Voluntary Petition: Authority of Directors to File Bankruptcy Petition for LLC

PERTANYAAN

What is a voluntary petition? Then is there a connection with the question of whether the board of directors is authorized to file a bankruptcy petition for the company itself without the approval of the General Meeting of Shareholders (“GMS”)?

INTISARI JAWABAN

A voluntary petition is a request from an individual debtor or a legal entity debtor (company) to voluntarily bankrupt themselves. As for the provisions of the voluntary petition applicant which is a company, it has been regulated in Law 40/2007. How does the provision sound?

Please read the review below for a further explanation.

ULASAN LENGKAP

This article is an English translation of Voluntary Petition: Kewenangan Direksi Ajukan Permohonan Pailit PT which was written by Dian Dwi Jayanti, S.H. and was published on Wednesday, 25 January 2023.

This article is an update of the article entitled The Meaning of Voluntary Petition which was written by Sovia Hasanah, S.H. and first published on Monday, 22 January 2018.

All legal information available on Klinik hukumonline.com has been prepared for educational purposes only and is general in nature (read the complete Disclaimer). In order to obtain legal advice specific to your case, please consult with Justika Partner Consultant.

Voluntary Petition

Voluntary petition according to the 9^th Edition of Black’s Law Dictionary is:

A voluntary petition is a petition filed with a bankruptcy court by a debtor seeking protection from creditors. – Also termed bankruptcy petition; debtor's petition. The petition is a formal written request presented to a court or other official body.

M. Yahya Harahap in his book entitled Perseroan Terbatas (p. 410) defines voluntary petition as a request to bankrupt oneself voluntarily. Individual debtors (in Bahasa Indonesia known as debitur) or debtors of legal entities (companies) who have been in a state of insolvency, can file for bankruptcy (faillessments request, bankruptcy petition, or filing of bankruptcy petition) against themselves.

It is further explained that the debtor with his own awareness and will voluntarily file for bankruptcy (bankruptcy is known as pailit) against himself so that he is declared bankrupt by the court. The aim is that the problem of financial difficulties he faces can be immediately resolved by the court through the curator to the creditors. It is expected that once all debts have been settled with the creditors, the debtor will be able to start setting up and developing new businesses (p. 411).

So, a voluntary petition is a request by an individual debtor or a corporate debtor to bankrupt themselves voluntarily. In the context of your question, we assume that the voluntary petitioner here is a corporate debtor. Therefore, for further explanation, we refer to the Law 40/2007.

Also read: 2 Requirements for Bankruptcy and its Explanation

Authority of the Board of Directors to File a Voluntary Petition

Article 104 section (1) Law 40/2007 authorizes the Board of Directors (“BoD) to file for bankruptcy against the company itself in the form of a voluntary petition by first obtaining approval from the General Meeting of Shareholders ("GMS").

In the event of bankruptcy occurs due to the fault or negligence of the BoD and the bankruptcy assets are inadequate to pay off all liabilities of the company in the said bankruptcy, then every member of the BoD shall be jointly and severally liable for all liabilities not paid off from the said bankruptcy assets.[1]

The liability shall also apply to members of the BoD found to be at fault or negligent who were members of the Board of Directors within a 5 year period prior to the bankruptcy declaration decision is pronounced.[2]

However, members of the BoD shall not be liable for the Company’s bankruptcy if he/she can prove that:[3]

1. the said bankruptcy was not due to his/her fault or negligence;
2. he/she has performed management in good faith, with due care, and with full responsibility in the interest of the company and in accordance with the purposes and objectives of the company;
3. he/she has no conflict of interest, either directly or indirectly, over the acts of management that are taken;
4. he/she has taken measures to prevent the occurrence of bankruptcy.

However, the right is not inherently attached to the directors. In order for the Board of Directors to have the authority to file a bankruptcy petition to bankrupt the company, then:[4]

1. The BoD must first obtain approval (goedkeuring, approval) from the GMS. As long as there is no GMS approval, the BoD is not authorized to file a bankruptcy petition to bankrupt the company concerned;
2. Thus, the right of the BoD to bankrupt the company through voluntary petition is not an inherent authority of the BoD;
3. However, the authority only exists in the BoD, depending on the condition of the prior approval of the GMS.

Also read: Responsibility of the Board of Directors and Board of Commissioners if the Company is Bankrupt

So, if asked whether the Board of Directors is authorized to file a bankruptcy petition for the company itself without the approval of the GMS? The answer is no. As long as there is no approval from the GMS, the authority of the BoD to file a bankruptcy petition to bankrupt the company is limited.[5]

These are the answers we can provide, we hope you will find them useful.

Legal Basis:

1. Law Number 40 of 2007 on Limited Liability Companies;
2.  Regulation of the Government in Lieu of Law Number 2 of 2022 on Job Creation which has been enacted into law under Law Number 6 of 2023.

Reference:

M. Yahya Harahap. Hukum Perseroan Terbatas. Jakarta: Sinar Grafika, 2016.

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[1] Article 104 section (2) Law Number 40 of 2007 on Limited Liability Companies (“Law 40/2007”).

[2] Article 104 section (3) Law 40/2007.

[3] Article 104 section (4) Law 40/2007.

[4] Yahya Harahap. Hukum Perseroan Terbatas. Jakarta: Sinar Grafika, 2016, p. 413.

[5] Yahya Harahap. Hukum Perseroan Terbatas. Jakarta: Sinar Grafika, 2016, p. 413.