laws could set particular authorisations for submitting chapter petitions even when the businesses are in monetary misery. For instance, the Minister of Finance has vested the ability to file an software of PKPU/chapter in opposition to sure state owned enterprises participating within the public sectors. That is necessary as a result of the insolvency of those particular entities could influence nationwide stability generally.
Judgments of non-Indonesian courts are usually not enforceable in Indonesian courts. Consequently, within the case of cross-border insolvency the place the debtor is a overseas entity and has obtained a overseas courtroom determination which mandates a restructuring/chapter, that call won’t be recognised in Indonesia. To acquire an Indonesian courtroom judgment, a claimant can be required to pursue claims in Indonesian courts on the idea of Indonesian legislation. A overseas courtroom judgment could possibly be admissible as non-conclusive proof in a continuing on the underlying declare in an Indonesian courtroom and could also be given such evidentiary weight because the Indonesian courtroom could deem applicable in its sole discretion. Re-examination of the underlying declare de novo can be required earlier than the Indonesian courts.
The Chapter Legislation permits PKPU/chapter proceedings to be initiated in opposition to a overseas entity that runs its enterprise inside the jurisdiction of Indonesia. The courtroom that has the jurisdiction to look at the case is the courtroom that has the jurisdiction over the debtor’s Indonesian headquarters (Article 3 paragraph (4) of Chapter Legislation).
Whereas the Indonesian courtroom doesn’t recognise the overseas courtroom judgment, it could present technical help to the overseas courtroom continuing upon receiving the letters of rogatory from the overseas judicial authority (This help is regulated underneath the Memorandum of Understanding of the Ministry of International Affairs and the Supreme Courtroom No. PRJ/HI/102/02/2018/01 and No. 01/NK/MA/2/2018 of 2018 on Dealing with of Judicial Help Requests in Civil Issues), for the authorized data or paperwork, and the service of judicial course of.
The rising variety of PKPU/chapter circumstances has proven the necessity for regulatory reform of the Chapter Legislation, not solely as a result of many companies are surviving their monetary distresses attributable to the pandemic, but in addition to keep away from any danger of exposing themselves to PKPU/chapter circumstances because of the comparatively reachable PKPU/chapter circumstances. Essentially the most crucial objects to revisit embody the factors of debt which set off a PKPU/chapter continuing.
Because the market is anticipating Indonesia’s financial restoration to proceed progressively rising, it’s anticipated that many dominant market gamers will strategise their company actions to be extra targeted on escalating their enterprise in a sustainable means, together with by preliminary public choices, joint ventures and acquisitions.
Finally, the PKPU/chapter regime, whereas already offering ample protections to collectors, also needs to present extra balanced protections for companies of their survival efforts, particularly throughout tough instances, which in flip will enable the nationwide financial proceed to develop positively in the long term.
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