Dispute Resolution
Jakarta
Client Alert
February 2017
For More Information:
Timur Sukirno
Managing Partner
+62 21 2960 8500
timur.sukirno@bakernet.com
Andi Kadir
Partner
+62 21 2960 8511
andi.y.kadir@bakernet.com
Hendronoto Soesabdo
Partner
+62 21 2960 8610
hendronoto.soesabdo@baker
net.com
Nikki Krisadtyo
Associate
+62 21 2960 8632
nikki.krisadtyo@bakernet.com
New Supreme Court Regulation on
Corporate Crimes Puts Corporations at
Greater Risk of Prosecution
Introduction
The Supreme Court recently issued Supreme Court Regulation No. 13 of 2016
on Case Handling Procedures for Corporate Crimes ("SC Regulation"). The SC
Regulation may change the direction of prosecution in criminal cases involving
corporations. While corporations are subject to a number of criminal sanctions in
numerous laws, such as the Forestry Law, Environmental Law, Anti-Money
Laundering Law, and Anti-Corruption Law, there have been few criminal cases
where a corporation was brought before a judge and sanctioned. After the
issuance of the SC Regulation, the Corruption Eradication Commission (KPK)
has stated that it intends to use the SC Regulation to chase corporations in
corruption cases.
The SC Regulation is a procedural regulation. It does not deal with crimes and
does not expand the sanctions imposed by the laws governing various crimes.
Group and successor liability
The SC Regulation applies to any type of corporation, whether it is in the form of
a limited liability company or a partnership. The SC Regulation does not
differentiate between local and foreign corporations. Given the broad definition of
"corporation" and the non-differentiation of local and foreign corporations, the SC
Regulation can also be applicable to foreign corporations, although there may be
jurisdiction issues of Indonesian law enforcement agencies over foreign
corporations depending on the circumstances of the case.
Criminal liability is not only limited to corporations, but can also be applied to a
group of corporations. If a crime is committed by a corporation with its parent or
subsidiary or other related corporations, they can also be held accountable for
the crime, depending on their roles in the crime.
The SC Regulation also governs the liability of a corporation after a restructuring.
Generally, restructuring will not relieve a corporation from its liability; the liability
will be borne by the successor or surviving corporation. The SC Regulation goes
into further detail on liability in cases of mergers, consolidations, spin-off, and
liquidation.
In the event of a merger or consolidation, the surviving corporation bears the
liability for any crimes committed before the merger or consolidation. However,
the extent of the liability of the surviving corporation is not clear. There are at
least two possible interpretations: (1) the liability extends to the whole value of
the assets placed in the surviving corporation at any time, or (2) the liability only
extends to the value of the assets placed in the surviving corporation by the
corporation that committed the crime prior to the merger or consolidation. In any
event, the limit of the liability of the corporation should refer to any law that
governs the sanctions of the crime. The SC Regulation cannot be used as a
basis to impose a higher sanction than the law governing the crime.
 In the event of a spin-off, the liability may extend to either one of the corporations
being spun off, or both, depending on their roles.
If a corporation is in a liquidation process, the liability still lies with the
corporation. Thus, initiating liquidation does not free a corporation from its
criminal liability. Criminal liability is only lifted if the corporation has been
effectively dissolved, where there can be no criminal liability. However, this does
not stop the state from going after the liquidated assets. Assets which are alleged
to have been used to conduct a crime or are the result of a crime can be chased
after. The claim for these assets is filed against the former management, heirs, or
third parties who control the assets of the liquidated corporation.
Seeing this, corporations contemplating restructuring may perhaps take into
consideration their liability in light of the restructuring—whether they will lose or
be exposed to more liability because of the restructuring. This calls for due
diligence to assess the risks that the corporation is exposed to due to pre-
existing criminal liability.

Determination of corporations' fault under the SC

Regulation
The SC Regulation provides that in determining whether a corporation is at fault
for a crime, judges can look at the following:
1. whether the corporation obtained any benefit from the crime or whether
the crime was done for the interest of the corporation
2. whether the corporation acquiesced to a crime
3. whether the corporation took the necessary steps to prevent or mitigate
adverse effects and ensure compliance with the law to prevent a crime.
The SC Regulation seems to take a broad approach to whether or not a
corporation can be deemed at fault or not. The SC Regulation also seems to
suggest that corporations must take active steps to prevent a crime, as inaction
leading to a crime can lead to prosecution. While the SC Regulation is not yet
tested, corporations may consider implementing more rigid and stricter internal
policies to make sure that they prevent their people from committing crimes, and
when a crime has occurred, to mitigate its adverse effects.
The SC Regulation ties the act committed by the management to the corporation.
If a person in the management ceases to hold the same position or passes away
after committing the crime, the corporation is not released from its liability.

Liability of Management
The SC Regulation adopts a wide interpretation of "management", as it is defined
not only to include people having the authority to manage or represent a
corporation, but also those that have control over or can influence a corporation's
policies or decisions. Potentially, this means that "management" is not only
limited to members of the board of directors of the corporation being
investigated/prosecuted.
The investigation of corporations and their management can be done separately
or individually. In investigations and court proceedings, the corporation is
represented by the management. Thus, a member of the management can be
summoned in his/her capacity as a representative of the corporation and in
his/her capacity as a member of the management.

2 New Supreme Court Regulation on Corporate Crimes Puts Corporations at Greater Risk of Prosecution  February 2017
 Court Sanctions
In a crime involving corporations, judges can sanction the corporation, the
management, or both. Under the SC Regulation, if a fine is sanctioned against a
corporation and it fails to pay, the prosecutor's office can confiscate the assets of
the corporation to be auctioned off. However, if a fine is sanctioned against a
member of the management and he/she fails to pay in accordance with the SC
Regulation, he/she will be put in confinement.
The SC Regulation also sets out other sanctions that can be imposed on
corporations, i.e., seizure of evidence, restitution, and repair of damage.
www.hhp.co.id
New Era of Enforcement
Hadiputranto, Hadinoto & Partners
The Indonesia Stock Exchange
The SC Regulation sheds light on procedural law relating to the handling of
Building, Tower II, 21st Floor corporate crimes, an area that traditionally has not been well regulated. The SC
Sudirman Central Business District Regulation seems to follow a trend away from the thinking that corporations are
Jl. Jenderal Sudirman Kav. 52-53 not subject to criminal law. This should be a call for corporations to start looking
Jakarta 12190 into their internal policies to make sure that they have a set of company policies
Indonesia in place to deal with corporate crimes, so that they may limit their exposure to
being entangled in a crime. Lastly, with the issuance of the SC Regulation,
Tel: +62 21 2960 8888 corporations looking to enter into a restructuring deal may also look deeper into
Fax: +62 21 2960 8999
the liabilities that they may attract because of the restructuring.

©2017 Hadiputranto, Hadinoto & Partners. All rights reserved. Hadiputranto, Hadinoto & Partners is a member firm of Baker & McKenzie International, a Swiss Verein with member law firms around the world. In
accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office”
means an office of any such law firm.

This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.

3 New Supreme Court Regulation on Corporate Crimes Puts Corporations at Greater Risk of Prosecution  February 2017