Indonesia

Law No. 37 of 2004 on Bankruptcy and Suspension of Debt Payment Obligation (“Bankruptcy Law”) provides two legal procedures: Bankruptcy and Suspension of Debt Payment Obligation (PKPU).

Bankruptcy allows a debtor’s assets to be placed under general confiscation by court decision. It can be filed by a debtor or creditor if the debtor has at least two creditors and one due debt, proven with simple evidence.

To avoid premature bankruptcy, a PKPU petition (a court-supervised restructuring) can be filed before or during early bankruptcy proceedings. If both are filed, PKPU is prioritized. If PKPU fails, the debtor is declared bankrupt.

PKPU allows the debtor to propose a settlement plan. The same conditions apply; at least two creditors and one due debt. Once granted, an automatic stay applies. The debtor has 45 days, extendable to 270 days, to propose a plan. If approved by the court, it binds all creditors except those who rejected it.

Debtors facing financial difficulties can seek protection from creditors either through out-of-court restructuring or a court-supervised process. Each option has its own mechanisms and consequences.

Out-of-court restructuring is based on voluntary agreements between debtors and creditors. Common legal tools under the Indonesian Civil Code (ICC) include:

• Novation. Replacing the original debt obligation with a new one, with modified terms.
• Cession. Transferring the debtor’s obligation to a new creditor, with acknowledgement or acceptance in writing by the debtor or notification to the debtor.
• Subrogation. A third party (e.g., a guarantor or insurer) settles the debt and takes over the creditor’s rights.

These approaches require mutual consent, meaning they only work if all involved creditors agree. If even one creditor refuses, they may continue enforcement efforts, leaving the debtor exposed.

In-court restructuring offers stronger legal protection as regulated under the Bankruptcy Law, which provides a mechanism for PKPU. A PKPU petition (filed by the debtor or creditor) triggers an automatic stay on creditor actions and allows time to propose a court-approved settlement.

To qualify, the debtor must have at least two creditors and one matured debt, proven with simple evidence. Once granted, the process is overseen by an administrator and supervisory judge, and the debtor’s control over assets is limited.

Indonesia does not have a statutory “pre-insolvency” restructuring procedure where debtors can bind creditors before bankruptcy. However, debtors and creditors may engage with out-of-court restructuring through voluntary negotiations or in-court restructuring through PKPU.

The PKPU process begins with a petition of PKPU by a debtor or creditor to the district court. Once granted, it triggers an automatic stay on creditor actions. The debtor then has 45 days, extendable up to 270 days with creditor and court approval, to submit a restructuring plan. Creditors will vote on the plan, and if approved and ratified by the court, it becomes a binding settlement agreement. If the plan is rejected, the debtor will be declared bankrupt.

3.1 What are the conditions to entry?

The conditions for a PKPU petition are that debtors or creditors shall demonstrate that there is more than one creditor, and debt which has matured and is payable. Additionally, for the PKPU petition to be granted, the filing must comprise facts that can be simply proven.

3.2 Can creditor claims be compromised “within a class”?

Indonesia classes creditors as preferred, separatis (“secured creditors”) and concurrent (“unsecured creditors”). In general, secured creditors have priority over unsecured creditors in enforcing their rights in receiving payment because they either have interest under the law (preferred creditor) or hold collateral rights (separatis creditor).

The creditors’ meeting will decide on the class of the creditors’ claim, whether the class remains or is compromised/adjusted, and which decision will be finalized in the form of a settlement agreement, with the approval of those creditors or their attorneys present in the meeting.

3.3 Is there a “cross-class cramdown”?

The Bankruptcy Law does not specifically regulate cross-class cramdown. The application of cross-class cramdown will follow the settlement agreement which requires the approval of the creditors or their attorneys present in the creditors’ meeting. The settlement agreement shall bind all creditors except for creditors who rejected the settlement.

3.4 Can shareholder claims be compromised?

The shareholder claims can be compromised. Pursuant to the provision of Law No. 40 of 2007 concerning Limited Liability Company (“Company Law”), creditor claims will take precedence over shareholder distributions in a liquidation scenario, meaning that when assets have already been distributed to the shareholders, if a valid creditor claim emerges, the court has the authority to order the shareholders to return the distributed assets proportionally to cover the outstanding creditor claims.

3.5 Can secured creditors’ claims be compromised? Are deficiency claims treated differently?

The secured creditors’ claims can be compromised based on their discretion and willingness to settle. For example, they may settle for 70% under secured claims and the remaining 30% of the receivables as deficiency claims under unsecured claims.

3.6 Can creditors propose competing plans?

Creditors may propose competing plans, however, since the plans will be finalized in the form of a settlement agreement that binds all creditors, except those creditors failing to approve the settlement, the decision will require the approval of the creditors or their attorneys present in the creditors’ meeting.

3.7 What level of court or other third-party supervision is there of the process(es)?

PKPU involves judicial oversight by the Commercial Court, supported by administrators and a supervisory judge. The court is responsible for controlling the proceedings, reviewing the petition within three to 20 days, and convening mandatory hearings within 45 days, while the administrators and supervisory judge manage the debtor’s assets.

Indonesian law recognizes clawback claims under the term Actio Pauliana. Clawback claims allow creditors to nullify transactions that harm their interests, and such claims can be pursued by filing a claim with a relevant Indonesian district court. Under the ICC, creditors must prove harm and, depending on the case, the debtor’s or counterparty’s knowledge. Under the Bankruptcy Law, certain transactions within one year before bankruptcy are presumed harmful and can be annulled.

4.1 What is the applicable law that provides for clawback and/or antecedent transaction claims?

Under the ICC, clawback claims let creditors cancel debtor transactions that harm their interests. For transactions with value (e.g., sales), both parties must have known or should have known the harm. For gratuitous acts (e.g., gifts), only the debtor’s knowledge is required. This prevents asset dissipation at the creditors’ expense.

Likewise, the Bankruptcy Law allows courts to annul harmful transactions made within one year before bankruptcy, such as undervalued sales, preferential payments, or fraudulent transfers, with a presumption of harm. These rules help protect creditors, though claims still rely on proof of harm and awareness.

4.2 What are the relevant “look-back” periods for claims?

Within the ICC, there is no statutory look-back period. However, the Bankruptcy Law stipulates a time period of one year before the decision declaring bankruptcy is rendered.

4.3 Who can pursue the claims?

Following the ICC, those who can pursue clawback claims are creditors. However, under the Bankruptcy Law, the rights are given to curators to pursue the claims. 

4.4 What remedies are available and how do they operate in practice?

Under the ICC, creditors may file clawback claims with the relevant district court under tort. On the other hand, under the Bankruptcy Law, clawback claims by the curator shall be requested to the relevant district court under other claims. Both require the plaintiff/petitioner to prove that at the time such a transaction was made by the debtor, the debtor should have known that such action would harm the creditors.

4.5 What defenses are available?

Clawback claims aim to nullify debtor transactions that harm creditors, especially those lacking legitimate commercial justification, such as selling property at 10% of market value without clear purpose. However, debtors may defend such transactions by proving they were made in good faith and for valid business reasons.

4.6 Is there a general right of action in respect of transactions defrauding creditors or Actio Pauliana claims?

See Question 4 and following, above; Indonesian law recognizes clawback claims under the term Actio Pauliana. It allows plaintiffs/petitioner to nullify transactions that harm their interests, and such claims can be pursued by filing a claim with a relevant Indonesian district court.

4.7 Who can pursue the claims?

See Question 4.3, above.

4.8 What remedies are available and how do they operate in practice?

See Question 4.4, above.

4.9 What defenses are available?

See Question 4.5, above.

Under the Company Law, a company includes the General Meeting of Shareholders (GMS), Board of Directors (BoD), and Board of Commissioners (BoC). The BoD manages the company in line with its goals, laws, and articles of association (AoA). If losses arise as a result of their actions or negligence, directors can be held personally liable.

Managers are not company organs and act based on delegation from the BoD, so their liability generally falls under the BoD’s responsibility.

If bankruptcy occurs as a result of the BoD’s actions (including former directors within the past five years) and the company’s assets do not cover its debts, directors may be held jointly and severally liable, unless they can prove:

• the bankruptcy wasn’t due to their actions;
• they acted in good faith and responsibly;
• they had no conflict of interest; and
• they took steps to prevent bankruptcy.

The BoD remains responsible, including for managers’ actions under their supervision.

5.1 What are the duties of directors and managers?

According to the Indonesian Company Law, the BoD shall manage the company in the interests of the company in accordance with its purpose and objectives. Moreover, the policies to manage the company are set within the limits by the Company Law and/or the AoA.

In the case of losses incurred by the company, each member of the BoD shall be fully and personally liable if they are found to have been at fault or negligent in performing their duties. In the event a bankruptcy occurs due to the actions or negligence of the BoD, and the assets are not sufficient to pay all of the company’s obligations in connection with such bankruptcy, each member of the BoD shall be jointly and severally liable to all obligations which remain unpaid from the bankruptcy assets.

However, managers’ liability falls within the director(s)’ scope of responsibility.

5.2 What claims can be brought against directors and managers arising from breaches of those duties?

Directors may face claims through:

• derivative lawsuits by shareholders holding at least 10% of voting shares;
• internal claims by other directors or commissioners on behalf of the company;
• bankruptcy claims by a curator, if the directors’ fault or negligence led to insolvency; and
• tort claims by third parties under the Civil Code for unlawful acts causing harm.

Managers, while not company organs, may be personally liable under tort if their independent actions cause direct loss, but are generally under the responsibility of the directors.

5.3 Who can pursue the claims?

Shareholders holding at least 10% of voting shares may file a lawsuit against BoD members through the district court if their actions or negligence caused losses to the company. Lawsuits can also be filed by other BoD or BoC members on behalf of the company.

Under the Bankruptcy Law, curators may file claims if the BoD’s negligence contributed to the company’s bankruptcy.

5.4 Do directors have, at any time, a strict obligation to file for insolvency and, if so, when does that arise?

Under Indonesian law, directors are not strictly required to file for insolvency at any specific point and cannot file for bankruptcy without prior approval from the GMS. However, directors are bound by a fiduciary duty to act in good faith, with honesty and full responsibility. If the company is insolvent or unable to pay its debts, directors must inform shareholders and consider appropriate legal steps, including bankruptcy, to avoid further losses to creditors.

Failure to act prudently in such situations may expose directors to liability if creditors suffer preventable harm.

5.5 Can directors and managers be found liable for the increase in sums owed to creditors after a company becomes insolvent?

Yes, directors can be held liable for any unpaid corporate obligations including the increase in sums owed to creditors, particularly if such increase results from actions or omissions by the directors after the company has become insolvent.

In contrast, managers are generally not liable under the Company Law, as they are not corporate organs and lack independent authority to represent or manage the company. Their responsibilities stem from internal delegation. However, liability may arise if it can be proven that the manager’s actions, taken without proper corporate governance, directly caused the loss.

5.6 In what other circumstances can directors and managers be found liable directly to creditors of the company?

Directors are generally liable to the company, but creditors may hold them personally liable if they act beyond authority, abuse their position, or commit unlawful acts causing harm. The Company Law permits such claims for losses due to fault or negligence. If bankruptcy results from their actions and assets are insufficient, directors may be jointly and severally liable for unpaid debts.

Managers, as non-corporate organs, may still be personally liable under the ICC if their unlawful actions, especially without proper governance, cause loss to creditors.

Access to accurate information about the debtor’s assets, liabilities, and financial affairs is essential in bankruptcy to ensure fair asset management and distribution. Under the Bankruptcy Law, curators (“office holders”) have the legal authority to collect this information and may also request court assistance to compel cooperation from third parties.

The office holders, under the supervision of a supervisory judge, have the right to manage and liquidate the bankrupt debtor’s assets. This includes investigating the debtor’s property, contracts, accounts, bank records, income, expenses, and business activities. In practice, however, office holders may face difficulties, especially when dealing with uncooperative debtors or complex corporate structures.

6.1 What information can be obtained by office holders in respect of a debtor’s property, information and affairs?

In practice, the office holders request asset declarations from the debtor and may inspect business premises, accounting books, and relevant documentation. They rely heavily on the debtor’s cooperation; uncooperative debtors can delay or obstruct the process. Public records and third-party data (e.g., land registries, company registries, banks) are also used to verify information.

Once appointed, office holders assume full control over the debtor’s estate and have the authority to gather all information related to the debtor’s assets and affairs. This includes:

• physical and intangible assets;
• financial and banking records;
• legal relationships; and
• corporate structure and ownership records.

Under the Company Law, relevant documents may include annual reports and other documents concerning the debtor’s financial and legal status.

6.2 How is that information obtained in practice?

Office holders obtain information primarily through formal request to the debtor, access to company records, and examination of books and documents. They may also obtain information from third parties such as banks, creditors, tax offices, and the Ministry of Law (MOL) government registries. The Bankruptcy Law allows inspection and seizure of documents related to the debtor’s estate.

Office holders often begin with requesting information from the debtor, then verify via public registries (e.g., land offices) and banking institutions. If the debtor is uncooperative, curators may need to escalate to the court to compel compliance.

6.3 Can the court assist in obtaining that information and how does that work in practice?

Yes, the Court may assist office holders by issuing orders to compel the debtor or third parties to provide necessary information or documents. This authority comes from the Bankruptcy Law and procedural laws, allowing summons, interrogations, or document seizure.

In practice, office holders may request court assistance when facing resistance. While courts generally support such requests, formal procedures and hearings may cause delays. The effectiveness of enforcement depends on judicial efficiency and debtor compliance, which varies on a case-by-case basis.

In Indonesia, foreign office holders are not automatically recognized, as the country has not adopted the UNCITRAL Model Law on Cross-Border Insolvency. A separate proceeding must be filed in the relevant Indonesian court, and only court-appointed Indonesian office holders have the legal authority to investigate a debtor’s assets and affairs.

7.1 Is the UNCITRAL Model Law on Cross-Border Insolvency adopted?

Indonesia has not adopted the UNCITRAL Model Law on Cross-Border Insolvency, which means foreign insolvency judgements are not automatically recognized in Indonesia. Therefore, a separate Indonesian proceeding must be filed to the relevant Indonesian district court with the foreign insolvency judgement as evidence.

7.2 Is it possible to recognize office holders from other jurisdictions?

Indonesia does not recognize foreign insolvency office holders due to its non-adoption of the UNCITRAL Model Law on Cross-Border Insolvency.

7.3 What is the process and what are the conditions for recognition?

Indonesia has no process for recognizing foreign insolvency office holders due to its non-adoption of the UNCITRAL Model Law.

7.4 What information can be obtained by office holders in respect of a debtor’s property, information and affairs?

Following the point above, that Indonesia does not recognize foreign insolvency office holders, we note that, formally, they are not able to obtain any information deriving from the debtor’s property, information and affairs. 

7.5 What steps can a foreign office holder take to recover assets belonging to the debtor?

The current Indonesian legal framework does not provide foreign office holders with the capacity to directly recover assets from debtors in Indonesia.

7.6 Is a foreign office holder able to bring clawback claims or fraudulent transaction claims?

Clawback claims are possible; as long as the claims are directed against Indonesian parties, foreign office holders can file clawback claims or fraudulent transaction claims with the assistance of an Indonesian advocate.

In Indonesia, insolvency office holders must be licensed by the MOL, hold qualifications such as advocate, public accountant, or a bachelor’s degree in law, economics, or accounting, and pass a certification exam by the Indonesian Bankruptcy Practitioners Association (AKPI).

They must also remain independent, free from conflicts of interest, and may not handle more than three ongoing cases at once. These ethical standards are further governed by the practitioners’ association.

8.1 Can a foreign office holder take appointments?

Foreign office holders cannot be appointed to manage Indonesian bankruptcy cases under the current Indonesian Bankruptcy Law.

8.2 What are the conditions for becoming an office holder?

To become an insolvency office holder in Indonesia, candidates must:

• hold qualifications such as advocate, public accountant, or a bachelor’s degree in law, economics, or accounting;
• have completed the required office holder’s training and passed the exam held by the relevant association;
• have never been convicted of a crime punishable by five years or more;
• have never been declared bankrupt; and
• pay the required Non-Tax State Revenue (PNBP).

Additionally, persons who act as insolvency office holders must be domiciled in Indonesia, possess expertise in bankruptcy estate management and/or settlement, and must be registered under the MOL.

8.3 What are the main rules of professional conduct?

Under the AKPI rules, bankruptcy practitioners must follow the law, act with integrity, independence, and fairness, avoid conflicts of interest, and report misconduct. They must also uphold public interest, maintain professional dignity, and comply with association bylaws.

AKPI prohibits members from transferring assets without court approval, replacing peers unethically, accepting bribes, or using media for self-promotion, except for legal advocacy. Violations that harm ethics or public trust may lead to sanctions.