The commercial court of Central Jakarta recently declared the Indonesian subsidiary of Prudential bankrupt. The bankruptcy of Prudential Indonesia, which remains one of the strongest insurance companies in Indonesia, was declared based on a petition filed by one of its former agents, Lee Bon Siong, for unpaid bonuses to the total of Rp5.7 billion ($612,900). This declaration has once again drawn a lot of attention to the Indonesian legal system, particularly from the British government and the international business community.
The Indonesian Bankruptcy Law (Law 4 of 1998) dictates that a debtor must be declared bankrupt by the relevant commercial court if and when: (i) it has more than two creditors; and (ii) one of its debts has been due and payable but remains unpaid. The IMF-sponsored bankruptcy provisions have been providing greater than expected protection for Indonesian debtors rather than the simplicity for the creditors to render a debtor bankrupt in Indonesia. Strangely, the same provisions have taken victims among high-profile, high-net-worth international companies operating in Indonesia, such as Prudential and Manulife, both insurance companies.
Fortunately, the Indonesian Supreme Court has ruled in favour of Prudential (as it did previously with Manulife), annulling the bankruptcy ruling of the lower court.
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