CAN RECONCILIATION BE DONE AFTER THE DEBTOR IS DECLARED BANKRUPT?
Debtor may offer reconciliation if the majority creditor does not agree with the bankruptcy decision against the debtor due to not being asked for approval nor summoning the majority creditor.
After declared bankrupt by the Commercial Court’s decision, Debtor still has the right to offer reconciliation. This right is stipulated under Article 144 of Law No. 37 of 2004 on Bankruptcy and Suspension of Debt Payment Obligation (“Bankruptcy Law”) which states:
“The Bankrupt Debtor shall have the right to offer reconciliation to all creditors.”
This reconciliation offer can be offered by debtor, only if the majority creditor (the largest holder of receivables) is forced to accept the bankruptcy decision, yet on the other hand, he does not agree with aforesaid decision. Majority creditor recognized that the bankruptcy petition was filed by the minority creditor without asking majority creditor for approval, or the Commercial Court did not summon the majority creditor, although the majority creditor believes that debtor is still capable to pay his debts.
Under such circumstances, the debtor may use his right to offer reconciliation to the creditors. The stages for debtor in offering reconciliation when the debtor is already declared bankrupt are:
- Submission and Discussion of Reconciliation Proposal
The Bankrupt Debtor Debitor Pailit shall submit a reconciliation proposal to the creditors within no later than eight days before the claim verification meeting to the Commerical Court Registrar’s office to be seen by the concerned parties. Aforesaid reconciliation proposal shall be discussed and decided after the claim verification meeting. However, the discussion and decision on the reconciliation proposal may be postponed until the date to be determined by the supervisory judge, but no later than 21 days afterwards in case:
- During the meeting, a permanent committee of Creditors is appointed which mebers do not consist of the same persons as the member of temporary committee, and the majority of Creditors gives its written opinion of the reconciliation proposal; or
- The reconciliation proposal has not been made available at the Commercial Court Registrar’s office within the specified time, and the majority of Creditors present wish a postponement of the meeting.
If the discussion and the decision on the reconciliation proposal is not postponed, then it will continue to decide on the reconciliation proposal.
- Quorum to Make the Decision on Reconciliation Proposal
Reconciliation proposal is accepted if it is approved in Creditors meeting by more than ½ (half) of the concurrent creditors present in the meeting, whose rights are acknowledged or temporarily acknowledged, representing at least 2/3 (two thirds) of all the concurrent’s receivables which acknowledged or temporarily acknowledged by the concurrent creditors or their proxies present in the meeting.
- Drafting Minutes of the Meeting
After the meeting on reconciliation proposal has been conducted, referring to Article 154 paragraph (1) of Bankruptcy Law, the Minutes of the Meeting shall be made and contains:
- The content of the reconciliation proposal;
- The name of the Creditors entitled to vote by being present at the meeting;
- The votes cast;
- The result of the voting; and
- Other matters that were discussed at the meeting.
The minutes shall be signed by the supervisory judge and the substitute registrar.
- Ratification and Rejection on Reconciliation Proposal by the Commercial Court.
After the reconciliation plan has been accepted before the closing of the meeting, the Supervisory judge shall determine the date of the following hearing which the Court will make a decision whether the reconciliation proposal will be ratified or rejected (Article 156 paragraph 1 of Bankruptcy Law). This means that although the reconciliation proposal has been accepted bt the creditors in the meeting, it has not been considered as an approved reconciliation proposal by debtor and creditors. The approved reconciliation proposal must be submitted to the Commercial Court for ratification or rejection.
At the court hearing on the determined date, or no later than 7 (seven) days after the date of the hearing, the Court shall render its decision together with such grounds. (Article 158 jo. Article 159 of Bankruptcy Law). In accordance with Article 159 paragraph 2 of Bankruptcy Law, the Court shall reject the ratification of the reconciliation proposal if:
- The Debtor’s asset, including any goods on which retention rights are imposed, considerably exceed the sum which was stipulated in reconciliation proposal;
- The reconciliation proposal is not fully guaranteed; and/or
- The reconciliation proposal is based on fraud or conspiracy with one or more creditors, or by using other unfair means, regardless whether the Bankrupt Debtor was involved in conducting such acts or not.
- Cassation Against Ratification and Rejection of Reconciliation Proposal
Cassation may be filed by the Creditors who voted in favor of the reconciliation proposal as well as the Debtor itself within 8 (eight) days of the decision by the Court. (Article 160 paragraph 1 of Bankruptcy Law). Subsequently, for the reconciliation proposal is ratified may be filed for cassation within 8 (eight) days of the decision by the Court by:
- The Creditors who voted against it or were absent at the voting;
- The Creditors who voted in favor on the ground of having discovered any unlawful acts such as: fraud, conspiracy, or other unfair means.
- Validity of the Reconciliation
The ratified reconciliation proposal is binding upon all Creditors who have No. priority right without exception, whether they have or have not appeared in the bankruptcy. (Article 162 of Bankruptcy Law) It is necessary to know that the decision on ratification of reconciliation proposal is final. This means that if the reconciliation proposal is rejected, the Bankrupt Debtor can not offer reconciliation in this bankruptcy (Article 164 of Bankruptcy Law).
Once the reconciliation proposal has been ratified and become final, the bankruptcy will be ceased. Subsequently, the Curator is obliged to announce the reconciliation in the State Gazette of Republic of Indonesia and in at least two daily newspapers (Article 166 of Bankruptcy Law).
As the bankruptcy ceases, the debtor may run its business, and its asset as if there had been no bankruptcy. However, debtor is obliged to fulfil all conditions stated in reconciliation proposal. Based on the schedule listed in the proposal, debtor shall pay all or some of its debts to creditors.
We hope this article is useful.
BP Lawyers can assist you
BP Lawyers can assist you in providing the best solution of bankruptcy and suspension of debt payment obligation cases through dispute settlement process in the Commercial Court. You can contact us via:
Dalmy Nasution, S.H./Ali Imron, S.H.I