Difference between Bankruptcy and Liquidation based on Limited Liability Company Law No.40 of 2007 and Law No. 37 of 2004 concerning Bankruptcy and Suspension of Payment
From : A.M Oktarina Counsellors at Law
Contributors : Pramudya Yudhatama, S.H., Khaifa Muna Noer Uh’Dina, S.H.,
Raysha Alfira, S.H., Putri Shaquila, S.H.
Reviewer : Noverizky Tri Putra Pasaribu, S.H., L.L.M (Adv).
A. Background
In recent times, there have often been companies that cannot survive when they experience destruction and / or failure in running their business and business and then decide to carry out Liquidation and / or Bankruptcy for the company. However, as we know, to carry out Liquidation and Bankruptcy requires requirements and procedures that must be fulfilled first by the company. Then what kind of steps must be taken by the company to carry out Liquidation and also Bankruptcy and what is the difference between Liquidation and Bankruptcy?
B. Legal Basis
- Law Number 40 of 2007 concerning Limited Liability Companies (“UUPT“).
- Law Number 37 of 2004 concerning Bankruptcy and Suspension of Payment (“UUK-PKPU”).
- Regulation of the Minister of Finance of the Republic of Indonesia Number 272/PMk.05/2014 concerning the Implementation of Liquidation of Accounting Entities and Reporting Entities at State Ministries/Institutions (“Permenkeu No. 272/PMK.05/2014“).
- Indonesian Civil Code (“Civil Code“).
Before diving further into the mechanism of bankruptcy and liquidation, by definition bankruptcy itself refers to Article 1 paragraph (1) of the Law that reads “Insolvency is a general confiscation of all assets of the Insolvent Debtor whose management and settlement is carried out by the Curator under the supervision of the Supervising Judge as stipulated in this Law.” And also the definition of liquidation, namely the act of settling all assets and liabilities as a result of the termination / dissolution of accounting entities and / or reporting entities at state ministries / institutions, referring to Permenkeu No.272/PMK.05/2014.
Based on the results of our research there is a difference between liquidation and bankruptcy, it includes regulations, conditions, legal consequences, authorities and others. So what are the differences? Let’s look at the table below:
| DIFFERENCE | LIQUIDATION | BANKRUPTCY |
| Regulation | UUPT | UUK-PKPU
|
| Condition | Some conditions and mechanisms for the Liquidation process: – Based on the decision of the GMS and based on the determination of the court; – Companies that have been declared bankrupt are in a state of insolvency as stipulated in the Law on Bankruptcy and Suspension of Debt Payment Obligations; or – the revocation of the Company’s business license thus requiring the Company to liquidate in accordance with the provisions of laws and regulations. – must be followed by liquidation carried out by the liquidator or curator; – The Company cannot take legal action, unless it is necessary to settle all the Company’s affairs in the context of liquidation. – In the event that the dissolution occurs on the basis of a decision GMS, the period of establishment of that is stipulated in The articles of association have expired or are repealed bankruptcy based on a commercial court decision and GMS does not appoint liquidators, the Board of Directors acts as Liquidator. (Vide Article 142 paragraph (1), paragraph (2) and paragraph (3) of the PT Law). | That the conditions for the occurrence of the mechanism or process of Insolvency must be fulfilled 2 elements: – There are 2 (two) or more creditors; – There is 1 (one) debt that is due or due and collectible that is not paid by the debtor. “A debtor who has two or more Creditors and does not pay in full at least one debt that has fallen due and can be collected, is declared bankrupt by a decision of the Court, either on his own application or on the application of one or more of his creditors.” (Vide Article 2 paragraph (1) UUK-PKPU).
|
| Application Procedure | – Announcing Indonesian newspapers and state news, (“BNRI”) followed by notifying the Ministry of Law and Human Rights (“Kemenkunham“) to be recorded in the company’s register that the company is in liquidation.
– In the announcement of the newspaper and BNRI are required to add the phrase “in liquidation” in the newspaper that has been created on behalf of the company that will carry out the liquidation process.
– The liquidator must also notify the Minister about the plan to distribute the liquidated assets by notifying by registered letter to the relevant Minister, the payment of the remaining liquidated assets to shareholders; and other actions that need to be taken in the implementation of wealth clearance.
– After the expiration of 90 days of this second announcement, the liquidator can settle by selling assets that have previously been assessed with the services of an independent appraiser followed by distributing these assets to their creditors on the basis of pari passu pro rata parte.
– Conduct GMS on the accountability of the liquidation process that has been carried out.
– In the event that the GMS accepts accountability for the liquidation process that has been carried out, it is followed by an announcement to the newspaper that is then followed by a notification to the Minister that the liquidation process has ended.
– In the event that the announcement has been made, the Minister will record the expiration of the company’s legal entity status and remove the company’s name from the list of companies followed by an announcement in the State Gazette of the Republic of Indonesia. (Vide Article 147 paragraph (1), Article 143 paragraph (2), Article 149 paragraph (1), Article 152 paragraph (1), Article 152 paragraph (3), Article 152 paragraph (5) j.o Article 152 paragraph (8) of the Law and Article 1131 jo.1132 of the Civil Code)
| – The application for bankruptcy declaration is submitted to the Commercial Court and those entitled to file it include creditors, debtors, Bank Indonesia, Minister of Finance, Capital Market Supervisory Agency and prosecutors in the public interest.
– The application for bankruptcy statement that has been received by the court will be processed through an examination hearing and no later than the bankruptcy decision must be read 60 (sixty) days after the date of registration of the bankruptcy statement application.
– Make announcements in the BNRI and at least 2 (2 two) daily newspapers determined by the supervisory judge.
– After no later than 5 (five) days after the bankruptcy declaration decision is received by the Curator and the Supervisory judge, the curator must notify the holding of the creditor meeting to creditors known by registered letter with advertisements in at least 2 (two) daily newspapers.
– The Curator is authorized to open letters and telegrams addressed to the Insolvent Debtor to the receiver’s address
– All creditors are required to submit their receivables to the curator and the curator registers the receivables held by the creditors.
– No later than 14 (fourteen) days after the bankruptcy declaration decision is pronounced, the supervisory judge must set, the deadline for filing bills, the deadline for tax verification to determine the amount of tax liability, the day, date, time and place of the creditor’s meeting to hold a matching of receivables.
– The Curator must make a recording of the bankrupt assets no later than 2 (two) days after receiving the decision letter of his appointment as a curator, and the recording of the bankrupt assets is carried out under the hands of the curator appointed with the approval of the Supervisory Judge.
– The Curator holds a receivables matching meeting/verification meeting, no later than 5 (five) days after the determination and must notify the determination to all Creditors whose addresses are known by letter and announce it in at least 2 (two) daily newspapers.
– The Curator creates a List of recognized provisional Receivables, and a List of disputed Receivables with their reasons. (Vide Article 8, Article 15 paragraph (4), Article 86 paragraph (3), Article 105, Article 115, Article 113 paragraph (1), Article 100, Article 114, and Article 117 of the UUK-PKPU). |
| Legal consequences | The dissolution of the Company does not result in the Company losing its legal entity status until the liquidation is completed and the liquidator’s liability is accepted by the GMS or court. (Vide Article 143 paragraph (1) of the Law) | The consequence of bankruptcy law for an individual is that he by law loses his right to control and manage his wealth.
“The debtor by law loses his right to control and administer his property that is included in the bankruptcy estate, from the date the judgment of the declaration of bankruptcy is pronounced.”
(Vide Article 24 paragraph (1) UUK-PKPU)
|
| Regulatory authorities | – Liquidator – Curator – Notary (Vide Article 142 paragraph (2) point a of the Law)
| – Debtors – Creditors – Curator – Supervising Judge (Vide Article 1 and Article 15 paragraph (3) of UUK-PKPU) |
Referring to the above mechanism, of course, corporate entities that will experience dissolution of their business, need to look carefully at the cases that occur. The implementation has differences that are general and principled, so it can be explained that liquidation and bankruptcy are very different.
C. Conclusion
As mentioned above related to the mechanism of some differences in carrying out the stages of Liquidation and Bankruptcy, that we need to know regarding the procedures for Liquidation and Bankruptcy, basically Liquidation and Bankruptcy have some of the same legal provisions, for example, as both can only be done if they already have a court decision. But of course both have different legal terms and conditions as we have mentioned above.
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