Going Concern In Bankruptcy: A Strategy to Enhancing Recovery for Concurrent Creditors

The legal status of bankruptcy causes the Debtor to lose the right to control and manage their assets. The responsibility for managing and settling the estate is transferred entirely to the Curator. Within bankruptcy proceedings, Concurrent Creditors are ordinary creditors whose claims are not secured by collateral rights (such as mortgages or fiduciary security interest). Based on the priority structure, Concurrent Creditors occupy the lowest position, ranking after Secured Creditors (holders of collateral) and Preferential Creditors (holders of special privileges). If most of the Debtors assets have already been pledged, Concurrent Creditors may potentially receive no repayment at all. to prevent or avoid this disadvantageous situation and to realize the principle of fairness (paritas creditorium), Indonesian Bankcruptcy Law provides a crucial instrument that can alter this outcome, namely the principle of business continuity (going concern).

In simple terms, going concern refers to the principle that allows a Bankrupt Debtor to continue business operations, provided they are deemed capable and viable. This mechanism is intended generate profit and enhance the value of bankruptcy estate (boedel pailit).

The main objectives of going concern are:

1. Enhancing the value of the Bankruptcy Estate: By continuing the business, the economic value of the company’s assets -especially movable assets- is considered higher than if they were immediately sold or liquidated.
2. Maximizing repayment to Concurrent Creditor: The profits derived from ongoing business operations can be utilized by the Curator to settle the Debtor’s obligations, which in turn may provide repayment to concurrent Creditors. This is crucial for achieving fairness, particularly in situations where all of the bankruptcy estate has been pledged to Secured Creditors.

The implementation of Going concern is regulated under Article 179 Paragraph (1) of UU Np. 37 Tahun 2004 Tentang Kepailitan dan PKPU (Bankruptcy and PKPU Law). This provision forms the legal basis for the Curator or Creditors present at the meeting to propose that the Bankrupt Debtor’s business be continued (if no settlement plan exists or if such a plan has been rejected). Under the Going concern framework, the curator is responsible for managing and settling the company’s bankruptcy estate. The Curator has the authority to assess whether maintaining Going concern would increase the values of the bankrupt assets. Procedurally, the Curator must obtain approval from the Temporary Creditors’ Committee or authorization from the Supervisory Judge in order to implement Going concern.

The Role of Curator and The Importance of Creditor Oversight

Once a bankruptcy ruling is declared, the Debtor loses the right to manage their assets, and the Curator is granted broad authority to administer and liquidate the debtor’s estate (boedel pailit). Within the going concern framework, the Curator’s role becomes highly central and decisive:

1. Initial Decision Maker: The Curator must assess whether the Debtor’s business operations remain viable and whether the bankruptcy estate would hold greater value if continued rather than liquidated.
2. Managerial Executor: The Curator is responsible for running the ongoing business, requiring managerial competence to achieve the objective of increasing the value of the bankruptcy estate.
3. Accountability Enforcer: The Curator must carry out duties based on principles of transparency and fairness, while remaining accountable to the court and to the creditors.

Although going concern serves a noble objective, the Bankruptcy and PKPU Law does not specifically regulate mechanisms of accountability and credit oversight, particularly for Concurrent Creditors. In practice, this process involves managing company’s cash flow, which is highly vulnerable to misuse of authority.

Oversight by Concurrent Creditors is essential to ensure:

• Financial Transparency: Safeguarding against any misuse company funds and ensuring that assets are managed optimally.
• Curator Accountability: Concurrent Creditors must have supervisory mechanisms, such as mandatory monthly reports from the Curator on the outcomes of going concern operations.
• Protection of Rights: Creditors are entitled to verify that profits generated through going concern are genuinely allocated for the benefit of all creditors in line with the principle of fairness.

Without active oversight from Concurrent Creditors, the objectives of fairness and maximizing repayment are unlikely to be achieved.