Reka Dewantara, I Gusti Ngurah Parikesit
This article examines the normative inconsistency between the Bankruptcy and Suspension of Debt Payment Obligations Law (UUK–PKPU) and the Company Law (UU PT), which creates a risk of premature dissolution of state-owned banks that are still economically viable. The study aims to conduct an epistemological and normative analysis of the bankruptcy regime applicable to state-owned banks in Indonesia by examining insolvency tests through a comparative law perspective and elaborating the concept of epistemic failure within the framework of Lon Fuller’s legal philosophy. This research employs a normative juridical method, using statutory, conceptual, and comparative approaches. Legal norms and principles are analysed through hermeneutic interpretation to assess their coherence and practical implications. The findings reveal that Indonesia’s current bankruptcy framework fails to distinguish clearly, both conceptually and operationally, between balance-sheet insolvency and cash-flow insolvency. As a result, banks experiencing temporary liquidity problems may be treated as insolvent, leading to premature liquidation despite their underlying economic soundness. This condition highlights a significant normative inconsistency between the UUK–PKPU and the Company Law. Furthermore, Indonesian bankruptcy law remains predominantly liquidation-oriented and relies heavily on procedural formalism. This approach contrasts with the legal frameworks of the European Union and common law jurisdictions, which prioritise rescue and rehabilitation mechanisms as primary responses to financial distress. Accordingly, this article strengthens the argument for regulatory harmonisation and advocates the adoption of a dual insolvency test, as well as the institutionalisation of rescue and rehabilitation mechanisms as mandatory priorities before liquidation in Indonesia’s bankruptcy law. © 2025, Maulana Malik Ibrahim State Islamic University of Malang. All rights reserved.
Faculty of Law, Universitas Brawijaya, Indonesia; Faculty of Law, Universitas Udayana, Indonesia
