Fee Guidelines for Administrators and Receivers in Indonesian Bankruptcy Proceedings
By Dewi Savitri Reni and Dewi Mayangsari
Law No. 37 of 2004 regarding Bankruptcy and Suspension of Debt Payments (the "Bankruptcy Law") stipulates that the fees for Administrators and Receivers are decided after the bankruptcy or the Suspension of Debt Payment (Penundaan Kewajiban Pembayaran Utang or "PKPU") is concluded.
While there is some subjectivity in determining the fees of Administrators and Receivers, the fees must follow the guidelines set by the Ministry of Law and Human Rights (MOLHR) in Regulation No. 1 of 2013 regarding Guidelines for Fees of Receivers and Administrators ("MOLHR Reg 01/2013"). Under this Regulation, the fees for Administrators and Receivers depend on the particular case, as elaborated below.
While establishing fee guidelines, MOLHR Reg 01/2013 also seems to have discouraged creditors from pursuing bankruptcy proceedings, for fear that they will be saddled with the Receiver fees. This situation, however, has been rectified by the issuance of Supreme Court Decision No. 54 P/HUM/2013 dated December 19, 2013 ("SC Decision"), as elaborated below.
Administrator fees depend on whether the PKPU ends with a settlement. If the PKPU ends with a settlement, then the fees for the Administrator shall be decided by the judges handling the PKPU and charged to the debtor, using the following factors:
- the work performed by the Administrator;
- complexity of the work;
- capability of the Administrator; and
- the tariff of the Administrator (note that the Regulation does not clarify what is meant by the tariff of the Administrator).
Administrator fees are capped at a maximum of 10% of the total debt that must be paid by the Debtor. If the PKPU ends without a settlement the fees of the Administrator shall be decided by the judges and charged to the debtor considering the same four factors above, and are capped at a maximum 15% of the total debts that must be paid by the debtor.
When the judges approve a bankruptcy application, one of the following scenarios will happen:
- a party appeals to the Supreme Court (the parties can only appeal to the Supreme Court for cassation and/or the review process the High Court cannot examine bankruptcy cases);
- the parties settle; or
- the bankruptcy process continues to the sale of the debtor's assets to pay its obligations to its creditors.
If the bankruptcy is rejected in the appeal stage, either in cassation or review, the fee for the Receiver will be decided by the judges and charged based on the judgment of the relevant judges, and can be charged to either the party that applied for the bankruptcy alone or shared between the party that applied for the bankruptcy and the debtor.
In deciding the fee, the judges shall consider the following:
- the work performed by the Receiver;
- complexity of the work;
- capability of the Receiver; and
- the tariff of the Receiver (note that the Regulation does not clarify what is meant by the tariff of the Receiver).
If the bankruptcy is approved or ends with a settlement a set formula is used to decide the fee for the Receiver.
Temporary Receiver Fees
Article 10, paragraph (1) of the Bankruptcy Law defines a Temporary Receiver as a Receiver who is assigned to supervise the management of the debtor's business and payments to creditors, as well as the assignment or security of the debtor's assets in a bankruptcy that is under the authorization of a Receiver.
Pursuant to Article 2, paragraph (3) of MOLHR Reg 01/2013, fees for a Temporary Receiver shall be as follows:
- if the bankruptcy application is granted the fees will be decided in the first creditors meeting;
- if the bankruptcy application is rejected the fees will be decided by the judges and charged to the party that applied for the bankruptcy.
In deciding the fees, the judges will consider the following:
- the work performed by the Temporary Receiver;
- complexity of the work;
- capability of the Temporary Receiver; and
- the tariff of the Temporary Receiver (note that the Regulation does not clarify what is meant by the tariff of the Temporary Receiver).
In addition to the above fees, Receivers may be entitled to additional fees from the sale of assets held by other creditors or third parties. These fees must not exceed 2.5% of the total sale price of such assets. If there are any additional Receivers or Administrators the fees for such Receivers or Administrators shall be decided by the creditors meeting.
We note that subsequent to the issuance of MOLHR Reg 01/2013, many creditors were reluctant to apply for bankruptcy proceedings because if the bankruptcy application was rejected, the party that applied for the bankruptcy was required to pay the entire fees of the Receiver. The result was that following the issuance of the Regulation, creditors, especially the ones holding the debtor's collateral, were more likely to apply for a PKPU than a bankruptcy proceeding. This provision also raised some issues in practice, where the Receivers received partial payments at most because the party that applied for the bankruptcy was not capable of paying the full Receiver fees itself.
These issues have been resolved by the SC Decision. That decision found that Article 2, paragraph (1) point c of MOLHR Reg 01/2013, which stipulated that Receiver fees must be charged wholly to the party that applied for the bankruptcy, is not legally binding (tidak mempunyai kekuatan hukum mengikat). The Supreme Court found that the article was contrary to the Bankruptcy Law, which regulates that if the judges in the appeals stage cancel a bankruptcy decision, then they shall also decide the bankruptcy costs and Receiver fees based on their judgment. In such case the Receiver fees can be either wholly charged to the party that applied for the bankruptcy or shared between such party and the debtor.
This article is intended for informational purposes only and does not constitute legal advice. This article should not be acted upon in any specific situation without appropriate legal advice.