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An Essay of Bankruptcy Law from Business Perspective

An Essay of Bankruptcy Law from Business Perspective

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Published by Fezi Afesina Haidir
An individual assignment for business law class. Please share your opinion and give your rate.
An individual assignment for business law class. Please share your opinion and give your rate.

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Categories:Types, Business/Law
Published by: Fezi Afesina Haidir on Mar 11, 2013
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08/14/2013

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 MM5001Business Law and Business Ethics
FINAL EXAM
Bankruptcy of PT Kertas Nusantara in Business and Law Perspective29111311 Haidir AfesinaMBA Executive 46MASTER OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS AND MANAGEMENTINSTITUT TEKNOLOGI BANDUNG2012
 
 
Abstract
The phenomenon of bankruptcy in business sounds frightening for the company. It is becausethe cost of Bankruptcy is very expensive and it borne by the firm shareholder. It not onlyhappened to company with unhealthy financial condition, but also healthy one. In addition,having working capital loans from any of financial or non-financial institutions is normal for the business growth and development. Therefore mostly bankruptcy results from financial distress,which happens when the market value of the assets is insufficient to satisfy the debt claims, or when the firm does not generate enough cash flow to meet the coupon and interest payments.The essay will cover the issues of bankruptcy lawsuit and its effect. The analyses use both of law and business perspective in order to see the relation. Act No. 37 of 2004 on Bankruptcy andSuspension of Payment is being used as the guideline. Taken example of PT Kertas Nusantara(formerly PT Kiani Kertas) that successfully failed from being bankrupt. It started whencreditors of PT Kertas Nusantara threatened to file a case review against a Jakarta CommercialCourt. Some issues from the mechanism and also the story behind made it interesting as a business lesson learned. The creditors objected to the court's approval of a time extensionrequest, which awarded more time to the company to pay off its debts.
 
 
Background
In business world, the uncertainty of economic condition may put firms in the risk of experiencing financial distress or bankruptcy. Therefore bankruptcy is a phenomenon that isoften greatly feared the company, either by the owner or the management. Means the companyunable to run its operations properly and could not produce normally. Thus the company isconsidered to have failed in business or unable to pay its debts. However, filling for bankruptcyis also considered the most appropriate solution to resolve the issue of corporate debt that couldnot be resolved (Fuady, 2008).For the growth of the company, there is a need of increasing demand for additional capital. Thusthe company borrow capital to creditors in this case the financial institutions, both banks and thefinancial institutions of non-bank financial institutions. Working capital loans by these creditorsabide the consequences in accordance with the payback period is determined by both parties i.e.debtor and creditor (Saliman, 2005). Nevertheless, prediction error towards the continuity of capital in the future can cause severe loss for the company.
PT Kertas Nusantara
The business atmosphere in Indonesia is highly competitive. It is often occurs ups and downs interms of gains and losses. Consequently, few companies lose money and eventually go out of  business. PT Kertas Nusantara (formerly PT Kiani Kertas) experienced the bankruptcy condition
.A
company owning a large pulp mill in Berau East Kalimantan by Prabowo Subianto,Indonesian politician conglomerate of great movement of Indonesian Party (Gerindra). As oneof the biggest pulp and paper companies in Indonesia and the biggest in South East Asia, it haslots of controversy since its established in 1997 especially high debts. In 2004, Prabowo boughtthe company from IBRA (Indonesian Bank Restructuring Agency) or BPPN, and being funded by the bank loan of USD 230 million. Then it processed into a well-established company calledPT Kertas Nusantara (PT KN). Along the way, the company had difficulty working capital.Thus a number of domestic and foreign investors intend to invest in this company.Unfortunately all ended without a deal.The case started in 2005. Allied Ever Investment Ltd, a Hong Kong based company, has filed bankruptcy lawsuit against PT Kertas Nusantara for defaulted payments of US$20 million. It began since its receivables that arise from the agreement signed debts on December 20, 2004.The issue has been on and off until 2011. Indeed it is a negative publication for Prabowo whonominate as presidential candidate in 2014. The company admitted that they could not complete

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