Amicable Debt Collections Indonesia

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 1. General information

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 Payments in Indonesia usually take 30 days on average;  however, delays may reach up to 20 days.

The payment  behaviour of Indonesian companies in recent years has  improved and would be somewhere between acceptable  and good.

During the amicable phase, it is common practice  to appoint a lawyer to serve a warning letter to the debtor.  The warning letter provides a stern message to the debtor  that the creditor is vigilant about the outstanding debt.

We  can only serve the debtor with a warning letter if we already  possess strong preliminary evidence, such as the sale  purchase agreement, invoices, packing or shipping list.

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 1.2. Local agents

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 At the present time, the most effective way is to use a local  lawyer.

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 1.3. Interest

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 Indonesian law prescribes no standard payment terms, but  the Civil Code regulates late payment interest, which has to  be paid by the defaulting party at the request of the nondefaulting  party before a court.

Two sorts of interest would  apply. A conventional interest rate (‘bunga konvensional’)  may be agreed by the parties through a contract and apply  in case of late payment or if a breach of other obligations  occurred.

However, if no contractual agreement exists, a 6%  per annum legal interest rate (‘bunga moratoir’) is set by law.

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 1.4. Debt collection costs Indonesia

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 To date, there is no law or regulation in Indonesia that  regulates collection costs in particular or debt collection  activities in general.

However, within Indonesian law, there  is a split between material and immaterial losses. Material  losses is direct losses caused by the debt, i.e. the principal  debt and/or the cost of shipping.

Immaterial losses are  indirect losses resulting from the debt. Legal costs will be  included as an indirect loss.

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 2. Legal collections Indonesia

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 2.1. General information

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 Legal action in Indonesia is usually lengthy and costly,  and decisions may be inconsistent. Therefore, it is always  advisable to consider amicable settlement opportunities as  a serious alternative to formal proceedings, which overall  should only be commenced when the debt is very significant  (in excess of USD 500,000).

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 2.2. Required documents

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 According to article 164 of ‘Herzienne Indlands Reglement’  (HIR), the required documents are as follows:  

To prove the argument in court, we can use the following  evidences:

1) letter or written document,

2) third party  witness,

3) suspicion,

4) recognition by the defendant,

5)  oath.

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 2.3. Legal dunning procedure

The composition of a typical civil trial in Indonesia is as follows:  

The first hearing will open the conference by asking the  identity of the party, then carry on and urge the parties  to engage in mediation or conciliation. If mediation is not  reached, the court will proceed to the next stage (time for  mediation is 30 days).

However, if mediation is reached, it  will be made of consent, and the trial is completed.  

At the second session, the agenda is the submission of  the defendant to answer the claims of the plaintiffs. The  answer is made in three documents for the plaintiff, the  judge and the defendant’s own archives.  

The third session is a hearing, during which the submission  of the plaintiff’s reply is expected. The plaintiff’s reply is  the response to answer from the defendant stated in the  second session above.  

The fourth session is the rejoinder submission. Rejoinder  is a response to the plaintiff’s reply.  

The fifth session is to provide evidence and/or witnesses  by the plaintiff against the plaintiff’s arguments  previously submitted to strengthen the plaintiff’s lawsuit.  

The sixth session consists of the evidence and/or  witnesses by the defendant to amplify or reinforce their  answer.  

The seventh session is to submit the conclusions by the  parties as a final step to strengthen their arguments  before the judge issues a verdict.  The eighth session consists of the judge’s decision.

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 2.4. Lawsuit

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 Below are the tasks to prepare in a lawsuit:  

- Prepare a power of attorney  

- Prepare the primary opinion and advice regarding the  case

- Prepare and submit the draft lawsuit, any responses,  sure-rejoinder, testimony and conclusion related to the  civil lawsuit  

- Attend court mediation process  

- Attend any court hearings  

- Apply for confiscation of execution at court (if any)  

- Brief and propose any witness in court  

- Submit any supporting documents or evidence.

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 2.5. Debt collection costs

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 Costs of legal action are USD 10,000–USD 40,000,  depending on the complexity of the case.

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 2.6. Expected time frame

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 The time period of a civil court proceeding at the district  court may be 270 days maximum.

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 3. Insolvency proceedings

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 3.1 General information

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 The aim of the insolvency proceedings is to pay out all  creditors with the same quota by liquidating the assets of  the debtor company or collecting the enforceable income of  the individual who is declared bankrupt.  

The procedure is called suspension of debt settlement  obligation (PKPU).  The procedure for applying for PKPU will be addressed to  the chairman of the commercial court, whose jurisdiction  covers the legal position of the debtor.

The application will  be signed by the debtor and the advocate.  

If the applicant is the creditor, the court will summon the  debtor by the bailiff by registered express mail no later than  seven days before the hearing at PKPU court.

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 3.2. Proceedings

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 Insolvency in Indonesia is not a matter of cash flow or  balance sheet.

A debtor having two or more creditors failing  to pay at least one debt that has matured and become  payable may be declared insolvent by the decision of  Indonesian Commercial Court, either at the debtor’s own  petition or at the request of one or more of the debtor’s  creditors.

The term ‘failing to pay’ is interpreted broadly and  does not necessarily mean that the debtor does not have  sufficient cash flow to pay their debts.

Sometimes, a debtor  would be declared insolvent by the Indonesian Commercial  Court when, following a suspension of payment procedure,  no composition plan has been approved by the creditors  and the court alike.

The Insolvency Law No 4/1998 (Law  4/1998) was replaced in 2004 by the Law on Insolvency  and Suspension of Payment No 37/2004 (the Insolvency  Law), which governs insolvency and suspension of payment  procedures in Indonesia.

This framework has reduced the  amount of inconsistent decisions that used to be rendered,  but in practice the insolvency system is still to be tested.

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 3.3. Required documents

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 - The composition plan for rescheduling payment of the  debt
 - The shipping or packing list
 - An original power of attorney
 - Copies of invoices
 - Copies of contracts
 - Copies of orders, order confirmations and delivery notes
 - Copies of general conditions of sales, if there are any
 - Copies of any other correspondence that may verify the  claim.

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 3.4. Expected time frame and outcome

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 There are two agendas:
 - Temporary PKPU – 45 days
 - Permanent PKPU – 270 days maximum.

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 The goal is to reach a peaceful settlement and have the  debt’s repayment scheduled.

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