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Regulation of bankruptcy and postponement of debt obligations or abbreviated as PKPU was first enacted by Government Regulation In lieu of Law Number 1 Year 1998 on Amendment to Bankruptcy Law (“Perppu 1/1998”). Perppu 1/1998 was subsequently enacted into law through Law Number 4 Year 1998 on Stipulation of Government Regulation in Lieu of Law Number 1 Year 1998 on Amendment to Bankruptcy Law (“Law 4/1998”). Perppu 1/1998 is intended to solve the debt problem in a fair, prompt, open, and effective manner1. The law was in fact, stipulated as a result of the monetary crisis that hit Indonesia in 1972

As the law develops in the community, Perppu 1/1998 is no longer appropriate. Therefore, in 2004, the government issued Law No. 37 of 2004 on Bankruptcy and Suspension of Payment/PKPU (“Bankruptcy Law”).

One of the fundamental changes of Perppu 1/1998 to the Bankruptcy Law is the process of applying for PKPU, which originally only be submitted by the debtor, but then also the creditor3. The philosophical foundation allows creditors to apply for PKPU, one of which is contained in the Explanation of Bankruptcy Act in paragraph 15, namely to avoid the potential of debtor’s fraud.

For example, the debtor seeks to give an advantage to one or more particular creditors so that the other creditor is disadvantaged, or the debtor rushes all of his or her possessions to relinquish responsibility to the creditors. With the application of PKPU by creditors, any management actions and ownership of the debtor’s asset is under the supervision of the board so as to prevent the possibility of such matters.

But in its progress, the authority for creditors to apply for PKPU is deviated from the initial purpose of the formation of Bankruptcy Law. In practice, it is not uncommon for creditors to use bankruptcy and PKPU institutions to force debtors with sound financial condition to enter the PKPU process so that all of their business activities are under supervision and approval of the management. Not infrequently, the actual company is still prospective and able to pay its debts tipped bankrupt and all of its assets are in foreclosure by the curator.

It is understood that bankruptcy and PKPU in Indonesia do not require
an insolvency test.4 Conversely, the Bankruptcy Law requires that debtors simply prove to have two creditors and one debt that has matured. Therefore, the debtor is declared bankrupt or PKPU is not merely a condition of a debtor that is unable to pay, but the unwillingness to pay the debtor’s debt. Formally, it is irrelevant to use the reason that companies are still able to pay to avoid bankruptcy proceedings and PKPU. However, we need to go back to the philosophical foundation of the formation of the Bankruptcy Law, the principle of business continuity.

Therefore, according to the author, it would be more appropriate if the main objective of PKPU is to help debtors who have difficulty in paying their debt in order to continue their business. In this case, the debtor is given the opportunity to submit a settlement proposal to its creditors. On the contrary, it would be inappropriate if PKPU’s request by creditors is intended to force debtors to pay their debts, moreover to shut down the debtor’s business. Thus, it is hoped that the new Bankruptcy Law Draft plan will be able to fulfil the sense of justice for both parties.