B&A News Brief – The Supreme Court Nullifies The Minister Of Law Regulation That Burdens The Receiver Fee Entirely On Creditor
The Supreme Court of Indonesia recently published Decision No. 54 P/HUM/2013 (the “SC Decision”) nullifying the Minister of Law and Human Rights Regulation that required the creditor/bankruptcy petitioner to pay all of the receiver’s fee in cases where the bankruptcy petition is dismissed in cassation or civil review (peninjauan kembali) proceedings. The Supreme Court stated that the Minister’s Regulation contradicted the Bankruptcy Law provision which allows judges to determine the sharing of payment of the receiver’s fee between the creditor/bankruptcy petitioner and a debtor.
Under Indonesian law, the receiver’s fee is regulated under Law No. 37 of 2004 regarding Bankruptcy and Suspension of Obligation of Payment of Debt (“Law 37/2004”). It is further elaborated under the Minister of Law and Human Rights Regulation No. 1 of 2013 regarding the Guidance on Receiver and Administrator Fees (“Regulation 1/2013”).
Article 17 paragraphs (2) and (3) of Law 37/2004 states that the panel of Supreme Court judges who dismiss a bankruptcy petition determines whether the receiver’s fee is to be borne by the bankruptcy petitioner or between the bankruptcy petitioner and the debtor. Article 2 paragraph (1) (c) of Regulation 1/2013, which the SC Decision nullified, had stated that Petitioner was to bear responsibility for the receiver’s fee. (Note that the SC Decision only nullifies Article 2 paragraph 1 (c) and does not affect the remaining provisions of Regulation 1/2013.)
The SC Decision has drawn positive reactions particularly from business people, receivers and qntlistrators. It is understood that the provision of Article 2 paragraph (1) (c) of Regulation 1/2013 had discouraged bankruptcy actions against (uncooperative) debtor(s) because of the potentially onerous costs the Petitioners had to bear in cases where the bankruptcy petition fails. Many also argued that Article 2 paragraph (1) (c) was in fact a double punishment for Petitioners who had earlier been financially harmed by the debtor.
Pending a revision to Regulation 1/2013, it is expected that Supreme Court judges will give serious consideration to Article 17 paragraphs (2) and (3) of Law 37/2004 in cases where the bankruptcy petition is dismissed.
Regulation 1/2013 provides guidelines for calculating the receiver’s fee for each of the three possible bankruptcy proceedings outcomes, namely: (i) the parties approve the settlement plan; (ii) the liquidation of the debtor’s assets; and (iii) the annulment of bankruptcy (in the cassation or civil request (peninjauan kembali) stage).
Under scenario (i) and (ii), the receiver’s fee is calculated from the amount of the total debtor’s assets minus total debts by using the following progressive rate:
For scenario (iii), the receiver’s fee is determined by the judges who are required to consider the work performed by the receiver, the complexity of the work, the capability of the receiver, and the receiver’s tariff. Regulation 1/2013, however, does not provide an explanation of “the receiver’s tariff”.
The receiver may receive other fees arising from the sale of a debtor’s assets in the possession of other creditors or third parties whose right to enforce security is stayed. In these cases, the fee is set at a maximum of 2.5% of the sale of the assets. Other additional fees could also be agreed at the creditors meeting and are to be paid out of the debtor’s assets.
TEMPORARY RECEIVER FEE
The fee payable to a temporary receiver appointed under Law 37/2004 is also subject to Regulation 1/2013. If the bankruptcy petition is granted, the fee is to be determined at the first creditors meeting. If the petition is dismissed, the judges will use their discretion to determine the fee after considering the work performed by the receiver, the complexity of the work, the capability of the receiver, and the receiver’s tariff.
Under Law 37/2004, a temporary receiver is one appointed before the judges render their decision on a bankruptcy petition. The temporary receiver supervises the management of the debtor’s business, payments to creditors, and the transfer and encumbrance of the debtor’s assets which fall under the authority of a receiver appointed under bankruptcy proceedings.
Regulation 1/2013 states that when the suspension of payment proceedings concludes in a settlement, the qntlistrator’s fee is to be determined by judges after considering the work performed by the qntlistrator, the complexity of the work, the capability of the qntlistrator, and the qntlistrator’s tariff. The fee is to be paid by the debtor. The fee is set at a maximum of 10% of the debtor’s total debt. A higher rate of up to 15% may be applied if the suspension of payment proceedings ends by way of the liquidation of assets.
Regulation 1/2013 states that if an additional receiver or qntlistrator is required, the relevant fee is to be determined by a creditors meeting.
For further information, please contact: [email protected]