Financial distress is often perceived as the beginning of a company’s collapse. However, modern insolvency systems are no longer designed solely to liquidate financially troubled companies, but also to preserve businesses that still possess economic value through restructuring mechanisms. In Indonesia, this objective is reflected in Law Number 37 of 2004 concerning Bankruptcy and Suspension of Debt Payment Obligations (“Bankruptcy and PKPU Law”), which remains the primary legal framework governing bankruptcy and PKPU proceedings in Indonesia. Through the Suspension of Debt Payment Obligations (Penundaan Kewajiban Pembayaran Utang/“PKPU”), the law provides debtors and creditors with an opportunity to achieve a structured restructuring settlement under court supervision.
Pursuant to Article 222 of the Bankruptcy and PKPU Law, a debtor who foresees that it will be unable to continue paying debts that are due and payable may file for PKPU with the intention of proposing a composition plan to creditors. Conceptually, PKPU is designed as a corporate rescue mechanism rather than merely a process leading to liquidation. Unlike bankruptcy proceedings, which focus on the liquidation and distribution of the debtor’s assets, PKPU emphasizes debt restructuring, rescheduling of payment obligations, and business continuity. Through this approach, the law recognizes that preserving a company as a going concern may, in many circumstances, generate greater economic value than immediate liquidation.
The development of PKPU practice in Indonesia also reflects a broader shift from a liquidation-oriented regime toward a rescue-oriented insolvency framework, where business continuity is increasingly viewed as an economic interest deserving legal protection. Nevertheless, in practice, restructuring efforts do not always succeed in saving a company, as the effectiveness of PKPU remains dependent on the debtor’s business prospects, creditor approval, and the company’s ability to implement a realistic restructuring proposal.
One significant example can be seen in the PKPU proceedings involving PT Garuda Indonesia (Persero) Tbk under Decision Number 425/Pdt.Sus-PKPU/2021/PN.Niaga.Jkt.Pst. Facing substantial financial obligations to lessors, suppliers, and various other creditors due to the severe impact of the COVID-19 pandemic on the aviation industry, Garuda Indonesia chose to pursue restructuring through the PKPU mechanism instead of directly entering bankruptcy proceedings. During the process, the Commercial Court granted temporary PKPU status, allowing the company to prepare and negotiate a restructuring proposal under judicial supervision. This mechanism reflects the purpose of PKPU under the Bankruptcy and PKPU Law, namely to provide a temporary moratorium for debtors to formulate a feasible settlement plan while simultaneously protecting creditors’ interests through judicial supervision and creditor voting procedures.
The restructuring process also demonstrated the importance of creditor approval within Indonesia’s insolvency framework. Pursuant to Articles 281 and 285 of the Bankruptcy and PKPU Law, a composition plan becomes binding only after obtaining approval in accordance with the statutory voting thresholds and subsequent ratification (homologation) by the Commercial Court. In Garuda Indonesia’s case, the homologation of the restructuring plan transformed the outcome of commercial negotiations into a legally binding settlement applicable to all creditors. This process demonstrated that PKPU does not merely function as a procedural step before bankruptcy, but also as a legal instrument capable of facilitating corporate recovery, preserving business continuity, and balancing the interests of debtors and creditors through a court-supervised restructuring process.
In addition to the Bankruptcy and PKPU Law, contemporary corporate restructuring practices are also influenced by developments in financial sector regulations and corporate governance policies, including various restructuring measures introduced by the Financial Services Authority (Otoritas Jasa Keuangan/OJK) following the pandemic period. Although these developments do not alter the substantive provisions of Law No. 37 of 2004, they indicate that modern restructuring approaches increasingly prioritize business stability and economic sustainability rather than merely asset liquidation.
From the perspective of insolvency law development, the Garuda Indonesia case reflects an effort to balance the enforcement of creditors’ rights with the economic continuity of the debtor company. Liquidation is not always the most commercially rational solution, particularly where a company still retains operational value and realistic restructuring prospects. In many circumstances, preserving business continuity may provide a higher recovery rate for creditors, protect employment, and minimize broader economic disruption. This approach aligns with the philosophy of modern restructuring law, under which insolvency is viewed not solely as corporate failure, but also as an opportunity for business recovery under legal supervision.
For business actors, this case serves as a reminder that PKPU is not simply a mechanism to postpone debt payments, but a strategic legal instrument that allows companies to reorganize their obligations while maintaining operational continuity. At the same time, the process highlights the importance of transparency, good faith negotiations, and credible restructuring proposals, as creditor confidence remains one of the key factors determining whether restructuring efforts will succeed or ultimately lead to bankruptcy proceedings.
