One of the most common types of sanctions imposed on corporations is a criminal fine. However, a question that often arises among legal practitioners and businesspeople is: How if a corporation that has been ordered to pay a criminal fine is unable or refuses to pay?
The enactment of Law No. 1 of 2023 on the Criminal Code (New Criminal Code) marks a new chapter in Indonesian criminal law, including with regard to corporate criminal liability. Unlike the old Criminal Code, which was a legacy ofPenal Codewhich does not explicitly designate corporations as subjects of criminal offenses, the new Criminal Code (KUHP) affirms that corporations—including limited liability companies, foundations, cooperatives, state-owned enterprises (BUMN), regionally-owned enterprises (BUMD), and other entities or associations—may be held criminally liable as provided for in Articles 45 and 46 of Law No. 1 of 2023.
Article 118 of Law No. 1 of 2023: Basic Provisions on Criminal Fines for Corporations
Article 118 of Law No. 1 of 2023 stipulates that criminal penalties for corporations consist of a principal penalty in the form of a fine and an additional penalty. Specifically regarding fines, the provisions differ significantly from those for fines imposed on individuals. While the minimum fine for an individual is set at Rp50,000, the threshold for corporations is much higher—specifically, at least Category IV, equivalent to Rp200,000,000. The maximum amount is determined based on the severity of the prison sentence for the relevant criminal offense, ranging from Category VI for sentences of less than seven years, Category VII for sentences of seven to fifteen years, up to Category VIII (maximum Rp50 billion) for offenses punishable by death, life imprisonment, or a twenty-year prison sentence.
This category scheme was intentionally designed so that the amount of fines can be easily adjusted in line with economic and monetary developments, without the need to amend the law every time the value of the rupiah changes.
If the Fine Is Not Paid: Seizure and Auction First
The new Criminal Code does not immediately resort to other options when a corporation fails to pay an imposed fine. The mechanism is implemented in stages. The first stage, as stipulated in Article 81, involves the seizure and auction of the assets or income of the convicted party—in this context, the corporation’s assets or income—to settle the unpaid fine.
Only if the proceeds from the seizure and auction are insufficient, or if it is factually impossible to carry them out (for example, because the corporation no longer possesses any assets subject to enforcement), does Article 82(1) of Law No. 1 of 2023 provide for an alternative penalty. For individuals, these alternative penalties may take the form of imprisonment, probation, or community service, provided that the fine does not exceed Category II. The problem is that these three types of alternative penalties clearly cannot be applied to corporations. Imprisonment, probation, and community service are sanctions applied to individuals, not to legal entities. This is where the unique nature of corporate regulation lies: the law provides specific alternatives.
Equivalent for Corporations: Suspension of Business Operations
When the seizure and auction of a corporation’s assets are insufficient to cover the amount of the fine, the new Criminal Code provides for a substitute penalty in the form of the suspension of some or all of the corporation’s business activities. This means that a corporation may be forced to cease operations—either entirely or in specific business lines—as a consequence of its inability to pay the fine through asset enforcement mechanisms.
This provision is consistent with the broader philosophy of supplementary penalties set forth in Article 118(b) of Law No. 1 of 2023, which indeed provides for the suspension of all or part of a corporation’s business activities as one of eleven types of supplementary penalties, alongside other options such as the revocation of specific licenses, the closure of business premises, and even the dissolution of the corporation. These additional penalties—including license revocation, business closure, and the suspension of business activities—are imposed for a maximum period of two years.
Interestingly, the enforcement mechanism also applies to other additional penalties beyond fines. Article 120, paragraph (2), and (3) of Law No. 1 of 2023 stipulate that if a corporation fails to comply with additional penalties—such as the payment of damages, remediation resulting from a criminal offense, or funding for job training—the corporation’s assets or revenue may also be seized and auctioned by the prosecutor to fulfill those obligations.
What If a Corporation Really Had No Capital?
The above provisions sound straightforward on paper, but in practice, the enforcement of laws against corporations often faces more complex issues: what if a corporation no longer possesses any property at all, or if its assets have already been transferred before the judgment becomes final and binding?
Law enforcement experience under the regime prior to the new Criminal Code—for example, in corruption cases involving corporations—shows that this issue is not merely theoretical. Some observers have pointed out that if a corporation does not have sufficient assets, there are virtually no further instruments available to compel payment, given that such obligations cannot simply be transferred to the corporation’s board of directors or management, since it is the legal entity itself that is being penalized, not the individuals behind it.
The new Criminal Code seeks to close this loophole by providing alternative penalties such as the suspension of business operations, and even the extreme option of corporate dissolution as an additional penalty. However, the effectiveness of these provisions will ultimately depend heavily on the diligence of law enforcement officials in seizing assets as early as the investigative stage—to ensure that corporate assets do not have time to “disappear” before a judgment is enforced—as well as on the consistency of the courts in imposing adequate additional penalties from the outset, rather than relying solely on fines.
Note: This article is intended for editorial and general educational purposes and is not intended to serve as a legal opinion regarding a specific case. For application to a specific case, we recommend consulting with an attorney or legal expert, whom you can contact through this website.
