PKPU in Indonesia: A Legal Guide for Debtors

In Indonesia, businesses facing financial distress have a critical legal mechanism to reorganize their debts and avoid bankruptcy: the PKPU (Penundaan Kewajiban Pembayaran Utang), or Suspension of Debt Payment Obligations. Governed by Law No. 37 of 2004 on Bankruptcy and Suspension of Debt Payment Obligations, PKPU in Indonesia provides a court-supervised restructuring process that allows debtors to negotiate with creditors and seek recovery while protecting their assets from immediate liquidation.

This guide offers an overview of PKPU in Indonesia—focusing on debtor rights, procedural stages, legal remedies, and strategic considerations. If you are a business owner in distress situation, understanding how PKPU operates is essential for navigating insolvency risks under Indonesian law.

Key Takeaways

• PKPU allows debtors to legally restructure debts while avoiding immediate bankruptcy, giving them time to negotiate with creditors under court protection.
• Debtors must act in good faith, remain transparent, and comply with strict legal procedures, including submitting a credible and feasible composition plan.
• An automatic stay halts all creditor enforcement actions, protecting the debtor’s assets during the PKPU period and allowing operations to continue.
• Success depends on creditor approval, which requires meeting specific voting thresholds—failure can result in conversion to bankruptcy.
• Early legal intervention and expert guidance are crucial to navigate the complexities of PKPU and achieve the best possible outcome.

What is PKPU in Indonesia?

PKPU (Penundaan Kewajiban Pembayaran Utang) is a temporary suspension of debt payment process that allows debtors in Indonesia to restructure their debts under the supervision of the Commercial Court (Pengadilan Niaga). The process is designed to give breathing room to debtors while they negotiate a composition plan (rencana perdamaian) with creditors, with the goal of avoiding bankruptcy.

Unlike bankruptcy (Pailit), which leads to liquidation, PKPU offers a path to corporate recovery through court-sanctioned debt settlement arrangements.

Legal Framework for PKPU in Indonesia

The PKPU process is governed primarily by:

• Law No. 37 of 2004 on Bankruptcy and PKPU
• Supreme Court Circular Letters (SEMA) providing procedural guidance
• Applicable jurisprudence from Indonesian courts

Under this legal framework, a PKPU petition can be filed by either a debtor or a creditor when it becomes evident that the debtor is unable to pay debts that are:

• Due and payable
• Owed to at least two creditors

The goal of the law is to balance the interests of creditors and debtors while promoting business continuity.

Debtor Rights During PKPU

When a PKPU is granted, the debtor remains in control of their business but must act under the supervision of a court-appointed Administrator (Pengurus). Key rights of the debtor include:

• Operational Management: Debtors can continue running their business but require approval from the Administrator for decisions.
• Legal Protections: Creditors cannot enforce claims, seize assets, or initiate new lawsuits during the PKPU period.
• Proposal of Composition Plan: Debtors have the exclusive right to propose a restructuring plan (rencana perdamaian) to creditors.
• Appeal and Objection Rights: Debtors can challenge adverse court decisions or actions by the Administrator.

These rights empower debtors to work toward a viable financial solution without the immediate threat of bankruptcy or asset seizure.

READ MORE:

• The Differences Between PKPU and Bankruptcy in Indonesia
• Debt Collection in Indonesia: Legal Strategies & Best Practices

Stages of the PKPU Process

1. Filing the PKPU Petition

A PKPU petition can be filed by:

• Debtor (voluntary PKPU)
• Creditors

The petition is submitted to the Commercial Court, and the debtor must owe at least two creditors with undisputed, due, and payable debt.

2. Temporary PKPU (PKPU Sementara)

If the court approves the petition, it grants a Temporary PKPU for a maximum of 45 days. During this time:

• A Supervisory Judge (Hakim Pengawas) is appointed
• One or more Administrators (Pengurus) are assigned

The debtor prepares and negotiates a restructuring plan with creditors

3. Extension to Permanent PKPU (PKPU Tetap)

If negotiations are progressing, the court may grant a Permanent PKPU upon petition. This extension can bring the total PKPU duration to a maximum of 270 days.

4. Submission of Composition Plan

The debtor must submit a composition plan that outlines:

• Debt repayment proposals
• Rescheduling, haircuts, or debt-to-equity swaps
• Guarantees or collateral
• Future business viability projections

5. Creditors Voting

The plan must be approved by a double majority:

• More than ½ of the total number of creditors present
• Representing at least ⅔ of the total value of their claims

If approved, the court confirms the plan (homologasi), making it legally binding on all creditors.

Conversion to Bankruptcy (Pailit)

1. Grounds and Triggers for Conversion

If the debtor fails to submit a viable composition plan or if the plan is rejected by the creditors, the proceeding may be converted into bankruptcy upon request by:

• Any verified creditors
• The Administrator

Common triggers include:

• Breach of settlement terms post-approval
• No plan submitted within the PKPU period
• Failure to meet creditor voting thresholds

2. Strategic Considerations for Debtors

Conversion to bankruptcy (Pailit) results in the debtor’s assets being liquidated by a court-appointed Receiver (Kurator). To avoid this, debtors should:

• Act early and in good faith
• Ensure transparency in their financial disclosures
• Avoid asset transfers that can be deemed fraudulent
• Propose realistic and executable restructuring terms

Legal Remedies and Appeals Available to Debtors

Debtors are entitled to several legal remedies during the PKPU process:

• Appeal (Kasasi): Debtors can appeal the court’s PKPU decision to the Supreme Court within 8 days of issuance.
• Objection to Administrator: If an administrator acts improperly or exceeds authority, the debtor may submit an objection to the Supervisory Judge.
• Opposition to Bankruptcy Conversion: If the conversion is unjustified, the debtor can present evidence to prevent it.

Debtors must keep records of all proceedings and comply with legal requirements to support any remedy or appeal.

The Role of the Commercial Court in PKPU

The Commercial Court (Pengadilan Niaga) plays a pivotal role in overseeing the PKPU process:

• Evaluates the initial petition
• Appoints the Supervisory Judge and Administrator
• Decides on extensions and plan confirmation
• Rules on disputes or objections
• Authorizes conversion to bankruptcy if necessary

The court ensures that the PKPU process is fair, transparent, and compliant with the law.

Best Practices for Debtors Entering PKPU

1. Conduct Internal Reviews Early
   Assess your company’s liabilities, cash flows, and assets well before insolvency risk peaks.
2. Engage Legal and Financial Advisors
   Experienced professionals can help strategize, negotiate, and ensure compliance.
3. Prepare a Feasible Composition Plan
   Avoid unrealistic proposals. Credibility builds trust with creditors.
4. Communicate Transparently
   Update all stakeholders regularly and honestly.
5. Avoid Fraudulent Conduct
   Transactions made to hide or shift assets may be reversed and penalized.
6. Respect Court Timelines
   Deadlines in PKPU are fixed and non-negotiable.
7. Build Consensus Early
   Securing major creditors’ support before the vote increases the chances of plan approval.

Practical Commentary from Kusuma & Partners Law Firm

At Kusuma & Partners, we have successfully advised both debtors and creditors in high-stakes PKPU proceedings. Our experience shows that timing, strategy, and stakeholder engagement are critical.

Key takeaways from our practice:

• PKPU is a legal tool, not a last resort—act before insolvency deepens.
• Courts respond positively to good-faith restructuring efforts.
• A well-prepared composition plan can restore financial health and corporate credibility.
• Cross-border debtors should understand that PKPU is enforceable in Indonesia, even if foreign creditors are involved.

Our tailored approach helps clients avoid bankruptcy, maintain business continuity, and protect their reputations.

READ MORE:

• Understanding Antitrust and Competition Law in Indonesia
• Top 5 Mistakes to Avoid When Signing a Commercial Lease Agreement

Conclusion

The PKPU (Suspension of Debt Payment Obligations) mechanism in Indonesia serves as a vital legal remedy for companies in financial distress, offering a structured and court-supervised process to negotiate with creditors, restructure liabilities, and avoid liquidation. Unlike bankruptcy, PKPU allows debtors to maintain business operations while seeking a viable resolution with creditors.

However, the success of a PKPU proceeding depends heavily on early intervention, legal compliance, and a well-prepared composition plan supported by key stakeholders. Debtors must act in good faith, remain transparent, and work closely with experienced legal advisors to navigate the complex procedural landscape and safeguard business continuity.

How We Can Help

At Kusuma & Partners Law Firm, we understand the high stakes involved in PKPU proceedings. With deep expertise in Indonesian insolvency law and a proven track record in representing both debtors and creditors, we are committed to guiding our clients through every stage of the PKPU process with strategic precision and legal integrity.

Our experienced team of bankruptcy lawyers offers:

• End-to-end PKPU representation
• Strategic debt restructuring advice
• Litigation and court representation
• Cross-border creditor negotiations

Fill in the form below to get legal expert guidance on PKPU and Bankruptcy strategies that protect your future.

“DISCLAIMER: This content is intended for general informational purposes only and should not be treated as legal advice. For professional advice, please consult with us.”