INDONESIA Law and Practice Contributed by: Enny Purnomo Widhya, Nugrahani Astiyanti and I Gusti Ngurah Oka Anantajaya, Mochtar Karuwin Komar
• the business licence of the company is revoked so that the company is obligated to liquidate itself as stipulated in the applicable laws and regulations. Under the Bankruptcy Law There are two proceedings governed by the Bank - ruptcy Law: • declaration of bankruptcy; and • suspension of payment proceedings. 2.9.2 Overview of Relevant Types of Voluntary and Involuntary Restructurings, Reorganisations, Insolvencies and Receivership Under the Bankruptcy Law, the difference between a declaration of bankruptcy (voluntary insolvency) and the suspension of payment (restructuring) proceed - ings is as follows. • In a declaration of bankruptcy, once a company is declared bankrupt by the court, a receiver (cura - tor) will be appointed with a view to liquidating the assets of the bankrupt company. The bankrupt company is, however, entitled to propose a com - position plan. If the composition plan is approved by the creditors, the bankruptcy proceedings will be lifted, and the company can resume its busi - ness in accordance with the approved composition plan. • In a suspension of payment proceedings, an administrator will be appointed with a view to facilitating the company in jointly managing the assets and coming up with a composition plan. If the composition plan is approved by the creditors, the suspension of payment proceedings will be lifted, and the company can resume its business in accordance with the approved composition plan. If the composition plan is not accepted, the company will be declared bankrupt, and the assets of the company will be liquidated. 2.9.3 Co-Ordination, Recognition or Relief in Connection With Overseas Proceedings Based on the Bankruptcy Law, Indonesia maintains a structured approach to cross-border insolvency mat - ters with specific protective mechanisms. The law contains provisions focusing primarily on preventing creditors from circumventing Indonesian proceedings
rather than facilitating genuine co-operation. These provisions require creditors obtaining payments from foreign assets to reimburse the bankruptcy estate, including where creditors transfer claims or debts to third parties with the intention of obtaining preferential treatment or set-off opportunities in foreign jurisdic - tions that would not be permitted under Indonesian law. The Bankruptcy Law maintains flexibility by not restricting international co-ordination principles such as INSOL International Global Principles, allowing application where parties consent to follow frame - works like the UNCITRAL Model Law on Cross-Bor - der Insolvency. This was illustrated in 2024 by Singa - pore’s International Commercial Court’s recognition of Indonesian Suspension of Debt Payment Obligations (SOP) proceedings of PT Garuda Indonesia (Persero) Tbk. This recognition provides cross-border benefits, extending SOP protections to foreign assets, and facilitating global restructuring while protecting debt - ors from adverse actions across multiple jurisdictions during post-restructuring processes. 2.9.4 Effect of Lessee’s Insolvency on a Deregistration Power of Attorney In respect of the IDERA, the Aviation Law specifically states that the IDERA will survive a bankruptcy decla - ration or insolvency of its issuer; while a deregistration power of attorney will not survive upon the declaration of bankruptcy. 2.9.5 Other Effects of a Lessee’s Insolvency In principle, the bankruptcy of a contract party does not result in the termination or expiry of the lease. The rights and obligations of the parties remain as set out in the lease. However, where the obligation of the receiver to perform under the lease conflicts with their duty to treat all unsecured creditors equally, the receiver has no obligation to perform and the con - tract counterparty will have to accept damages as an unsecured creditor. Under Article 36 of the Bankruptcy Law, if at the time of bankruptcy declaration the bankrupt is party to an executory contract, the contract counterparty (non- bankrupt party) may request the receiver to confirm that it will perform the contract. If the receiver declines
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