Annexed to this working guide is a copy of a recent initiative launched in Indonesia to encourage private sector restructuring. In effect, this initiative proposes an informal (out of court) "work out" style of corporate restructuring in appropriate cases. We do not put this forward as a perfect model but it provides a good basis for examining the prospect of the possible application of a similar scheme or model in the countries which are the subject of this project.

Thus, in this section we ask that you read the annexure [particularly the part headed "1. Adoption of Principles", paragraphs "a" to "i"] and, having considered those principles, comment on their possible application and implementation in your economy. In particular we would like to know the following:

(a) by reference to each of the above paragraphs, comment on the suitability of their application in your economy;

 

As stated above, the Bankruptcy Law provides an out-of-court corporate-sector insolvent negotiation scheme, namely the composition proceedings. The composition proceeding is in its essence very close to the Indonesian private-sector restructuring schemes. For example:

• If a composition proceeding is filed with the court, a judge will be designated as the supervisor and a CPA will be designated as assistant supervisor to the insolvent corporate which seeks composition. The supervisor and assistant supervisor acts like an advisor notwithstanding their title. If a composition request is given to the commerce chamber, a supervisor or supervisors who act like advisors will also be designated by such commerce chamber.
• However, the composition proceeding can only be initiated by the insolvent.
• After commencement of the composition proceeding, the creditors should stand still for the enforcement procedures, unless the creditors are preferred or secured.
• During the composition proceeding, the financial and business condition of the debtor are subject to the creditors meeting's review and discussion. The supervisor or assistant supervisor are obligated to submit financial and business report of the debtor accordingly. In addition, the supervisor and assistant supervisor shall also provide their opinion regarding the composition.
• The scope of information to be submitted to the supervisor and assistant supervisor is very broad, covering every aspect in connection with the debtor's assets, financial condition and business operation.
• The agreed conditions for composition shall be reported to the court for its approval. Once approved, the conditions are applicable to all the creditors whether they participate in the composition proceeding or not.

  As mentioned above, the informal work out is generally considered or initiated by the corporate debtor in Taipei,China when it faces the financial difficulty. The pattern of informal work out in Taipei,China is similar to that in "The Jakarta Initiative" except that there is generally no involvement of government or its involvement is limited and passive (being initiated by the debtor or creditors), and the involvement of professionals is somehow limited, and the law is silent on facilitating the informal work out or restructuring. Given the need to enact a new law or amend the exiting law for the government's facilitation of the informal out-of-court work out, legislators' review and approval in connection therewith will have to be processed, which will take years.

(b) state the difficulties that might be encountered in their application in your economy;

 

Please refer to the last paragraph of (a) above.

(c) briefly state whether (and what) changes or additions might be required to the law in your economy for the application of the "work out" methodology and whether such changes or additions are a practical possibility.

Finally, in this section, we would like to know you opinion generally on this initiative, the areas that you regard as strengths; areas that are weak; and areas where you consider modification and improvement might be made.

 

Please refer to the last paragraph of (a) above.

The ideas of having the Committee, seeking the assistance from professionals, having the consensus mechanism with respect to the restructuring proposal, having the government's involvement, and recognizing the priority of interim financing are regarded as strengths. The weak areas are how to have a capable agent or leader to initiate and monitor the progress and push the progress efficiently. An implementation mechanism should be included in this regard.