The strict implementation of the doctrines of Separate Legal Entity, Fiduciary Duty, and Business Judgment Rule has contributed to the emergence of various fraudulent schemes committed by Directors, Shareholders, and/or Beneficial Owners who exploit the corporation as a shield to undertake wrongful acts that harm other Parties—for example, entering into credit agreements by, for, and on behalf of the Company with the intention of defaulting, and others. Several landmark decisions have introduced modern approaches and parameters to pursue the liability of Directors, Shareholders, and/or Beneficial Owners based on the doctrine of Piercing the Corporate Veil.

In addition to doctrinal legal approaches, common business practices offer a more practical method to ensure the fulfillment of obligations arising from agreements made by, for, and on behalf of the Company, generally through the encumbrance of the assets of Directors, Shareholders, and/or Beneficial Owners (hereinafter referred to as “Third-Party Assets”) as secured collateral.

The implementation of the Separate Legal Entity doctrine in the field of Bankruptcy and Suspension of Debt Payment Obligations (PKPU), as well as its simplified evidentiary requirements, does not accommodate efforts to prosecute the liability of Directors, Shareholders, and/or Beneficial Owners for the Company’s unpaid debts based on the doctrine of Piercing the Corporate Veil. Article 21 of Law No. 37 of 2004 concerning Bankruptcy and Suspension of Debt Payment Obligations (Law 37/2004)—“Bankruptcy comprises all assets of the Debtor at the time the bankruptcy declaration is rendered as well as everything acquired during the bankruptcy”—grammatically excludes Third-Party Assets from inclusion in the assets of the Bankrupt Estate.

Nevertheless, recent decisions from the Commercial Court have permitted the inclusion of Third-Party Assets in the list of Bankrupt Estate assets under certain circumstances, including: the existence of explicit consent from the Third Party to designate their assets as repayment for the Company’s debts—evidenced, among other things, through a Deed of Encumbrance of Mortgage (APHT) and/or personal guarantee (borgtocht); or concrete evidence showing that such Third-Party Assets were actually acquired using Company funds, which may be reflected in the Company’s Financial Statements.
On 23 November 2023, the Minister of Finance of the Republic of Indonesia enacted Minister of Finance Regulation (PMK) No. 122/2023 on Guidelines for Auction Implementation (PMK 122/2023). While PMK 122/2023 is expected to “enhance auction services, ensure more efficient, effective, transparent, accountable, simple, modern procedures, and guarantee legal certainty,” its implementation has, in practice, been viewed as creating certain obstacles in resolving bankruptcy cases. The regulation removes the Curator’s authority to file a request with the State Assets and Auction Service Office (KPKNL) to conduct an Execution Auction / public sale of Third-Party Assets listed in the Bankrupt Estate. The Curator may still conduct a private sale, provided that such Third-Party Assets are included in the list of Bankrupt Estate assets and prior approval from the Supervisory Judge has been obtained.

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