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Suspension of debt payment is meant to save companies from bankruptcy
The intent of PKPU is actually to benefit both the borrower and the creditor. It aims for a win-win instead of a lose-lose situation.
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The Indonesian Employers Association (Apindo) has demanded a three-year moratorium on the filing of bankruptcy and PKPU petitions as a result of the pandemic. (Courtesy of/kontan.co.id)
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s the impact of the prolonged COVID-19 pandemic deepens, more businesses are starting to feel its bite. According to the Indonesian Employers' Association (Apindo), as many as 1,298 companies have been unable to pay their creditors, who like other businesses, need the money themselves to pay their own debts.
As the borrowers have not been able to pay their debts, creditors have turned to the courts to salvage what they can. The mechanism for doing so is to file a petition for Suspension of Debt Payment Obligations (PKPU).
There is a popular but misconceived notion that filing for PKPU is akin to trying to have a business declared bankrupt. This is far from the truth or the spirit of PKPU. It doesn’t serve the best interests of the creditor to bankrupt the debtor because then the creditor could only recover a small portion of what they were owed as the borrower would be required to sell all his or her assets at rock-bottom prices.
This is where the beauty of the PKPU comes in. The intent of PKPU is actually to benefit both the borrower and the creditor. It aims for a win-win instead of a lose-lose situation.
This is how it works. If a PKPU lawsuit is granted by the Commercial Court, creditors and borrowers get a certain period of time to discuss ways to settle their debt. This is done by providing a repayment plan for the borrower. The debt restructuring PKPU proceeding itself is regulated in Articles 222 to 294 of the 2004 Bankruptcy Law. The background to the major changes to the Indonesian Bankruptcy Law can be traced back to the monetary turmoil of 1997, which greatly affected the business world in fulfilling obligations to creditors.
On April 22, 1998, Government Regulation in Lieu of Law (Perppu) No. 1/1998 was issued. This Perppu, then, through Law No. 4/1998, was enacted into law. Subsequently, the law was revised and named Law No. 37/2004 on bankruptcy and PKPU – the Bankruptcy Law.
Adjusting to the needs of the situation at each time, one of the objectives of the law is to provide opportunities for creditors and borrowers to seek fair settlements quickly, openly and effectively.
