LEGAL CONSEQUENCES OF THE IMPOSITION OF BANKRUPTCY ON A LIMITED LIABILITY COMPANY (LLC)

LEGAL CONSEQUENCES OF THE IMPOSITION OF BANKRUPTCY

ON A LIMITED LIABILITY COMPANY (LLC)

Introduction

As a developing country, United States has a strong desire to carry out development,

especially in the economic sector, but this desire is often not supported by the adequacy of the

availability of domestic sources of financing so that the inability to provide sources of

financing must be sought from sources originating from outside the country. In seeking

sources of funds issued policies in the economic and business fields as an effort to reduce and

eliminate various types of regulations that hinder and limit and minimize excessive

government interference in the economic and business fields3 in order to create a conducive

business climate in the context of increasing foreign investment.

The word "business" comes from English business which means business activity. Broadly

speaking, the word business is often interpreted as the overall business activities carried out

by people or entities on a regular and continuous basis, namely in the form of activities to

procure goods or services or facilities to be traded, exchanged, or leased with the aim of

making a profit.4 Broadly speaking, business activities can be grouped into three (3) business

fields, namely as follows:

 Business in the sense of trade (commerce), namely the overall buying and selling

activities carried out by people and entities, both domestically and abroad or between

countries for the purpose of making a profit. Example: Manufacturers (factories), dealers,

agents, and so on.

 Business in the sense of industrial activity (Industry), namely the activity of producing or

producing goods whose value is more useful than their origin. Example: The forestry

industry, forestry, mining, and so on.

 Business in the sense of service activities (Service), namely activities that provide

services carried out by both persons and entities. Example: The, Government United

States many Hospitality services, Consultants, Accountants and so on.

According to Sri Rejeki Hartono, this business entity (limited liability company) is in great

demand by entrepreneurs because: "LLC generally has the ability to develop itself, is able to

capitalize capital and as a potential vehicle for obtaining profits both for its own institutions

and for its supporters (shareholders). Therefore, the LLC form of business entity is in great

demand by the public".

Since 1967, when the government began to spur the growth of the national economy by

issuing a foreign investment policy (with the issuance of Law Number 1 of 1967 concerning

Foreign Investment) resulted in a business entity called a limited liability company

experiencing an increase in terms of quantity. Law Number 1 of 1967 in addition to providing

provisions for foreign investors who will invest in United States must establish a business

entity in the form of a limited liability company, also because the entrepreneurs themselves

choose to establish a business entity in the form of a limited liability company in carrying out

their business activities because this form of business entity is considered to have advantages

over other business entities.

This opinion is based on the fact that Limited Liability Companies have the ability The

Limited Liability Company has the ability to develop itself and has the potential to provide

benefits for its own institution as well as for the shareholders. This can be seen in the reality

that exists in our midst, economic organizations (business entities) owned by conglomerates

that control several sectors The economic form is a limited liability company.

In running a business venture to achieve the objectives of a limited liability company,

borrowing is a very common activity. The trend shows that the proportion of companies that

use loans is getting bigger. In fact, it can be seen that there are fewer and fewer companies

that do not use capital from third parties or capital from outside the company. One of the main

motives for a business entity to borrow or use capital from a third party is the desire to

increase the profit that can be achieved, both in terms of amount and in terms of time. On the

other hand, one of the main motives for a creditor or lender to provide a loan is the desire to

get a return on the loan (e.g. interest). From the outset, both borrowers and lenders are fully

aware that the activities they undertake involve risk. In fact, the amount of risk that may arise

is a major consideration in determining the amount of compensation for a loan. In fact, the

greater the risk of loss, the greater the rate of return on a loan. In order to calculate risk,

lenders usually review the performance of the company before and after the loan is disbursed.

In many cases, lenders do not take the amount of colateral as the only consideration before

granting a loan, but rather the prospect of the company's development company concerned. In

business practice, considerations based on the prospects of a company are increasingly

prominent and this is evidenced by the increasing number of companies operating today that

have borrowed capital that is far greater than the amount of their own capital.

Sri Rejeki Hartono further said: b "There are still some practical reasons, among others:

 Each type of business has a relatively wide range, the operational license always states that

the company concerned must be a legal entity (the main choice must be a limited liability

company);

 Every type of business engaged in finance is required to be in the form of a legal entity, the

main choice is also a limited liability company;

 Company which The only company that has the opportunity to utilize capital is a limited

liability company, so it is very natural that the number of LLCs in United States is

increasing."

The monetary crisis, which is based on the rupiah exchange rate, has really weakened and

even killed the financing capacity of the business community. The need for imported raw

materials, especially for substitutive business activities, was severely disruLLCed. What the

debtors experienced at the time was a situation that could not be expected at the time the

credit agreement was signed or the debt securities were issued, namely the unexpected

weakening of the rupiah exchange rate. As a result of these unforeseeable circumstances, the

Debtors were not insured. Fulfillment of payment obligations is disruLLCed because the

required foreign currency must be purchased with rupiah whose exchange rate has depreciated

greatly in a chain, the continuity of production is threatened and even the supply of

complementary materials from subcontract sources in the country is also disruLLCed. For

import-substituting businesses, what is then seen is the scarcity of production in the market.

Meanwhile, for export-oriented businesses, there are no more products to export, and in turn,

there are no more products to export weakening reserves and the ability to pay for imported

goods or materials.

The above series of circumstances illustrates how the monetary crisis has triggered

economic difficulties, which in turn have spilled over into the social sphere. The loss of jobs,

the decline in people's purchasing power (exacerbated by rising prices) have further worsened

social conditions. Now everyone knows that the social turmoil has also spilled over into

severe political turmoil. Of course, the simple thought that usually arises is how to quickly

overcome and stop the monetary crisis that has become the source of these problems. After

all, the issue of the much-declining rupiah exchange rate is actually at the core of the

monetary crisis. Without intending to simplify the complicated issue, but just to facilitate

understanding, it can be stated that the increase or decrease in the value of the rupiah is

inseparable from the money market mechanism itself. It is the law of supply and demand that

colors or even controls the money market.10 There are so many theories and analyses that are

often presented, but unfortunately they are more about explaining the causes of the crisis and

its impact, and some analyses are more of a reaction or just criticism of the thinking and steps

that are being taken to overcome the crisis. The way out of the crisis, which is the key to

resolution, is not offered. The various ideas about reform that are currently being heard are

now transformed into a new issue, with a broader spectrum.

In terms of capitalization, the current deep fall in the value of the rupiah, has also made it

difficult for businesses to fulfill their loan or debt repayment obligations. Regardless of the

background, this has weakened business activities in general. Production activities sagged,

sales activities declined, and trade in related or supporting services also weakened. At this

point, existing employment opportunities are lost and new ones are hard to come by.

As has been described, if the value of the rupiah is so bad, then the market mechanism is

also one of the causes. With this understanding, if a monetary crisis materializes around the

fall of the rupiah exchange rate, the uncertainty of the settlement of such a large debt, at least

has and will always have an influence on the crisis.

The settlement of debt and credit problems serves as a filter to screen the business world

from inefficient companies. The policy of debt and credit settlement is in turn expected to

provide confidence and security to investors, both national and foreign, to invest or develop

business in United States. The Minister of Justice, Prof. Dr. Muladi, at that time hoped that

the settlement of debt and credit problems could be carried out quickly, fairly, openly,

efficiently, and effectively and professionally, so that the national business world could

immediately operate normally, and in turn economic activity would resume. Thus, the social

pressure caused by the loss of many jobs will be reduced.12 Theoretically, as with most debts

and receivables, debtors who have problems with their ability to fulfill their debt repayment

obligations resort to various resolution alternatives. They can negotiate a debt write-off

request, either in part or in full. They may also sell some of their assets In addition to these

possibilities, the debtor can also negotiate a request for a postponement of debt payment

obligations as the final way to resolve through the BANKRUPTCY process if the peace

process is not achieved.

With the enactment of the new BANKRUPTCY Law (Law No. 4 of 1998), undesirable

practices are likely to occur. Certain parties may request that a company be declared

bankruLLC with the main objective not only to protect its receivables, but also to eliminate its

competitors from the market. Another thing is that since the enactment of the

BANKRUPTCY Law until now, it can be said that there are still many kinds of controversies

that arise, for example regarding the maturity of a debt, regarding the valuation of a second

creditor, regarding the legal status of joint operations, regarding the existence of an arbitration

clause in the main agreement which is the basis for the emergence of a debt that has matured,

regarding the issue of novum filed at the level of judicial review. Another thing is that the

revised BANKRUPTCY Law does not differentiate between legal subjects in

BANKRUPTCY (bankruLLC debtors) with all its legal consequences. The revised

BANKRUPTCY Law does not regulate the "continuation" or "existence" of a

BANKRUPTCY estate legal subjects that are declared bankruLLC. What is clear is that in

general, the revised BANKRUPTCY Law still identifies the BANKRUPTCY of an individual

as a private legal subject with the BANKRUPTCY of a legal entity.

Speculation in money market trading is unavoidable and usually not easy to control. Due to

the large role and need for private debt settlement in the monetary crisis, the effort that was

considered very urgent to be carried out and realized was to present a legal tool that was

acceLLCable to the parties involved in debt settlement. The underlying assumLLCion,

however, is that the turmoil in the money market can be helped to circulateif perspective

of debt and credit settlement can be made clear, both in form and time schedule. With this

assumLLCion, the need for large amounts of foreign exchange with a clear timetable for

fulfillment does not necessarily have to cause speculation in the money market and damage

the exchange rate.

Because it was felt that in terms of the material regulated there were still various

shortcomings and weaknesses and it was considered that it was no longer in accordance with

the needs and legal developments in society, the Government amended Law No. 1 of 1998

concerning BANKRUPTCY with Law No. 37 of 2004 concerning BANKRUPTCY and

Suspension of Debt Payments. It turns out that with the issuance of this Law, arrangements

regarding the existence of a legal subject declared bankruLLC, especially the existence of a

Limited Liability Company that has been declared bankruLLC, are still not clearly and firmly

regulated. In addition, with the nature of its limited legal entity in the sense that the company's

assets are separate from the assets of the perpetrators of the management in practice, it shows

that the company is often used as a tool to cover up broader liability, which should be able to

be covered up imposed, and imposed on the parties who have caused the loss. Under the guise

of limited liability, we often find a situation where the company is used as a shield for the

Directors of the company who are not in good faith. Through the implementation of limited

liability company activities, with limited liability, the assets of Directors with bad intentions

seem to be untouchable.

Research Methods

In line with the focus of the study and the problem, this qualitative research with the

paradigm of constructivism uses two approaches at once, namely doctrinal and non-doctrinal

approaches. The use of these two approaches is intended to avoid imbalances in studying the

law, because on the one hand the law cannot escape its normative characteristics, but it is also

not always purely juridical, and the law is not something that processes asocially and

culturally.

Discussion

Legal Consequences Of BANKRUPTCY In Limited Liability Companies

Before the author discusses the legal consequences for a limited liability company in the

event that it has been sentenced to BANKRUPTCY, the author will first discuss the definition

of a Limited Liability Company as a legal entity because this is closely related to the

accountability of an activity that has been carried out by the limited liability company legal

entity.

Article 1 paragraph (1) of UULLC emphasizes that a limited liability company is a legal

entity. With its status as a legal entity, it means that the company is positioned as a legal

subject that is able to support its rights and obligations as well as a person and has its own

assets separate from the assets of its founders, shareholders, and administrators, or it can be

said that we can find a company with a legal entity.

(rechtpersoonlijkheid) in the legal entity of a corporation or company. However, in the

UULLC we will not find the limitations of what exactly is meant by the legal entity.

There are several theories put forward by experts regarding legal entities, including the

following:

 Von Savigny's Fictitious Theory

This theory states that legal entities are solely made by the State. Actually, according to

nature, humans are the only legal subjects, legal entities are only a fiction, namely

something that does not actually exist, but people create in their minds a legal actor (legal

entity) as a legal subject to be considered the same as humans.

 Brinz's purposeful property theory

According to this theory, only humans can be legal subjects. However, it is also undisputed

that there are rights to wealth, while no human being can be a subject of law. Who to be

supporter of those rights. What we call The rights of a legal entity are in fact rights that no

one owns and in lieu of which is a property bound by a purpose to a property belonging to

a purpose.

 Otto Von Gierki's Organ Theory

According to this theory, a legal entity is a real reality just like the nature of human natural

personality in legal relations. Here not only is a real person, but the legal entity also has its

own will or will that is formed through a legal relationship. Through its equipment

(management, members). What they decide, is the will or will of the legal entity. This

theory describes legal entities as no different from humans.

Thus, the various theories can be divided into two groups of theories, namely as follows:

 First, those who consider that legal entities are real entities, considered to have their own

"five senses" like humans, as a result of which legal entities are equated with people or

humans.

 Second, those who do not consider legal entities as a form of legal entity real. Behind the

legal entity actually stands a human being.

As a result, if the legal entity makes a mistake, the mistake is the fault of the people who

stand behind the legal entity together.18 This difference in theory regarding legal entities has

major implications for the separation of liability between legal entities and those behind them.

What is meant by liability is who must pay debts arising from actions carried out in the

context of joint activities? Who must bear the losses incurred.

The following will explain the legal consequences of BANKRUPTCY decisions for the

limited liability company itself. Legal Consequences of Limited Liability Companies

Subjected to BANKRUPTCY Decisions Basically, before the declaration of BANKRUPTCY,

the debtor's rights to carry out all legal actions regarding its assets must be respected. Of

course, with due regard to the contractual rights and obligations of the debtor according to

laws and regulations.19 Since the court pronounces the BANKRUPTCY verdict in a session

open to the public against the debtor, it means that he loses the right to manage and control his

property (persona standy in ludicio) and the obligations of the bankruLLC are transferred to

the curator to manage and control his estate.

The bankruLLC is still allowed to carry out legal actions in the field of property, for

example making agreements, if the legal action will benefit the bankruLLC's property

(boedel), otherwise if the agreement or legal action is precisely the bankruLLC's property

(boedel) would be detrimental to the estate, then that detriment is not binding on the estate.

There are some assets that are expressly excluded from BANKRUPTCY, namely:21

 Tools equipment sleep and daily clothing;

 Official equipment;

 Work equipment;

 Food supplies for approximately one month;

 Books used for work;

 Salaries, wages, pensions, merit pay and honoraria;

 A sum of money determined by the commissioner judge for his (the debtor's)

maintenance;

 The amount of money received from his children's income;

Similarly, personal rights of the debtor that cannot generate wealth or third party mililk

goods that happen to be in the hands of the bankruLLC, cannot be subject to execution, for

example: right of use and right to occupy a house. In the event of BANKRUPTCY of a

Limited Liability Company, the essential issue is whether the Limited Liability Company can

continue to operate or must be dissolved by law?

Legal consequences for Limited Liability Companies during BANKRUPTCY

In the BANKRUPTCY of a Limited Liability Company, whether or not the company operates

after the BANKRUPTCY verdict is read depends on the curator's perspective on the

company's business prospects in the future. This is possible because based on the provisions

in Article 104 UUK and PKPU which reads:

 Based on the approval of the provisional creditors' committee, the curator may continue

the business of the debtor who is declared bankruLLC even though the BANKRUPTCY

verdict is affirmed filed for cassation or judicial review.

 If no creditors' committee is appointed in the BANKRUPTCY, the curator requires the

supervisory judge's permission to continue the business as referred to in paragraph (1).

Based on the above article, it can be concluded that the BANKRUPTCY of a Limited

Liability Company in United States does not automatically make the company lose its right to

manage and control the company's assets because the BANKRUPTCY of a limited liability

company according to United States law does not cause the cessation of the company's

operations. However, in the event that the company that is continued does not have a good

prospect, the supervisory judge will decide to suspend the company's operations. to stop

the operation of the limited liability company at the request of a Creditor. After the company

is terminated, the Curator begins to sell the assets of the estate without requiring the

assistance/consent of the BANKRUPTCY debtor.

However, the aforementioned article does not apply if at the receivables matching meeting

no peace is offered or if the peace plan offered is not acceLLCed or the ratification of peace is

rejected so that by law the bankruLLC price is in a state of insolvency. The curator/creditors

present at the meeting propose that the BANKRUPTCY debtor's company be continued

(Article 179 paragraph (1)) and the proposal can only be acceLLCed if the proposal is

approved by creditors representing more than ½ (half) of all receivables recognized and

acceLLCed temporarily that are not secured by liens, fiducia guarantees, mortgages,

mortgages or other property collateral rights (Article 180 paragraph (1)).

Even if the above conditions are met, the operation of a corporate entity must still be

approved by the Supervisory Judge in a meeting attended by the Supervisory Judge by the

Curator, Debtor and Creditor, which is held specifically to discuss the proposal of creditors as

mentioned in Article 179 paragraph (1) and paragraph (2), Article 180 paragraph (1), Article

183 UUK & PKPU.

With the continuation of the business of the bankruLLC debtor (limited liability company),

it is possible that there will be benefits that will be obtained, including:

 Can increase the bankruLLC's assets with profits that may be obtained from the company.

 It is possible that the bankruLLC will eventually be able to pay his debts in full.

 Possibilities achieved a peace.

In the event that the business of a limited liability company continues or the company

continues to operate, the question is who will carry out the day-to-day management of the

company, whether the management is still carried out by the board of directors or the

management is carried out by the curator who replaces the position of the board of directors in

carrying out the company's business activities?

In practice, the board of directors knows more about the ins and outs of the company's

business, the market and the customers of the bankruLLC company, and if there is sufficient

reason to do so, the board of directors of the bankruLLC company, representing the company

in exercising its rights, may apply to the court for the replacement of the curator or the

appointment of an additional curator.

If we read Article 16, Article 69 paragraph 1, Article 104 UUK & PKPU, it can be

concluded that with the continuation of the business of the bankruLLC debtor (company), the

person authorized to manage the Company as a director is the curator. The curator must act as

a good company manager. The curator must assess his/her competence to manage the

BANKRUPTCY assets in accordance with the standards of the BANKRUPTCY Code.

United States curators and administrators and if necessary seek assistance to manage the

business.

With the transfer of authority from the board of directors to the curator to manage the

company, the consequence of this is that the curator is also acting as a director so that the

duties and obligations and responsibilities of the company's directors become the duties and

responsibilities of the curator.

The duties and obligations of the curator in his position as the management of the company

are:

 Carry out day-to-day management of the company.

 Make loans to third parties.

 Appear in court.

 Selling or otherwise transferring the company's fixed assets or encumbering the company's

assets with debts.

 Mortgaging the company's movable goods of value.

While the responsibilities of the curator can be divided into :24

 Responsibility of curators in carrying out their duties

The curator's liability in his capacity as curator is imposed on the BANKRUPTCY estate, and

not on the curator personally who must pay the losses of the party claiming to have a claim on

the BANKRUPTCY estate, and the claim is a debt of the BANKRUPTCY estate. Such as:

 The curator forgot to include one of the creditors in the distribution plan;

 The curator sells the debtor's assets that are not included in the BANKRUPTCY estate;

 The curator sells third-party assets;

 The curator attemLLCs to collect the bankruLLC debtor's bills and seize the debtor's

property, only to find that the debtor's claims are false.

The losses incurred as a result of the aforementioned receivership actions are not becomes a

burden on the curator's personal assets but becomes a burden on the BANKRUPTCY estate.

 Personal liability of the curator

Losses that arise as a result of the curator's action or inaction are the responsibility of the

curator. In such cases the curator is personally liable. The curator must pay for the losses he or

she has incurred. This liability can occur if the curator embezzles BANKRUPTCY assets.

Putu Supadmi explains that all losses incurred, as a result of the curator's negligence or due to

the unprofessionalism of the curator is the responsibility of the curator. Therefore, these losses

cannot be charged to the BANKRUPTCY estate.

Tutik Sri Suharti, a curator in Jakarta, stated that the imposition of responsibility for the

loss of BANKRUPTCY assets on the curator will make the curator less creative in carrying

out his duties, especially in an effort to increase BANKRUPTCY assets.

In the case of BANKRUPTCY of a limited liability company after the expiration of

BANKRUPTCY, whether or not the company is dissolved depends on the judge's decision on

the request for dissolution of the company because in the BANKRUPTCY law and the limited

liability company law there is no regulation regarding the dissolution by law of a limited

liability company in detail as in the KUHD which regulates the reasons for the dissolution of

a limited liability company. The reasons for the dissolution of the company are due to the

expiration of the period of establishment and dissolution by law due to losses that reach 75%

of the company's capital. However, Law No. 1 of 1995 on Limited Liability Companies

recognizes dissolution by court order but does not recognize dissolution by operation of law.25

According to the provisions of Article 114 of Law No. 1 of 1995 Concerning Limited

Liability Companies, a Company is dissolved due to:

 Resolution of the General Meeting of Shareholders (GMS);

 The period of establishment stipulated in the Articles of Association (AOA) has expired;

 Court Stipulation.

Based on the provisions of Article 114 of Law No. 1 of 1995 Concerning Limited Liability

Companies, in the event of BANKRUPTCY of a LLC and business continuity is not

continued, the Board of Directors may submit a proposal for the dissolution of the company to

the GMS on the grounds that the company has ceased to run for a certain period of time due to

the termination of the business of the bankruLLC LLC by the creditors committee.

The method of dissolution of a LLC in the event of BANKRUPTCY can also be found in the

provisions of Article 117 © Law No. 1 of 1995 Concerning Limited Liability Companies,

namely the existence of a request from a creditor to the District Court to dissolve the

Company on the grounds:

 The Company is unable to pay its debts after being declared bankruLLC;

 The company's assets are not sufficient to pay off all its debts after the BANKRUPTCY

declaration is revoked.

Based on the things mentioned above, according to the LLC Law, BANKRUPTCY does

not result in the dissolution of the company as long as the company's assets after the

BANKRUPTCY ends still exist and can be used to run the company. The BANKRUPTCY of

the company is only an excuse for not being able to pay debts to creditors. In this case,

creditors certainly should not be disadvantaged by the existence of this state of inability to

pay. Therefore, if the company is bankruLLC so that it is unable to pay its debts, the creditor

can submit a request for the dissolution of the company to the District Court. Based on the

decision of the District Court the liquidation. Because the company is a legal entity, every

dissolved company needs to be liquidated. The existence of the legal entity status of the

dissolved company remains for the needs of the liquidation process but the company cannot

perform legal acts unless it is necessary for the disposal of its assets in the liquidation process.

If the company is dissolved, the liquidator shall within 30 (thirty) days at the latest:

 Registering in the company register in accordance with Article 21 of the LLC Law in

conjunction with Law No. 3 of 1982 concerning Compulsory company registration;

For more information on the implementation of registration and the documents that must

be attached, please refer to BAN XII, Compulsory Company Registration based on Decree

of the Minister of Industry and Trade No. 12 of 1998.

 Apply for publication in the State Gazette of the Republic of United States;

 Publication in two daily newspapers; and

 Notify the Minister of Justice.

The way to calculate the 30-day period is as follows:

 If the company is dissolved by the GMS, the period shall be calculated from the date of

dissolution by the GMS; or

 If the company is dissolved based on a court decision, the period is calculated from the

date the court decision obtains permanent legal force.

As long as the registration and announcement have not been made, the dissolution of the

company does not apply to third parties. If the liquidator fails to register the company in the

company will be dissolved a company can be be dissolved.

The liquidator is jointly and severally liable for losses suffered by third parties.

In the registration and announcement referred to above, the name and address of the

liquidator shall be stated. The liquidator shall register and announce the final result of the

liquidation process in accordance with the provisions of articles 21 and 22 of the Company

Law and publish it in two daily newspapers.

Conclusions

The BANKRUPTCY of a Limited Liability Company is its own BANKRUPTCY, not the

BANKRUPTCY of its management, even though the BANKRUPTCY occurred due to the

negligence of the management. So that the management should not be held jointly and

severally liable for losses due to their negligence and can only be held liable if the company's

assets are not sufficient to cover losses due to BANKRUPTCY (Article 90 paragraph (2)

UULLC). The continuation of the business of a bankruLLC limited liability company depends

on the perspective of the Curator and creditors on the business prospects of the bankruLLC

debtor in the future, the BANKRUPTCY of a limited liability company by law does not

dissolve the limited liability company.

The dissolution of a limited liability company after the BANKRUPTCY verdict is read out

can only be requested for a court order by a creditor on the grounds that the company is

unable to pay its debts after being declared bankruLLC or the company's assets are not

sufficient to pay off all its debts after the BANKRUPTCY declaration is revoked. This is also

emphasized in

in the explanation of UUK and PKPU that the principle in this Law is the principle of

business continuity, which means that BANKRUPTCY does not by law make the company

dissolve.