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Thursday, September 20, 2012

Indonesia Telecom Giant's Bankruptcy Stirs Fears of Legal Abuses

Per www.globalinsolvency.com:


Fri., September 21, 2012
A court ruling that Indonesia's biggest mobile phone operator is bankrupt, after not paying a disputed debt of just half a million dollars, has revived concerns over flawed laws that invite abuse and can trip up even highly profitable companies in Southeast Asia's largest economy, CNBC reported on a Reuters story. Analysts and shareholders have brushed the decision aside as one of the quirks of the country's legal system, saying it is almost inevitable that it will be overturned when Telkomsel appeals to the country's supreme court. The case has fuelled concerns among lawyers, however, that the bankruptcy law is open to abuses — such as forcing settlements to disputes that should be dealt with elsewhere in the legal system — and poses unnecessary risks for enterprises. "It's not a prudent and fair judgment. Every company has a loan or debt that will sometimes be disputed," said Harjon Sinaga, a partner at Lubis Ganie Surowidjojo law firm in Jakarta. Telkomsel, a subsidiary of PT Telekomunikasi Indonesia (Telkom), was taken to court by a prepay phone voucher distributor, PT Prima Jaya, which alleged in a petition for a bankruptcy declaration that the telecom giant still owed it 5.3 billion rupiah ($555,700). Jakarta Commercial Court accepted the petition and declared Telkomsel bankrupt on Sept. 14, despite the company posting a first-half profit this year of $770 million. Under Indonesian law, a company can be declared bankrupt if it can be shown to have at least two creditors and the debt owed to one of them is due and payable. The strength of the balance sheet is irrelevant.

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