Some Important Aspects to be Considered for Upcoming Amendment of Bankruptcy Law in Indonesia.

1. Some Issues on Bankruptcy Reform in
Indonesia
Aria Suyudi, SH., LLM
Lecturer Indonesia Jentera School of Law
Coordinator Judicial Reform Team Office Supreme Court of Indonesia
Presented in Indonesia-Netherlands Rule of Law and Security Update 2018
Atma Jaya University, INdonesia

2. The Presentation
• Situation
• What is the Problem
• Some Thought Forward

3. Several Indicators

4. Indicator 2015 2016 2017 2018
Global Rank 120 109 91 72
Enforcement
Contract
170 171 166 145
Resolving
Insolvency
73 74 76 38
Sub Indicator
Resolving Insolvency
Score
2016
Score
2017
Score 2018
Average Time 1.9 years 1.9 years 1.1 years
Average Cost (% from assets) 21.6% 21.6% 22%
Recovery Rate (cents on the
dollar)
31.2% 31.2% 64.3%
Strength of insolvency
framework index (0-16)
9.5 9.5 10.5
Current Situation
According to the EODB Survey

5. Current Situation
Selected Statistics
Commercial Court Central Jakarta Commercial Court Surabaya
Bankruptcy 2015 2016 2017 2015 2016 2017
Pending Starts 8 15 16 4 4
Incoming 55 67 73 24 31 23
Decided 36 54 76 31 19
Withdrawn 9 12 6
Unable to Meet
Requirement
-
Pending End 18 16 15 28 4 8
Suspension of
Payment
2015 2016 2017 2015 2016 2017
Pending Starts 10 15 21 7 3
Incoming 107 146 168 14 23 37
Decided 73 118 119 27 25
Withdrawn 16 22 7
Unable to Meet
Requirement
3
Pending Ends 25 21 70 3 14

6. Some Initial Observation
• DB score shows significant improvement and existing framework is
arguably solid, but it may not accurately describe the real situation.
• There is an indication and complaints that cost of bankruptcy
processes is expensive and bankruptcy is more identic to liquidation
rather than settlement.
• The information on how the post-bankruptcy process performs (time
and recovery rate), is not available.
• There is an indication that business actors needs to have a debt
collection mechanism which is expeditious, simple and effective

7. Some Problems (1)
• For economy at the size of Indonesia, national statistic of < 200
bankruptcy/suspension of payment cases annually indicates that the bankruptcy
law regime is not being used properly.
Compare to
• Australia, 16 million citizen, with 7,000 individual bankruptcy/ year and around 10,000
insolvency of Legal Entity/ Year
• Singapore, 6 million citizen, 2,705 petition for individual bankruptcy, debt repayment scheme
1131, and 280 company liquidation (stats from 2017)
• Malaysia, 29 million citizen, ± 19,000 personal bankruptcy annually.
• Prone to procedural misuses and/or abuses from parties with bad faith
• Bankruptcy in Indonesia is a simple system, which apply one system to all types of
debtor, regardless the nature of the debtor.

8. Some Problems (2)
• There is no single authority responsible to monitor and evaluate the
performance of the bankruptcy as a system
• There is no single authority responsible to make necessary intervention,
due to failure of the system, i.e. lack of understanding from criminal law
enforcement apparatus, abuse of bankruptcy by certain parties, including
asset less bankruptcy
• Court is arguably an important stakeholder in bankruptcy process, but is
not a regulator. Judiciary cannot replace the role that supposed to be
carried out by executive branch.
• It is difficult to attain the objective of bankruptcy as means to promote
asset recovery and peaceful resolution

9. Some Problems (3)
• Bankruptcy petition, is no longer a sufficiently simple process to determine whether a due and
payable debt can be summarily proven, longer procedures are required to arrive into that
conclusion.
• Capacity of the actors are not optimal.
• Capacity and experience level of Judges
• Technical skills of the bankruptcy professionals
• The bankruptcy professional need to develop mechanism to support transparency and
accountability of bankruptcy processes
• More than one association is currently mandated to conduct initial training, exam, and
continuous training, may create different standard due to differences in policies.
• Difficult to reach optimal result in bankruptcy, due to relatively lack of professionalism.

10. Some Problems (4)
• Bankruptcy Law is not Consumer /MSME Debtor friendly
• Art 216 Bankruptcy Law prevents effective rehabilitation to be conducted to
debtor, only after statement from the Creditor(s) that they have receive
satisfactory payment.
• Cost of bankruptcy is high (obligation to publish in 2 national newspapers)-art
15 (3) Bankruptcy Law).
• No legal instrument that is able to force debtor’s compliance to bankruptcy
proceeding, for example regulation concerning bankruptcy offences,
contempt of court.

11. Comparison-Structure of Bankruptcy in Several Jurisdiction
Indonesia Belanda Australia Amerika Serikat
Bankruptcy Bankruptcy (Failissement
Verordening)
Insolvency
(for company)
(Corporation Act 2001)
Regulator : Australia Securities
and Investment Agency (ASIC)
Profesion : Registered Liquidator
Chapter 7 : Liquidation for Individual and
business actos; also known as straight forward
bankruptcy
Chapter 9 : Reorganization for Municipalities
Suspension of Payment Suspension of Payment
(surseance van betaling)
(Failissement Verordening)
Personal Insolvency (Bankruptcy
Act 1966)
Regulator : Australia Finansial
and Securities Agency (AFSA)
Profesi : Registered Trustee
3 years (max 6 years) liquidation
for fresh start
Chapter 11 : Rehabilitation or reorganization
for business debtor, or individual with large
amount of assets, company’s bankruptcy
Chapter 12 : Rehabilitation of family farmers
and family fisherman.
Debt Rescheduling for Individual
Penjadualan Utang bagi Individu
(schudsaneringregeling
naturlijke persoon)
(Failissement Verordening)
Allow 3 years liquidation for
fresh start
Chapter 13 : Rehabilitation with the plan of
repayment for individual with permanent
source of income. Help individual with
permanent income to develop plan to repay all
or half of their debt.
Chapter 15 : Cross Border Insolvency

12. Some Thoughts Forward
• Need to review improve its current bankruptcy regime and create a process
which is more constructive, able to meet the needs of various type of debtors.
• Need to establish/appoint a Bankruptcy Authority/Regulator unit which will be
responsible to set the course forward on overall bankruptcy policy, maintain
statistics, educate public, coordination, etc
• Regulator needs to be equipped with sufficient power to investigate and making
inquiry, to make sure fair and transparent bankruptcy system.
• Need to ensure that public have easy access to all information concerning
liquidation and administration to make overall process become more efficient
and effective, i.e by establishing a national information portal on bankruptcy
• Encourage the profession to apply a more stringent standard in technical skills,
upholding the code of conduct and professionalism of their members and in the
course of taking disciplinary measures to the members.

13. Thank You for Your Attention
aria.suyudi@gmail.com