Law Number 37 of 2004 regarding Bankruptcy and Suspension of Debt Payments (the “Bankruptcy Law”) stipulates that the fees for Administrators and Receivers are decided after the bankruptcy or the Suspension of Debt Payment Obligations (Penundaan Kewajiban Pembayaran Utang or “PKPU”) is concluded.

While there is some subjectivity in determining the fees of Administrators and Receivers, the fees must follow the guidelines set by the Ministry of Law and Human Rights (“MOLHR”) in Regulation Number 1 of 2013 regarding Guidelines for Fees of Receivers and Administrators (“MOLHR Reg 01/2013″). Under this Regulation, the fees for Administrators and Receivers depend on the particular case, as elaborated on below.

While establishing fee guidelines, MOLHR Reg 01/2013 also seems to have discouraged creditors from pursuing bankruptcy proceedings, for fear that they will be saddled with the Receiver fees.

Administrator Fees

Administrator fees depend on whether the PKPU ends with a settlement. If the PKPU ends with a settlement, then the fees for the Administrator shall be decided by the judges handling the PKPU and charged to the debtor, using the following factors:

1. the work performed by the Administrator;
2. complexity of the work;
3. capability of the Administrator; and
4. the tariff of the Administrator (Note that the Regulation does not clarify what is meant by the tariff of the Administrator).

Administrator fees are capped at a maximum of 10% of the total debt that must be paid by the Debtor.

If the PKPU ends without a settlement the fees of the Administrator shall be decided by the judges and charged to the debtor considering the same four factors above, and are capped at a maximum 15% of the total debts that must be paid by the debtor.

Receiver Fees

When the judges approve a bankruptcy application, one of the following scenarios will happen:

1. a party appeals to the Supreme Court (the parties can only appeal to the Supreme Court for cassation and/or the review process; the High Court cannot examine bankruptcy cases);
2. the parties settle; or
3. the bankruptcy process continues to the sale of the debtor’s assets to pay its obligations to its creditors.

If the bankruptcy is rejected in the appeal stage, either in cassation or review, the fee for the Receiver will be decided by the judges and charged to the party that applied for the bankruptcy. In deciding the fee, the judges shall consider the following:

1. the work performed by the Receiver;
2. complexity of the work;
3. capability of the Receiver; and
4. the tariff of the Receiver (Note that the Regulation does not clarify what is meant by the tariff of the Receiver).

If the bankruptcy is approved or ends with a settlement the following formula is used to decide the fee for the Receiver:

A% x (Total Assets of Debtor – Debts)

A% shall be as follows:

Article 10, paragraph (1) of the Bankruptcy Law defines a Temporary Receiver as a Receiver who is assigned to supervise the management of the debtor’s business and payments to creditors, as well as the assignment or security of the debtor’s assets in a bankruptcy that is under the authorization of a Receiver. Pursuant to Article 2, paragraph (3) of MOLHR Reg 01/2013, fees for a Temporary Receiver shall be as follows:Temporary Receiver Fees

1. if the bankruptcy application is granted the fees will be decided in the first creditors meeting;
2. if the bankruptcy application is rejected the fees will be decided by the judges and charged to the party that applied for the bankruptcy.

In deciding the fees, the judges will consider the following:

1. the work performed by the Temporary Receiver;
2. complexity of the work;
3. capability of the Temporary Receiver; and
4. the tariff of the Temporary Receiver (Note that the Regulation does not clarify what is meant by the tariff of the Temporary Receiver).

Other Fees

In addition to the above fees, Receivers may be entitled to additional fees from the sale of assets held by other creditors or third parties. These fees must not exceed 2.5% of the total sale price of such assets.

If there are any additional Receivers or Administrators the fees for such Receivers or Administrators shall be decided by the creditors meeting.

We note that subsequent to the issuance of MOLHR Reg 01/2013, many creditors have been reluctant to apply for bankruptcy proceedings because if the bankruptcy application is rejected, the party that applied for the bankruptcy is required to pay the fees of the Receiver. The result is that since the issuance of this Regulation, creditors, especially those holding the collateral of debtors, are more likely to apply for a PKPU than a bankruptcy proceeding.

For further information, please contact:

Dewi Mayangsari, Soewito Suhardiman Eddymurthy Kardono

[email protected]

Dewi Savitri Reni, Soewito Suhardiman Eddymurthy Kardono

[email protected]

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