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Resolving Insolvency in

Indonesia - Jakarta

Below is a description of the time, cost and outcome of the most common insolvency proceeding in each economy under the case study assumptions, as well as the strengths and weaknesses in existing insolvency regulations in four areas: commencement of proceedings, management of debtor’s assets, reorganization proceedings and creditor participation.

This information was collected as part of the Doing Business project, which measures and compares regulations relevant to the life cycle of a small- to medium-sized domestic business in 190 economies. The most recent round of data collection was completed in June 2016.

Compare Indonesia - Jakarta to 189 other economies.

  • Indicator Explanation Answer
    Recovery rate (cents on the dollar) 29.9
    Proceeding After a maximum of 90 days since the declaration of bankruptcy is made or when the insolvency condition (rejection of the composition plan) starts, Mirage is entitled to initiate the enforcement of a deed of mortgage which is carried out through an Indonesian district court by a motion to foreclose and a court-supervised public auction conducted by the SAO (State Auction Office). foreclosure
    Outcome After the suspension of payment period, BizBank would gain possession of Mirage's assets and sell them piecemeal in a public auction. piecemeal sale
    Time (in years) The total foreclosure procedure, which will be suspended temporarily by the initiation of the bankruptcy proceedings, would take approximate 2 years in total. BizBank would initiate foreclosure after Mirage's default on payment. According to Part Six of Law No.37 of 2004 regarding Bankruptcy and Suspension of Obligation for Debt Payment, Mirage would petition to the Commercial Court for a suspension of payments. The foreclosure procedure then gets converted to reorganization. Bankruptcy cases are heard before the Commercial Court. It takes about 2 months from when the case is filed until the first hearing. The Commercial Court must then grant a provisional moratorium, and appoint a supervisory judge and an administrator or receiver to assist the debtor in managing its estate. Provisional moratorium is 90 days, but permanent moratorium, which can be granted as an extension of time is 270 days. During this time, Mirage must propose a composition plan and creditors will decide whether to accept the plan, reject it or proceed to a permanent moratorium. BizBank is likely to vote against the composition plan, which will lead to Mirage being declared bankrupt. At that time, moratorium ends, and BizBank can proceed with foreclosure proceedings. 2.0
    Cost (% of estate) The costs associated with the case would amount to approximately 22% of the value of the debtor's estate. Cost incurred during the entire insolvency process mainly include court or government agency fees (1%), attorneys’ fees (up to 10%), curator’s fees (up to 10%), fees of accountants, assessors, inspectors (up to 3%). 22.0
    Answer Score
    Strength of insolvency framework index (0-16) 9.5
    Commencement of proceedings index (0-3) 3.0
    What procedures are available to a DEBTOR when commencing insolvency proceedings? (a) Debtor may file for both liquidation and reorganization 1.0
    Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor? (a) Yes, a creditor may file for both liquidation and reorganization 1.0
    What basis for commencement of the insolvency proceedings is allowed under the insolvency framework? (a) Debtor is generally unable to pay its debts as they mature 1.0
    Management of debtor's assets index (0-6) 5.0
    Does the insolvency framework allow the continuation of contracts supplying essential goods and services to the debtor? Yes 1.0
    Does the insolvency framework allow the rejection by the debtor of overly burdensome contracts? Yes 1.0
    Does the insolvency framework allow avoidance of preferential transactions? Yes 1.0
    Does the insolvency framework allow avoidance of undervalued transactions? Yes 1.0
    Does the insolvency framework provide for the possibility of the debtor obtaining credit after commencement of insolvency proceedings? Yes 1.0
    Does the insolvency framework assign priority to post-commencement credit? (c) No priority is assigned to post-commencement creditors 0.0
    Reorganization proceedings index (0-3) 0.5
    Which creditors vote on the proposed reorganization plan? (a) All creditors 0.5
    Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as what they would obtain in a liquidation? No 0.0
    Are the creditors devided into classes for the purposes of voting on the reorganization plan, does each class vote separately and are creditors in the same class treated equally? No 0.0
    Creditor participation index (0-4) 1.0
    Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency representative? No 0.0
    Does the insolvency framework require approval by the creditors for sale of substantial assets of the debtor? No 0.0
    Does the insolvency framework provide that a creditor has the right to request information from the insolvency representative? No 0.0
    Does the insolvency framework provide that a creditor has the right to object to decisions accepting or rejecting creditors' claims? Yes 1.0