Frequently Asked Questions

In today’s hyperconnected global economy, cross-border commercial relationships are both an opportunity and a liability. When things go wrong—whether it’s a breach of contract, delayed payments, or fraud—disputes can arise across jurisdictions. Understanding cross-border commercial disputes becomes not just essential, but a legal survival skill for any company or investor.

These disputes involve complex questions: Which court has jurisdiction? Can a foreign judgment be enforced locally? How do treaties like the New York Convention or Hague Convention apply? And etc.

Understanding the Nature of Cross-Border Disputes

Cross-border disputes typically involve parties from different countries engaging in commercial transactions, often governed by diverse legal systems. When a dispute arises, conflicting laws and procedures complicate enforcement and resolution.

Common Causes of Cross-Border Disputes in Business

• Breach of international sales contracts
• Non-payment or delayed payment by foreign buyers
• Violation of intellectual property rights across jurisdictions
• Distribution or licensing disputes
• Delayed or non-performance due to government sanctions or currency controls

Each of these scenarios leads to complex enforcement dilemmas when the dispute spans two or more legal systems.

Jurisdiction in International Commercial Disputes

One of the biggest hurdles is determining which country’s court has the authority to hear a case.

1. Domestic vs Foreign Jurisdiction

Jurisdiction can be based on:

• Where the contract was performed
• Where the defendant resides or does business
• What the parties agreed in the contract

Courts generally prefer to avoid exercising jurisdiction over foreign parties unless justified under specific legal grounds.

2. Choice of Forum and Governing Law

Well-drafted contracts usually include:

• Choice of forum: agreed court or arbitration venue
• Governing law: which country’s law governs the dispute

Clear forum selection saves businesses from legal issues.

READ MORE:

• How to Enforce International Arbitration Award in Indonesia

International Treaties and Legal Frameworks

To facilitate cross-border enforcement, several international treaties play a role.

1. New York Convention on Arbitration

Indonesia is a signatory to the 1958 New York Convention, which allows for the recognition and enforcement of foreign arbitral awards in member countries.

2. Hague Convention on Judgments

While Indonesia is not yet a party to the 2019 Hague Convention on Recognition and Enforcement of Foreign Judgments, the treaty marks a global movement toward harmonized enforcement practices.

Enforcement of Foreign Judgments in Indonesia

Indonesia does not automatically enforce foreign court judgments.

1. Requirements for Enforcement (Exequatur Process)

To enforce a foreign arbitral award, the Indonesian court must issue an exequatur—a recognition of enforceability.

2. Role of Indonesian Supreme Court

The Mahkamah Agung (Supreme Court) plays a gatekeeper role in recognizing foreign judgments or arbitral awards.

Challenges in Cross-Border Judgment Enforcement

1. Reciprocity Principle

For foreign court judgments to be enforced in Indonesia, a reciprocity agreement must exist. This is rarely clear-cut, making enforcement inconsistent.

2. Public Policy Defense in Indonesia

Even if reciprocity exists, the Indonesian courts may refuse enforcement if the judgment contradicts public order (ketertiban umum).

Arbitration as a Preferred Dispute Resolution Method

International arbitration is often favored over litigation for cross-border cases.

1. Benefits of International Arbitration

• Neutral venue
• Privacy and confidentiality
• Flexibility in procedure
• Faster enforcement under the New York Convention

2. Enforcement of Foreign Arbitration Awards

Arbitral awards from New York Convention member states can be enforced in Indonesia, pending the exequatur by the Central Jakarta District Court.

READ MORE:

• How to Obtain a Mining Business License (IUP) in Indonesia

Case Study

A Singaporean company obtained a court judgment against an Indonesian distributor. When attempting enforcement in Indonesia, the court rejected it, citing:

• Lack of reciprocity
• The need for the judgment to not contravene Indonesian public policy

Had the parties chosen arbitration under SIAC (Singapore International Arbitration Centre), enforcement would likely have been possible under the New York Convention.

How to Protect Your Business in Cross-Border Contracts

1. Use of Clear Dispute Resolution Clauses

Include clauses specifying:

• Choice of law
• Arbitration institution (e.g., SIAC, ICC, BANI)
• Enforcement jurisdiction

2. Legal Due Diligence and Jurisdictional Risks

Know your counterparty’s home jurisdiction and the enforceability challenges before signing any agreement.

Practical Commentary from Kusuma & Partners Law Firm

At Kusuma & Partners, we’ve helped multinational clients navigate the turbulent waters of cross-border commercial disputes. We’ve advised on structuring arbitration-friendly contracts, conducted due diligence on enforceability of foreign judgments, and successfully obtained exequatur for international arbitral awards. In our experience, anticipating enforcement issues before they arise is the most effective strategy. Businesses need practical, pre-emptive legal advice—not courtroom firefighting after a dispute explodes.

Conclusion

Cross-border commercial disputes are inevitable in global business. But with the right legal foresight—clarity in contracts, smart use of arbitration, and understanding jurisdictional limitations—businesses can reduce risk and enforce their rights effectively. As Indonesia increasingly integrates with global commerce, strategic legal guidance is more critical than ever.

How We Can Help

Need help navigating a cross-border commercial dispute or enforcing a foreign award in Indonesia? Kusuma & Partners Law Firm offers expert, responsive, and effective legal assistance. Contact us today to protect your cross-border interests.

Fill in the form below to get our expert guidance.

“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.”

In Indonesia’s vibrant corporate landscape, not all shareholders have equal power. While majority shareholders often dominate corporate decisions, minority shareholders—those who own a smaller portion of shares—still have vital interests to protect. Whether you’re a foreign investor holding 10% of a local company or a founding member slowly diluted over time, protecting your stake is not just a desire—it’s your legal right.

Overview of Indonesian Company Law

1. Key Statutory Frameworks

The foundation of shareholder protection in Indonesia is laid out in Law No. 40 of 2007 concerning Limited Liability Company (Undang-Undang Perseroan Terbatas or “UUPT”). It governs the rights and obligations of shareholders and ensures a system of checks and balances within companies.

2. Types of Shareholders: Majority vs. Minority

• Majority shareholders: Typically hold over 50% of shares, with significant influence over the company’s decisions.
• Minority shareholders: Hold a smaller percentage but still have enforceable legal rights.

In practice, minority shareholders are more vulnerable to abuse, including exclusion from important decisions, unfair dividend policies, or even mismanagement. This makes protective mechanisms under the law crucial.

Fundamental Rights of Minority Shareholders

1. Access to Information

Article 50 and Article 100 of the Company Law grant shareholders access to company data. However, minority shareholders often face roadblocks in practice. Legally, they are entitled to financial statements, corporate resolutions, and board meeting summaries.

2. Voting Rights and Influence in GMS

Minority shareholders are entitled to attend and vote in the General Meeting of Shareholders (GMS). Although their votes may not always influence outcomes, certain decisions—like mergers or liquidation—require a higher quorum, giving minority groups strategic leverage.

3. Dividend Rights

All shareholders, regardless of size, are entitled to dividends proportionate to their shareholding. If the company distributes profits selectively or fails to distribute dividends without justification, legal remedies are available.

READ MORE:

• Resolving Company Disputes in Indonesia: Arbitration, Mediation, and Litigation

Protection Mechanisms Under the Law

1. Right to File Derivative Lawsuits (Article 97 and 114)

If directors or commissioners cause harm to the company through negligence or abuse of power, Article 97(6) and Article 114(6) allow shareholders (holding at least 1 share) to file derivative lawsuits on behalf of the company.

This mechanism is critical for minority shareholders to ensure corporate accountability without needing majority support.

2. Right to Request Company Dissolution (Article 146)

Article 146 of the Company Law permits minority shareholders—holding at least 10%—to file a petition for dissolution if the company’s activities are deemed contrary to the objectives stated in the Articles of Association or if mismanagement occurs.

3. Rights in Case of Fraud or Mismanagement

In cases of oppression, fraud, or embezzlement, minority shareholders can take civil or criminal actions against the board or majority shareholders, especially if personal interests are being jeopardized.

Recent Legal Developments and Court Decisions

In 2023, the South Jakarta District Court ruled in favor of a minority shareholder of PT XYZ who was denied access to board meeting minutes and dividend rights. The court upheld their right to transparency and proportionate profit distribution, reinforcing the judiciary’s role in protecting minority shareholders.

This decision sent a powerful message: Indonesian courts are increasingly willing to safeguard minority interests when evidence and legal standing are strong.

Practical Strategies for Safeguarding Minority Rights

1. Shareholders Agreement Clauses

Pre-emptive contracts like shareholders agreements (SHA) can empower minority shareholders. Clauses may include:

• Pre-emptive rights
• Reserved matters requiring unanimous consent
• Arbitration clauses for dispute resolution

2. Board Representation Rights

Minority investors can negotiate for board seats—a strategic way to influence decisions and stay informed.

3. Tag-Along and Drag-Along Provisions

These clauses are critical in the event of share sales:

• Tag-along: Allows minority shareholders to join a majority shareholder in a sale under the same terms.
• Drag-along: Obligates minority shareholders to sell when the majority sells, often with protective terms.

READ MORE:

• Understanding Shareholders Agreement in Indonesia

Role of OJK and Legal Remedies

The Financial Services Authority (OJK) oversees transparency and investor protection for public companies. Minority shareholders in listed companies can lodge complaints and request investigations.

Meanwhile, the commercial courts handle private company disputes. Remedies may include injunctions, compensation, annulment of GMS resolutions, or company dissolution.

Pitfalls and Challenges Minority Shareholders Face

While the law offers protection, challenges include:

• Costly litigation and time-consuming legal processes
• Difficulty accessing corporate records
• Collusion between directors and majority shareholders

These hurdles emphasize the need for robust preventive legal strategies from the outset of shareholding.

Practical Commentary from Kusuma & Partners

At Kusuma & Partners Law Firm, we frequently assist minority shareholders—both local and foreign—who face exclusion from key decisions, lack of dividend clarity, or dilution of shares without consent. Many of these issues could have been avoided with well-drafted shareholders agreements that include tag-along rights, board representation, or reserved matters requiring unanimous approval.

In our experience, minority shareholders often wait too long to act. We advise clients to seek legal advice proactively—especially when entering new ventures or sensing mismanagement. The Indonesian legal framework provides strong protection, but timely and strategic intervention is crucial to preserve your rights and avoid costly disputes.

Conclusion

Minority shareholders may be small in number, but they’re not powerless. The legal system in Indonesia—backed by Law No. 40 of 2007—provides both preventive and reactive tools to defend your interests. The key lies in knowing your rights, asserting them wisely, and getting trusted legal guidance.

How We Can Help

Need help protecting your minority shareholder rights? Please contact us today.

Fill in the form below to get our expert guidance.

“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.”

Disputes are an inevitable part of doing business—especially in Indonesia’s dynamic, growing economy. Whether you’re a local entrepreneur, a multinational investor, or a director of a medium-sized enterprise, understanding your options for resolving company disputes in Indonesia is essential to protect your rights and your business. This article dives into Resolving Company Disputes in Indonesia: Arbitration, Mediation, and Litigation, giving you a clear roadmap tailored to the Indonesian legal landscape.

Common Causes of Company Disputes in Indonesia

Disputes often arise from:

• Non-performance or delays in business partnerships
• Breaches of contract or shareholder agreements
• Unclear roles and responsibilities among directors or commissioners
• Corporate governance failures
• Misuse of company funds or assets
• M&A disagreements

These issues can seriously impact operations, cash flow, and even the reputation of your company.

Legal Framework for Resolving Company Disputes

1. Overview of Indonesian Civil Procedure

The Indonesian legal system is primarily civil law-based, regulated by the Civil Code, Law No. 48 of 2009 on Judicial Authority, and Regulation of the Supreme Court No. 1 of 2008 on Mediation. Dispute resolution begins with negotiation, but if this fails, formal mechanisms such as arbitration, mediation, or litigation must be considered.

2. Role of the Indonesian Commercial Court

For insolvency, intellectual property, and other commercial matters, the Commercial Court under the District Court has jurisdiction. This specialized court plays an important role in handling complex corporate disputes.

READ MORE:

• How to Deal with a Breach of Contract in Indonesia

Arbitration in Indonesia

1. Definition and Legal Basis

Arbitration is a private dispute resolution method where parties agree to submit their case to one or more arbitrators. The legal basis is Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution. Arbitration is especially favored in international contracts due to its neutrality and enforceability.

2. Arbitration Procedure under Indonesian Law

The arbitration process generally follows these steps:

1. Submission of the dispute to an institution like BANI (Badan Arbitrase Nasional Indonesia).
2. Appointment of arbitrators by mutual consent or by BANI.
3. Hearings and evidence presentation.
4. Binding award issued within 180 working days unless agreed otherwise.

3. Enforceability of Arbitration Awards

Domestic awards are enforceable directly through the District Court. For foreign arbitration awards, Indonesia is a signatory to the New York Convention 1958, meaning enforceability is possible with exequatur granted by the Central Jakarta District Court.

Mediation in Indonesia

1. Definition and Legal Framework

Mediation is a voluntary process involving a neutral third party to help disputing parties reach a mutually acceptable resolution. It is governed by Supreme Court Regulation No. 1 of 2016 and often required as a pre-condition in civil court cases.

2. Court-annexed Mediation vs Private Mediation

• Court-annexed mediation is mandatory in civil proceedings.
• Private mediation may be chosen voluntarily through institutions like PMN (Pusat Mediasi Nasional) or conducted independently.

3. Advantages of Mediation in Business Conflicts

• Cost-efficient and fast
• Preserves business relationships
• Confidential
• Parties control the outcome
• High compliance with settlement agreements

Litigation in Indonesia

1. Jurisdiction and Legal Process

Litigation is conducted in the General Court system, starting from District Court (Pengadilan Negeri) and potentially escalating to the High Court (Banding) and the Supreme Court (Kasasi and Peninjauan Kembali). It involves formal procedures, examination of evidence, and is open to the public.

2. Timeframe and Costs of Litigation

Litigation can be time-consuming—ranging from 6 months to several years—depending on the case’s complexity. Legal fees, court registration fees, and expert witness costs should be anticipated.

3. Appeal and Cassation Procedures

Unhappy with the verdict? The parties can file:

• Appeal (Banding) to the High Court within 14 days.
• Cassation (Kasasi) to the Supreme Court for legal review.
• Judicial Review (Peninjauan Kembali) in special cases with new evidence.

READ MORE:

• Indonesia’s Arbitration Reform Under Supreme Court Regulation No. 3 of 2023

Choosing the Right Dispute Resolution Mechanism

Your choice depends on various factors:

• Do you value confidentiality? Go for arbitration or mediation.
• Do you need a legally binding decision enforceable by the court? Litigation or arbitration might be more suitable.
• Is preserving the business relationship important? Choose mediation.
• For international business contracts, arbitration is often ideal.

Practical Tips for Business Owners and Investors

• Always include a dispute resolution clause in contracts.
• Use institutional arbitration (like BANI) for faster resolution.
• Document all business interactions clearly to avoid factual disputes.
• Seek early legal advice to prevent escalation.
• Consider hybrid clauses (e.g., mediation first, then arbitration).

Legal Trends and Challenges in Business Dispute Resolution

Indonesia is experiencing growth in online dispute resolution, increased use of international arbitration, and better judicial transparency. However, delays and inconsistent enforcement still pose challenges, particularly in court litigation.

Practical Commentary from Kusuma & Partners

At Kusuma & Partners, we’ve handled various complex corporate disputes—ranging from shareholder disagreements to cross-border arbitration. Our practical experience shows that the right dispute resolution method often depends not just on the law, but also the psychology and strategy behind the dispute. In many cases, starting with mediation saves time, money, and relationships—while arbitration offers protection in high-value or cross-border matters.

Conclusion

Navigating business conflicts doesn’t have to end in court battles. By understanding the mechanisms of resolving company disputes in Indonesia: arbitration, mediation, and litigation, companies can tailor their approach, save resources, and protect long-term interests. The best strategy is prevention, but when disputes arise, informed decisions matter most.

How We Can Help

Need expert help with a business dispute? Contact us today for tailored legal solutions in arbitration, mediation, or litigation. Let us protect your business—strategically and legally.

Fill in the form below to get our expert guidance.

“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.”

In today’s fast-evolving business landscape, corporate restructuring is no longer a luxury—it’s a necessity. Whether a company is navigating financial hardship, aiming for growth, or adjusting to regulatory shifts, understanding corporate restructuring in Indonesia is crucial for long-term viability.

Understanding Corporate Restructuring

Corporate restructuring refers to the process of significantly modifying a company’s operational, legal, ownership, or financial structure to improve profitability, streamline operations, or respond to economic and legal challenges. It is a strategic tool used to stabilize businesses, align them with market conditions, and increase shareholder value.

Types of Corporate Restructuring

1. Financial Restructuring – Focused on debt optimization, equity realignment, or resolving insolvency through court-supervised or out-of-court arrangements.
2. Operational Restructuring – Involves changing internal processes, reducing workforce, or closing underperforming units.
3. Legal Restructuring – May include entity mergers, acquisitions, spin-offs, or changes in corporate governance.
4. Strategic Restructuring – Entails redefining business direction, entering/exiting markets, or pivoting business models.

Legal Framework Governing Corporate Restructuring in Indonesia

Restructuring in Indonesia is governed by a complex legal framework, including:

• Law No. 40 of 2007 on Limited Liability Companies (Company Law)
• Law No. 37 of 2004 on Bankruptcy and Suspension of Debt Payment (PKPU)
• Law No. 25 of 2007 on Investment
• OJK Regulation No. 74/POJK.04/2016 on Mergers and Acquisitions of Public Companies

Common Strategies for Corporate Restructuring in Indonesia

1. Mergers and Acquisitions (M&A)

M&A is a common path for restructuring, allowing companies to consolidate market position or enter new markets. Legal due diligence, shareholder approval, and OJK/BKPM clearance are critical steps in this process.

2. Spin-offs and Divestitures

Spin-offs involve separating business units into new entities. They allow firms to streamline focus and unlock value, but must comply with corporate restructuring procedures and tax planning.

3. Debt Restructuring and PKPU

Under Indonesia’s PKPU (Penundaan Kewajiban Pembayaran Utang) mechanism, companies can suspend debt repayment while negotiating with creditors. This formal court-supervised process is a powerful tool during financial crises.

4. Capital Reduction or Injection

Companies may restructure their balance sheets by reducing capital (to absorb losses) or injecting new capital (to finance growth). These actions require GMS (General Meeting of Shareholders) approval and legal filings.

READ MORE:

• Merger in Indonesia: A General Overview for Businesses

Restructuring Triggers: When and Why Businesses Restructure

1. Economic Downturns and Crisis Recovery

During COVID-19 and post-pandemic recovery, many Indonesian companies restructured to survive declining revenue and cash flow constraints.

2. Regulatory or Compliance Pressures

Changes in foreign ownership rules, tax law reforms, or OJK regulations may compel businesses to realign their structures to maintain compliance.

The Process of Corporate Restructuring in Indonesia

1. Legal and Tax Due Diligence

Understanding the company’s legal and financial standing is critical. This includes identifying hidden liabilities, tax exposures, and compliance risks.

2. Stakeholder Communication and Consent

Shareholder and creditor consent is often legally required. Proper disclosure and approval through GMS are essential.

3. Regulatory Approvals and Implementation

For PT PMA or listed entities, the restructuring plan must be submitted to BKPM or OJK, followed by notarial deeds and Ministry of Law and Human Rights registration.

Tax Implications of Corporate Restructuring

1. Value-Added Tax (VAT) and Income Tax

Transfers of assets during restructuring may trigger VAT or income tax. Strategic planning is essential to minimize tax leakage.

2. Transfer Pricing and Withholding Tax

For intra-group restructuring, transfer pricing must reflect the arm’s length principle, or risk adjustment by the Directorate General of Taxes.

READ MORE:

• New Tax Audit Procedures in Indonesia : Key Updates and Implications for Taxpayers

Challenges and Risks in Corporate Restructuring

1. Legal Risks and Litigation

Improper procedures may lead to annulment by the court or disputes among stakeholders. This underscores the need for legal precision.

2. Employee and Labor Law Issues

Layoffs or organizational changes must comply with Law No. 6 of 2023 on Job Creation (Omnibus Law), ensuring fair severance and labor union involvement.

Practical Commentary from Kusuma & Partners

At Kusuma & Partners, we’ve guided numerous Indonesian and foreign clients through complex restructuring—from mergers and capital reductions to PKPU filings. One of the most critical lessons we’ve learned is that timing and preparation are everything. Businesses that restructure proactively—before financial or legal issues escalate—achieve far better outcomes than those that wait until crisis hits. Clear communication with stakeholders and early regulatory engagement are also key to avoiding costly delays or disputes.

We often remind clients that restructuring is not merely a legal procedure, but a strategic pivot that demands alignment between legal, financial, and operational functions. Whether through debt reorganization, shareholding adjustments, or business model changes, a well-planned restructuring—done with precision and compliance—can secure a company’s future. With our hands-on experience, Kusuma & Partners delivers practical, business-focused legal solutions that protect value and support long-term success.

Conclusion

Corporate restructuring in Indonesia is more than a legal formality—it’s a vital business strategy. Companies that restructure smartly and legally position themselves for resilience and growth. Yet, the journey is complex, demanding sound legal advice, financial prudence, and human sensitivity.

How We Can Help

Need to restructure your business in Indonesia? Let Kusuma & Partners Law Firm help you navigate the process with legal precision and business foresight. Contact us today for a consultation.

Fill in the form below to get our expert guidance.

“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.”

Using nominee shareholders may seem like a quick solution for foreigners looking to tap into Indonesia’s lucrative market. But is it really safe? As tempting as it sounds, this shortcut could backfire—legally and financially. Let’s unpack the legal risks of nominee shareholder arrangements in Indonesia and explore safer alternatives for your business.

Understanding Nominee Shareholder Arrangements

A nominee shareholder is someone who holds shares on behalf of another person—typically, a foreign investor. In Indonesia, this setup is commonly used when foreign ownership in certain sectors is restricted.

Why Foreigners Use Nominee Shareholders in Indonesia

Many foreign investors turn to nominee shareholders to bypass the Negative Investment List (now the Positive Investment List under Presidential Regulation No. 10 of 2021). They want to operate in sectors where full foreign ownership is not permitted. However, this workaround may open the door to unintended consequences.

Indonesian Legal Framework: Is It Legal?

Here’s where the problem starts. Nominee structures are not explicitly regulated under Indonesian law—but they are also not recognized as valid ownership.

1. Investment Law and Foreign Ownership Restrictions

Under Law No. 25 of 2007 on Investment, all foreign investments must be conducted through a PT PMA (foreign direct investment company). Using an Indonesian citizen to “hold shares on behalf of” a foreigner is not a recognized mechanism for foreign ownership.

2. Fiduciary Relationships vs. Legal Ownership

The legal system in Indonesia recognizes de jure (legal) ownership—not beneficial or economic ownership unless it is formally structured. A foreign party hiding behind an Indonesian nominee may be left with no enforceable rights.

Common Nominee Structures in Indonesia

Nominee arrangements take many forms. Understanding how they structure these arrangements can help you recognize the risks involved.

1. Individual Nominees vs. Corporate Nominees

Some use individuals—friends, employees, or local partners—as nominees. Others create an Indonesian company to act as the shareholder. In both cases, ownership remains under the name of the nominee, not the foreign investor.

2. Use of Loan Agreements or Power of Attorney

Some foreign parties sign “loan agreements” or powers of attorney to control the nominee. However, Indonesian courts often disregard these as attempts to circumvent investment regulations.

READ MORE:

• New Beneficial Ownership Regulation in Indonesia 2025: What Businesses Must Know

Key Legal Risks of Nominee Shareholder Arrangements in Indonesia

Let’s look deeper at why nominee arrangements can become a legal landmine.

1. Ownership Invalidity and Non-Enforceability

Courts may declare nominee arrangements null and void. Even with signed contracts, the authorities may not legally enforce ownership that doesn’t align with licensing and BKPM approvals.

2. Potential Criminal Exposure

Article 33 of the Indonesian Company Law and Article 263 of the Criminal Code (regarding false documents) may apply in nominee cases. Misrepresenting ownership to authorities could lead to criminal sanctions.

3. Tax Risks and Unreported Interests

Unreported ownership structures may raise red flags with Indonesian tax authorities. Tax authorities may subject beneficial owners to tax audits, impose penalties, or even accuse them of tax evasion.

4. Legal Disputes and Lack of Legal Standing

If a dispute arises, the foreign “owner” has no legal standing to sue or defend their interest in court. You’re essentially investing without protection.

Landmark Court Decisions on Nominee Structures

The case of PT Asuransi Jiwa Manulife Indonesia vs. PT Tirta Amarta Bottling highlighted that agreements violating investment laws may be unenforceable. The courts tend to protect the formal shareholder on paper, not the “real” owner behind the scenes.

Real-World Scenarios: When It Goes Wrong

• A foreign investor loses their hotel in Bali after a nominee refuses to transfer shares back.
• A partnership collapses when a nominee unexpectedly sells the shares.
• Disputes over control become impossible to resolve legally.

These are not rare—they’re frequent cautionary tales.

READ MORE:

• Understanding Shareholders’ Rights and Duties in a Limited Liability Company (PT)

Regulatory Trends and Future Enforcement Risks

Indonesia is moving toward greater investment transparency and tax enforcement. Cross-border data sharing, beneficial ownership disclosure (OJK & PPATK), and stricter BKPM requirements increase risks for hidden ownership.

Legal Alternatives to Nominee Arrangements

Instead of taking shortcuts, here are smarter options:

1. PT PMA as a Legitimate Investment Vehicle

Set up a PT PMA, get BKPM approval, and operate lawfully. Foreigners can now fully own businesses in many sectors.

2. Strategic Structuring Within the Law

Consider joint ventures with legally compliant frameworks, profit-sharing agreements, or holding companies—structured by legal professionals, not templates.

Practical Commentary from Kusuma & Partners

At Kusuma & Partners, we regularly advise clients who have unknowingly stepped into nominee traps. We’ve seen cases where parties lost millions of dollars due to unenforceable nominee contracts Our recommendation is clear: always structure your investment lawfully. We help clients set up PT PMA, navigate licensing with BKPM, and protect their investments from hidden legal liabilities. If you’re already in a nominee setup, we can assist in risk mitigation or restructuring.

Conclusion

Nominee shareholder arrangements may seem convenient—but in Indonesia, they’re a legal minefield. From ownership invalidity to criminal exposure, the risks are far-reaching. Fortunately, there are lawful ways to invest and operate in Indonesia, and they offer stronger protection and clarity.

How We Can Help

If you’re considering investing in Indonesia or are currently using a nominee arrangement, consult us today. Let our expert lawyers help you secure your business the right way. Book your free consultation now.

Fill in the form below to get our expert guidance.

“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.”

What happens when a director fails to act in the best interest of a company in Indonesia? Can they be personally sued or even jailed? The answer is yes—and the legal framework in Indonesia clearly lays out both civil and criminal consequences. Understanding Director’s Liability Under Indonesian Law: Civil and Criminal Consequences is vital for business owners, board members, investors, and professionals involved in corporate governance.

Let’s dive into the multifaceted liability risks directors face under Indonesian law—and how to avoid them.

Understanding Director’s Role in Indonesian Companies

1. Legal Definition of a Director

Under Law No. 40 of 2007 on Limited Liability Companies (“Company Law”), a director is someone appointed to manage the company’s day-to-day operations. They act as the “brain” of the corporation, with authority to represent the company in and outside the court.

2. Fiduciary Duties and Responsibilities

Directors are bound by fiduciary duties, namely:

• Duty of care
• Duty of loyalty
• Duty to act in good faith

They must act prudently and avoid conflicts of interest. Failing to do so can trigger legal exposure both internally (by the company or shareholders) and externally (by third parties or regulators).

Legal Basis of Director’s Liability in Indonesia

1. Company Law (Law No. 40/2007 on Limited Liability Companies)

Article 97(3) of the Company Law states that directors are personally liable for losses suffered by the company if they are at fault or negligent in carrying out their duties.

2. Other Relevant Laws

• Criminal Code (KUHP) – Fraud, embezzlement, and criminal negligence.
• Bankruptcy Law (Law No. 37 of 2004) – Presumption of guilt in insolvency.
• Anti-Corruption Law (Law No. 19 of 2019) – For directors of SOEs or companies managing public funds.
• Tax Law and Environmental Law – Personal liability may arise from violations.

Civil Liability of Directors

1. Liability for Mismanagement

If a director’s decisions result in financial loss due to recklessness or lack of prudence, they can be sued personally by the company (derivative suit) or shareholders.

Piercing the Corporate Veil

The protection of limited liability may be lifted when:

• The company is used for unlawful purposes.
• There is a clear conflict of interest.
• The director acts beyond their authority.

This doctrine allows creditors to go after the director’s personal assets.

2. Liability Toward Third Parties and Shareholders

Third parties may sue directors directly if:

• The director commits tort (e.g., fraud).
• The director breaches contractual representations.
• They issue misleading statements to investors.

Criminal Liability of Directors

1. Fraud, Embezzlement, and Corruption Charges

Directors can face criminal prosecution if they:

• Falsify company documents.
• Misappropriate company funds.
• Engage in corrupt practices with government or private entities.

These offenses can carry penalties of years of imprisonment and heavy fines.

2. Tax Evasion and Money Laundering

Under Indonesian Tax and Anti-Money Laundering laws, directors may be held liable for:

• Concealing assets.
• Falsifying tax returns.
• Facilitating illegal fund transfers.

Penalties include asset seizure and imprisonment.

3. Corporate Crimes and Environmental Violations

Environmental damage caused by a company due to management negligence can lead to the director being held criminally responsible. For example, directors of mining companies can be liable for illegal deforestation or pollution.

Director’s Liability in Bankruptcy and PKPU

1. Presumption of Fault in Insolvency

When a company is declared bankrupt, the directors are presumed at fault unless they can prove:

• The company was managed prudently.
• Financial statements were transparent and in compliance with accounting standards.
• There was no fraudulent transfer or concealment of assets.

2. Directors’ Duties in Pre-Bankruptcy Situations

If the director continues to incur debt when the company is already insolvent, it may be seen as bad faith, exposing the director to both civil and criminal liability.

READ MORE:

• How to Conduct a Corporate Legal Audit in Indonesia

How to Minimize Director’s Liability

1. Good Corporate Governance (GCG)

GCG principles help directors avoid liability:

• Implement internal audit mechanisms.
• Establish risk management and compliance protocols.
• Maintain transparency and accountability.

2. Seeking Legal Opinions and Compliance Advisory

Before entering into major transactions, directors should obtain:

• Written Legal Opinions.
• Regulatory compliance checks.
• Board approvals, documented formally.

These practices serve as legal safeguards if liability is later questioned.

Practical Commentary from Kusuma & Partners

At Kusuma & Partners Law Firm, we have assisted numerous directors, both Indonesian and foreign, in navigating the risks of personal liability. We have represented clients in disputes involving Director’s Liability Under Indonesian Law: Civil and Criminal Consequences, from internal shareholder lawsuits to criminal investigations involving the police and KPK.

Our advice? Don’t wait until problems arise. Conduct regular compliance reviews and document every critical decision. When in doubt—seek legal counsel. Prevention is far less costly than litigation or prison.

Conclusion

Directors in Indonesia bear serious responsibilities and, consequently, face serious liabilities. Whether it’s mismanagement, fraud, insolvency, or regulatory breaches, the consequences can be life-changing. Understanding Director’s Liability Under Indonesian Law: Civil and Criminal Consequences is not just about risk avoidance—it’s about leading with integrity, diligence, and accountability.

How We Can Help

Need legal advice on director liability, governance strategy, or compliance? Contact us today and let us help you safeguard your business.

Fill in the form below to get our expert guidance.

“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.”

Indonesia is emerging as one of Southeast Asia’s most dynamic investment destinations. With its expanding consumer market, robust natural resources, and government initiatives aimed at attracting foreign capital, Indonesia holds immense potential for international investors. However, along with these opportunities comes a complex legal landscape that can pose significant challenges. Foreign investors must understand not only how to seize business opportunities but also how to protect their interests when legal disputes arise. In this article, we explore in depth how foreign investors can navigate legal disputes in Indonesia, highlighting regulatory frameworks, dispute resolution mechanisms, and the crucial role of legal counsel.

Key Takeaways

• Legal disputes in Indonesia are complex, especially for foreign investors.
• Arbitration is often the preferred route for cross-border investment disputes.
• Choosing the right dispute resolution clause is critical in contracts.
• Engaging local legal experts like Kusuma & Partners ensures proper navigation of the legal system.
• Preventive legal planning is key to minimizing risks in Indonesia’s legal environment.

Understanding the Indonesian Legal Environment

1. Legal Framework for Investment

Indonesia’s legal system is rooted in civil law and heavily influenced by Dutch colonial codes. The primary legislation governing foreign investment is Law No. 25 of 2007 concerning Investment. This law establishes equal treatment for domestic and foreign investors, but it also subjects foreign investment to certain limitations, including the Negative Investment List (now updated to the Positive Investment List under Presidential Regulation No. 10/2021). Additionally, sector-specific regulations and regional autonomy laws can create inconsistent interpretations and compliance burdens.

Understanding the hierarchical nature of Indonesian law is essential. National laws (Undang-Undang), Government Regulations (Peraturan Pemerintah), Presidential Regulations (Peraturan Presiden), Ministerial Regulations, and Regional Regulations all play a role. Consequently, an investment that appears legally viable at the national level may still face restrictions at the regional level, making legal due diligence a critical first step.

2. Common Causes of Legal Disputes

Legal disputes involving foreign investors typically stem from:

• Breach of contract: Unclear contract terms, unilateral termination, or delays in performance.
• Regulatory non-compliance: Failure to obtain proper licenses or comply with zoning or environmental laws.
• Land disputes: Issues over land titles, overlapping claims, or improper land acquisition.
• Shareholder disagreements: Conflict with local partners over governance or dividend distributions.
• Government intervention: Revocation of permits or discriminatory enforcement.

These disputes, if not promptly and properly addressed, can escalate and cause reputational and financial harm. Identifying early warning signs and adopting a dispute prevention mindset are essential for safeguarding long-term investments.

Dispute Resolution Mechanisms in Indonesia

1. Litigation in Indonesian Courts

Litigation remains a legally valid and sometimes necessary path for dispute resolution. However, the Indonesian court system has notable limitations. First, the process is often slow, with cases potentially lasting several years due to backlogs and procedural complexity. Second, all proceedings are conducted in Bahasa Indonesia, which necessitates high-quality legal translation and interpretation.

Moreover, questions around impartiality, especially in regional courts, can lead foreign investors to feel uncertain about fair outcomes. While the Supreme Court continues efforts to improve judicial integrity through reform and transparency initiatives, inconsistent jurisprudence and limited precedent usage in civil law still pose risks. Thus, litigation may be best reserved for cases where arbitration is unavailable or has failed.

2. Arbitration: Domestic and International Options

Arbitration has increasingly become the preferred dispute resolution method for foreign investors. It offers confidentiality, procedural flexibility, and expert adjudication. Law No. 30 of 1999 on Arbitration and Alternative Dispute Resolution governs arbitration in Indonesia. Furthermore, Indonesia’s ratification of the 1958 New York Convention enables the enforcement of foreign arbitral awards.

For domestic disputes, the Indonesian National Arbitration Board (BANI) is commonly used. For international commercial matters, reputable forums like the Singapore International Arbitration Centre (SIAC), International Chamber of Commerce (ICC), and Hong Kong International Arbitration Centre (HKIAC) are preferred.

It is important for investors to draft arbitration clauses that clearly identify the seat, language, and applicable rules of arbitration. Ambiguities in dispute resolution clauses can lead to procedural complications or unenforceability.

3. Mediation and Alternative Dispute Resolution (ADR)

Besides arbitration, Indonesian law supports mediation and other ADR methods. In fact, court proceedings under the Indonesian Civil Procedure Code require preliminary mediation efforts. Mediation is particularly useful in disputes involving long-term partnerships where preserving relationships is essential.

Successful ADR depends on both parties’ willingness to compromise and the presence of a skilled mediator. In Indonesia, mediation is often informal but can be institutionalized through organizations such as the Indonesian Mediation Center (PMN). Well-drafted mediation clauses can also streamline the path to amicable settlements.

READ MORE:

• How to File a PKPU Petition in Indonesia: A Legal Guide

Foreign Investor Challenges in Legal Disputes

1. Language Barrier and Legal Complexity

All legal proceedings and documents in Indonesia must be conducted in Bahasa Indonesia. This linguistic requirement often leads to misunderstandings or contractual discrepancies, especially when the original document was drafted in a foreign language. Courts have ruled in multiple cases that agreements not written in Bahasa Indonesia may be considered void under Law No. 24/2009 on the Flag, Language, and National Symbols.

Furthermore, the intricacies of overlapping regulations and bureaucratic procedures make navigating the legal system highly complex without proper legal guidance. Missteps in interpretation or translation can result in costly setbacks or unfavorable judgments.

2. Enforceability of Contracts and Awards

Indonesia’s commitment to the New York Convention is commendable; however, enforcement is not automatic. Local courts can refuse recognition of foreign arbitral awards based on public policy or procedural defects. This risk underscores the need for thorough legal vetting and compliance during contract drafting and arbitration proceedings.

Additionally, enforcement of foreign court judgments (as opposed to arbitral awards) is not yet fully recognized under Indonesian law, as there is no bilateral or multilateral treaty to this effect. Consequently, arbitration remains a more effective route for cross-border enforcement.

3. Corruption and Bureaucratic Hurdles

Despite notable anti-corruption reforms, Indonesia still grapples with bureaucratic inefficiencies and corruption at various levels. Delays in court rulings, “hidden costs,” and preferential treatment in some jurisdictions can frustrate foreign investors.

However, initiatives such as the e-Court system, judicial transparency programs, and the Corruption Eradication Commission (KPK) have shown promise in improving the business climate. Investors should insist on transparency and accountability in all dealings and engage counsel to oversee bureaucratic interactions.

Protecting Investment through Legal Planning

1. Drafting Dispute-Resistant Contracts

Contracts are the first line of defense against legal disputes. Foreign investors must ensure contracts are detailed, legally compliant, and aligned with Indonesian law. Key components include:

• Clearly defined scope of work and deliverables
• Payment schedules and termination conditions
• Force majeure and indemnity provisions
• Governing law and dispute resolution clauses

Avoid using overly complex legalese that can cause confusion in translation. Instead, use precise, plain language that holds up in both Bahasa Indonesia and English versions.

2. Governing Law and Forum Selection Clauses

Strategically selecting the governing law and forum is crucial in cross-border contracts. While Indonesian courts accept foreign law under certain conditions, disputes governed by foreign law may still be subject to public policy considerations under Indonesian enforcement standards.

Ideally, contracts should specify international arbitration in a neutral venue (e.g., Singapore or London) with clear procedural rules. This approach minimizes jurisdictional ambiguity and increases the likelihood of enforceability.

READ MORE:

• How to Enforce International Arbitration Award in Indonesia

Role of Legal Counsel for Foreign Investors

1. Importance of Local Legal Expertise

Foreign investors often make the mistake of relying solely on their home country advisors. However, local legal insight is indispensable. A local lawyer understands regulatory nuances, cultural norms, and procedural peculiarities that international counsel may overlook.

Legal counsel can assist in:

• Pre-investment due diligence
• Regulatory compliance reviews
• Contract negotiation and drafting
• Dispute resolution and enforcement

Choosing a law firm with bilingual lawyers and cross-border experience ensures seamless communication and effective representation.

2. How Kusuma & Partners Supports Foreign Clients

At Kusuma & Partners Law Firm, we specialize in guiding foreign investors through Indonesia’s legal terrain. Our services include:

• Comprehensive contract reviews with dual-language compliance
• Representation in court and arbitration proceedings
• Mediation and negotiation support
• Assistance with regulatory filings and dispute avoidance strategies

We act not just as legal advisors but as strategic partners invested in our clients’ long-term success.

Practical Commentary from Kusuma & Partners

From our extensive experience, we’ve seen that proactive legal strategy often makes the difference between success and loss. For instance, a recent client—a European investor in renewable energy—faced a permit revocation due to misaligned regional regulations. By initiating dialogue with regional authorities and invoking contractual mediation clauses, we helped resolve the matter without litigation, saving time and cost.

Such outcomes are not coincidental—they are the result of planning, local insight, and timely legal intervention.

Conclusion

Indonesia remains a high-potential but legally intricate market for foreign investors. To thrive, investors must not only focus on financial strategy but also on legal preparedness. Understanding how foreign investors can navigate legal disputes in Indonesia requires a combination of regulatory awareness, strategic contract design, and expert local counsel.

Don’t let preventable disputes disrupt your investment. With the right legal support, you can mitigate risks and focus on growth.

How We Can Help

If you’re a foreign investor needing legal clarity or facing a dispute, contact us today. Let our experienced team help you navigate Indonesia’s legal environment with confidence and strategic foresight.

Fill in the form below to get our expert guidance.

“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.”

Indonesia stands at the forefront of the global mining industry. With its rich reserves of coal, nickel, bauxite, copper, and tin, the country plays a pivotal role in powering the world’s energy transition and manufacturing supply chains. However, amid increasing environmental concerns and the push for economic sustainability, the Indonesian government has taken a bold step by introducing new mining quota rules in Indonesia. These changes aim to bring greater transparency, discipline, and fairness to mineral extraction activities. As a result, businesses involved in mining must now recalibrate their legal and operational strategies to stay compliant and competitive.

Key Takeaways

• Indonesia has revamped its mining quota regulations starting 2024, affecting IUP/IUPK holders significantly.
• The new system prioritizes compliance, production history, and ESG commitments for quota approval.
• Companies must follow stricter procedures and timelines to secure their production quotas legally.
• Failure to comply may result in heavy sanctions, including permit suspension or revocation.
• Legal advisory is crucial—navigating the system without expert guidance risks non-compliance.

Regulatory Framework Governing Mining Quotas

To understand the significance of the new policy, it is essential to examine the legal backbone. The foundation lies in Law No. 2 of 2025 (amending Law No. 4 of 2009) on Mineral and Coal Mining (known as the Minerba Law), which sets out the overarching legal regime. Complementary regulations include:

• Government Regulation No. 25 of 2024 on Mineral and Coal Mining Activities,
• Minister of Energy and Mineral Resources (MEMR) Regulation No. 10 of 2023 on Guidelines for Granting Mining Business Licenses, and

These regulations assign the power to issue and oversee quotas to the MEMR, working closely with the Directorate General of Mineral and Coal (Ditjen Minerba) and regional authorities in cases involving local IUP. This structured framework ensures that mining operations remain accountable, environmentally compliant, and aligned with national objectives.

The 2024–2025 Reforms: What Changed?

Beginning in 2024, the Indonesian government revamped its quota system to address key inefficiencies. Previously, quota allocation was opaque, often delayed, and susceptible to manipulation. Under the new rules, several critical changes were introduced:

• Centralized Digital Platform (SIMBARA) for submission and tracking,
• Quota evaluation based on performance metrics, including past realization, financial readiness, and ESG adherence,
• Quota restrictions for non-compliant or idle permit holders.

This shift toward data-driven governance reflects Indonesia’s commitment to curbing illegal mining, enhancing fiscal accountability, and supporting downstream value addition. Importantly, the new mining quota rules in Indonesia now place the onus on companies to prove their reliability before receiving approval.

READ MORE:

• How to Obtain a Mining Business License (IUP) in Indonesia

Objectives Behind the New Mining Quota Rules

But what exactly is the government trying to achieve? Fundamentally, this reform serves four strategic purposes:

1. Prevent Overproduction and Resource Depletion: By tightly regulating extraction volumes, the government aims to safeguard mineral reserves for future generations.
2. Enhance Revenue Collection: Quota-based control reduces tax leakages and boosts non-tax state revenue (PNBP) from mining.
3. Strengthen ESG Accountability: Integrating ESG criteria into quota decisions ensures that only responsible companies benefit from state resources.
4. Align with Downstream Policy: The quota mechanism also supports the national mandate to process minerals domestically before export.

Collectively, these goals signify a paradigm shift—from production-centric regulation to performance- and sustainability-based policy.

Key Criteria for Quota Allocation

To obtain a production quota, companies must now undergo a multi-factor evaluation process. The key criteria include:

• Accuracy in Production Realization: Companies must demonstrate at least 80% realization against the previous year’s approved RKAB.
• Environmental Compliance: Valid AMDAL, UKL/UPL, and environmental reports are mandatory.
• Financial Standing: The MEMR requires proof of capital adequacy and clean tax records.
• Operational Readiness: Companies must show ongoing production or justifiable delays, such as infrastructure constraints.
• ESG Commitments: Measures to support local communities and minimize ecological damage will be assessed.

Moreover, each of these components contributes to a composite score, which is then used to approve, reject, or adjust requested quotas.

Quota Application Process

Navigating the new mining quota rules in Indonesia requires precision and diligence. Here’s how companies can manage the application process:

1. Update the RKAB: Start by submitting an annual or multi-year Work Plan and Budget through the e-RKAB system. Ensure that it aligns with production forecasts, environmental constraints, and economic feasibility.
2. Submit Supporting Documents: Include environmental licenses, tax clearance, CSR records, and past quota utilization reports.
3. Evaluation Stage: The MEMR conducts a thorough assessment involving cross-ministerial inputs if necessary.
4. Issuance of Quota Letter: Once approved, you’ll receive a quota letter specifying allowable tonnage, timeline, and monitoring obligations.
5. Ongoing Reporting: You must regularly upload production realization data via SIMBARA and maintain transparency throughout the mining year.

Failing to meet any step may result in rejections or significant delays.

Legal Consequences of Non-Compliance

Compliance is no longer optional—it’s a legal necessity. Under the new system, companies that fail to comply may face serious legal repercussions. These include:

• Monetary Penalties: Fines of up to IDR 10 billion for overproduction or false reporting.
• Permit Suspension or Revocation: Repeat offenders risk losing their IUP or IUPK altogether.
• Blacklist Inclusion: Companies may be barred from applying for future quotas for up to three years.

Moreover, government audits may lead to criminal investigations in cases of fraudulent quota claims or environmental breaches. Legal foresight and proactive compliance are now indispensable for survival in this sector.

READ MORE:

• Understanding Capital Injection Procedures in Indonesia

Impact on Existing Mining Permits (IUP & IUPK)

The new mining quota rules in Indonesia apply universally, including existing IUP and IUPK holders. Nevertheless, transitional measures have been introduced to ease the adjustment. Companies are given:

• 6-month compliance window to adjust operational plans,
• Opportunity to revise their RKABs to match new formats,
• Warning letters before sanctions, allowing rectification within specific deadlines.

Importantly, even companies with long-standing permits must realign with the new quota calculation formula, or risk quota reduction or revocation.

Environmental and Social Considerations

Mining is no longer judged solely by production metrics. Today, environmental and social responsibility is central to regulatory approval. The government now monitors:

• Tailings and waste disposal practices,
• Biodiversity impact mitigation,
• Community engagement and local hiring,

These factors directly influence a company’s eligibility for full or partial quotas. Although a company may meet other technical criteria, a poor ESG score could mean reduced quotas. Therefore, integrating ESG into business operations is not just a moral choice—it’s a strategic imperative.

Challenges Companies May Face

Despite the intended improvements, the new system is not without its flaws. Businesses are likely to encounter:

• Digital Platform Bottlenecks: SIMBARA and e-RKAB may crash during peak submission periods.
• Ambiguous Guidelines: Certain provisions, especially regarding ESG scoring, remain vague and open to subjective interpretation.
• Regulatory Overlap: Conflicts between national and local licensing authorities can delay approvals.
• Increased Costs: Complying with the new standards may raise legal, operational, and audit costs.

Therefore, understanding these barriers early on allows companies to prepare mitigation strategies and seek legal support before problems arise.

Strategic Tips for Businesses to Stay Compliant

To effectively operate under the new regime, companies should:

1. Build a Legal-Compliance Team: This helps in real-time monitoring of regulatory updates and document readiness.
2. Engage Stakeholders Early: Include local governments and communities in planning to prevent future conflicts.
3. Run Internal ESG Audits Annually: Demonstrate proactive commitment to social and environmental safeguards.
4. Consult with Legal Experts Regularly: This ensures documentation and procedures are fully aligned with MEMR expectations.

Staying ahead of the curve reduces risk, maximizes operational continuity, and protects your legal standing.

READ MORE:

• How to Deal with a Breach of Contract in Indonesia

Practical Commentary from Kusuma & Partners

At Kusuma & Partners, we’ve witnessed firsthand the confusion and uncertainty many mining clients face in adapting to these sweeping changes. From unclear RKAB formats to navigating the SIMBARA system, the regulatory landscape can be daunting. Our legal professionals offer end-to-end solutions—from document preparation, compliance, quota negotiations, to dispute resolution. We understand how crucial it is to balance commercial goals with legal certainty, especially in Indonesia’s rapidly evolving mining ecosystem. If your company operates in mining, partnering with us means peace of mind and regulatory confidence.

Conclusion

In summary, the new mining quota rules in Indonesia reflect a maturing legal framework that promotes environmental integrity, operational discipline, and regulatory transparency. For companies, these rules present both a challenge and an opportunity. Those who embrace compliance, invest in ESG, and plan ahead will thrive in this new environment. However, those who ignore the legal shifts may find themselves sidelined by sanctions and setbacks.

How We Can Help

Need guidance on mining quotas, RKAB compliance, or compliance? Contact us today for tailored legal solutions that ensure you’re not just compliant—but ahead.

Fill in the form below to get our expert guidance.

“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.”

Facing mounting debts or unpaid invoices from a debtor? Or perhaps your company is overwhelmed with liabilities it cannot repay in time? In Indonesia, a powerful legal tool exists to provide breathing space for restructuring debt: PKPU (Penundaan Kewajiban Pembayaran Utang), or Debt Payment Suspension. This mechanism is designed to allow debtors and creditors to reach a fair settlement through Indonesian Commercial Court.

This guide explains a walkthrough of how to file a PKPU petition in Indonesia, ensuring that whether you are a creditor or debtor, you’re equipped with the legal knowledge to protect your interests.

Key Takeaways

• PKPU is a legal mechanism in Indonesia to suspend debt payments and restructure obligations before bankruptcy.
• Both creditors and debtors can file a PKPU petition through the Commercial Court with specific legal requirements.
• The PKPU process includes court hearings, creditor verification, and restructuring plan negotiations under court supervision.
• If no agreement is reached, the debtor may face bankruptcy; hence legal representation is critical.
• Kusuma & Partners Law Firm provides expert legal guidance and representation throughout the PKPU process.

Legal Basis of PKPU (Suspension of Debt Payment) Proceedings

PKPU proceedings are governed under Law No. 37 of 2004 concerning Bankruptcy and Suspension of Debt Payment Obligations (Bankruptcy Law). This law provides the legal framework for:

• Who can file a petition
• The structure of proceedings
• Rights and obligations of parties involved
• Legal consequences of PKPU outcomes

Additionally, the Indonesian Commercial Court (Pengadilan Niaga) has exclusive jurisdiction to hear PKPU matters.

Who Can File a PKPU Petition?

Both creditors and debtors have the right to initiate a PKPU petition. Here’s how:

• Creditors: Must prove that the debtor has at least two debts, one of which is due and unpaid.
• Debtors: May proactively seek court protection to reorganize their liabilities before creditors push for bankruptcy.

The ability for either party to initiate adds flexibility and fairness to the process, allowing mutual debt settlements without hostile action.

READ MORE:

• The Differences Between PKPU and Bankruptcy in Indonesia

Types of PKPU: Temporary and Permanent

PKPU comes in two forms:

1. Temporary PKPU (PKPU Sementara)
   • Valid for up to 45 days.
   • Typically used to negotiate debt restructuring proposals with creditors.
2. Permanent PKPU (PKPU Tetap)
   • Can last up to 270 days (including extensions).
   • Granted if initial negotiations show promise but need more time.

A temporary PKPU may be extended into a permanent one by court approval if the debtor shows serious intent and creditors are receptive.

Requirements for Filing a PKPU Petition

Before filing a PKPU petition in Indonesia, ensure that the following criteria are met:

• The debtor has at least two creditors.
• One or more of the debts must be due and payable and can be simply proven.
• The application must be filed with the Commercial Court where the debtor is domiciled.
• Accompanied by evidence such as invoices, loan agreements, or default letters.

Failure to meet these requirements may result in immediate rejection of the petition.

Process: How to File a PKPU Petition in Indonesia

1. Understanding the Role of the Commercial Court

The petition is submitted to the Commercial Court, which is a special division within the District Court that handles insolvency and commercial disputes.

2. Required Documents and Submission Format

The PKPU application should include:

• Formal petition letter.
• Evidence of debts (at least two creditors).
• Identity documents of the petitioner.
• Supporting contracts, invoices, or correspondence.
• Power of attorney (shall be represented by an Indonesian lawyer).

3. Initial Court Hearing and Debtor’s Response

Once the petition is filed:

1. The court schedules a preliminary hearing (usually within 3 days).
2. The debtor may respond or contest the claim.
3. The court reviews whether the debtor meets the insolvency threshold.

If accepted, a temporary PKPU is granted.

The Role of Supervisory Judge and Administrator Team (Tim Pengurus)

The court will appoint:

• A Supervisory Judge (Hakim Pengawas) to oversee the process.
• An Administrator Team (Tim Pengurus), who assists in verifying creditor claims and facilitates negotiation between parties.

These roles are vital in maintaining impartiality and legal order throughout the process.

READ MORE:

• PKPU in Indonesia: A Legal Guide for Debtors

Timeline and Key Milestones in a PKPU Case

Here’s a rough timeline:

• Day 1–3: Petition submitted; court schedules initial hearing.
• Day 4–7: Hearing and issuance of temporary PKPU.
• Day 8–45: Creditor verification and meeting.
• Day 45+: If agreed, extension to permanent PKPU.
• Max 270 days: Deadline to reach an agreement, or risk bankruptcy ruling.

What Happens After PKPU is Granted?

Once the court approves a PKPU, the parties must comply with its terms.

• All debt enforcement is temporarily halted.
• The debtor must submit a restructuring plan to the creditors and the parties must negotiate.
• Creditors vote to accept or reject the proposal.
• If approved, the plan becomes binding.
• If the court rejects the petition, it may declare the debtor bankrupt

Thus, the outcome hinges on good faith negotiation and transparency.

Risks and Legal Consequences for Debtors and Creditors

For debtors, a failed PKPU could lead to:

• Bankruptcy declaration
• Asset liquidation
• Loss of business reputation

For creditors, risks include:

• Delayed repayments
• Reduced recovery (in restructuring plans)
• Competing claims from other creditors

Your legal representative defends your interests throughout the process.

Strategies for Creditors During PKPU Process

Creditors should:

• Actively participate in creditor meetings.
• Verify their claims accurately.
• Review and negotiate the restructuring plan carefully.
• Consider forming a creditor committee for collective bargaining.

Having strategic legal support enhances leverage and protection.

Alternative to PKPU: When to Consider Bankruptcy

If a debtor has no genuine intent to restructure or is clearly insolvent, filing for bankruptcy may be more appropriate than initiating or agreeing to PKPU.

The decision should depend on:

• Financial transparency of the debtor
• Risk of further loss
• Feasibility of recovery via restructuring

READ MORE:

• Debt Collection in Indonesia: Legal Strategies & Best Practices

Practical Commentary from Kusuma & Partners

In our experience, early legal intervention is critical in PKPU matters. Many clients approach us too late—when the company is already at the brink of collapse or after creditors have begun collection actions.

At Kusuma & Partners, we advise companies and creditors to:

• Monitor signs of financial distress early.
• Engage in legal consultation before filing or responding to PKPU.
• Use PKPU strategically as a tool for survival, not delay.

With experiences handling high-profile PKPU cases, our team ensures clients navigate this complex legal terrain with clarity and confidence.

Conclusion

Filing a PKPU Petition in Indonesia is more than just a procedural manual—it’s a roadmap for businesses, creditors, and stakeholders facing serious financial challenges. Whether you are trying to save your business or secure repayment from a distressed debtor, understanding and executing PKPU correctly can make the difference between resolution and ruin.

How We Can Help

Facing financial disputes or unpaid debts? Need to file or defend against a PKPU petition? Our experienced legal team will assess your situation, prepare the right strategy, and represent your best interests in court. Reach out today for a consultation.

Fill in the form below to get our expert guidance.

“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.”