On 16 December 2015, the Financial Services Authority (Otoritas Jasa Keuangan / “OJK”) issued the following regulations:
In this alert, we confine our discussion to Rule No. 32/POJK.04/2015, Rule No. 30/POJK.04/2015 and Rule No. 31/POJK.04/2015.
B. Key Changes
B.1 Rule No. 32/POJK.04/2015 on Capital Increases in Public Companies with Pre-emptive Rights (“POJK No. 32/2015”)
Although POJK No. 32/2015 essentially reiterates what is contained in Bapepam Rule No. IX.D.1 on Pre-emptive Rights (Bapepam-LK Chairman’s Directive No. Kep-26/PM/2003, dated 17 July 2003) (“Rule No. IX.D.1”), it also incorporates a number of changes and new requirements that are applicable to Public Companies, as described below:
POJK No. 32/2015 acknowledges the payment of shares in-kind, as permitted under Law No. 40 of 2007 on Limited Liability Companies (“Companies Law”). Under POJK No. 32/2015, payment in-kind is allowed provided that: (i) it is related to the use of the proceeds, and (ii) an appraiser is appointed to assess the fair value and the fairness of such in-kind contribution. The time between the date of the appraisal report and the payment of shares in-kind should not exceed 6 months.
In addition to in-kind payments, POJK No. 32/2015 allows receivables to be used as payment for shares, provided that such receivables have been disclosed in the Public Company’s most recent audited financial statements.
In addition to the Prospectus that must be prepared in advance of a rights issue, POJK No. 32/2015 requires a Public Company to disclose all relevant information by no later than the date of announcement of the General Meeting of Shareholders (“GMS”). Such disclosure must encompass, at a minimum, the following information:
The announcement must (i) be placed in at least 1 (one) daily newspaper with nationwide circulation or be posted on the Stock Exchange website; and (ii) be posted on the Company’s website.
POJK No. 32/2015 requires the GMS of the Public Company to be convened prior to the submission of the Registration Statement to the OJK. The time between the granting of approval by the GMS and the coming into effect of the Registration Statement issued by the OJK shall not exceed 12 months. This marks a significant change from Rule No. IX.D.1, under which the Registration Statement must first be declared effective by the OJK before the convening of the GMS.
Previously, the Registration Statement was to be submitted simultaneously with the announcement of the GMS. Under POJK No. 32/2015, the Registration Statement should be submitted after the GMS, and becomes effective:
POJK No. 32/2015 provides greater clarity as regards the requirement that the standby buyer, majority shareholder and a prospective assignee of pre-emptive rights each provide a declaration that they have sufficient funds to exercise their rights or obligation to purchase the remaining shares (as the case may be). This requirement, however, is not applicable where payment is to be made in-kind. The majority shareholder is required to submit a declaration as to whether it intends to exercise its rights or to assign them to a third party. If the majority shareholder intends to exercise its rights, it must issue a declaration certifying that it has sufficient funds, supported by evidence from its bank in the form of bank statements or latest account balance. These documents should be submitted at the same time as the submission of the Registration Statement to the OJK.
B.2 Rule No. 30/POJK.04/2015 on Realization Reports on Utilization of Proceeds of Public Offerings (“POJK No. 30/2015”)
The key changes under POJK No. 30/2015 relate to the following matters:
a. Reporting schedule; and
b. Procedure for varying the use of proceeds.
Reports must be submitted to the OJK on a semi-annual basis (June 30 and December 31) until such time as the entire proceeds of the public offering have been exhausted. The first report should be submitted on the first reporting date (June 30 or December 31, as the case may be) after (i) the submission date of shares in an IPO or securities in a public offering of debt securities and/or sukuk, or (ii) the allotment date for a capital increase conducted through a rights issue.
Reports to the OJK should be submitted using the standard form appended to POJK No. 30/2015.
In the specific case of a Public Company, the utilization of proceeds from a public offering must also be accounted for to the GMS as part of the meeting’s agenda. Such accountability report should, at a minimum, contain information on:
a. The total proceeds of the public offering or rights issue;
b. The total costs related to the offering;
c. The proceeds that have been used and what they were used for; and
d. Unused proceeds and the reasons for their not being used.
In the case of all Issuers, unused proceeds of a public offering should be invested in “safe and liquid financial instruments,” and the Issuer is required to disclose the nature and locations of such investments, the applicable interest rate or profit-sharing arrangements (bagi hasil), and whether there is any relationship of affiliation between the company and the party with which the unused proceeds are invested. According to the Elucidation on POJK No. 30/2015, “safe and liquid financial instruments” include government/sovereign bonds and time deposits. In addition, unused proceeds must be invested in the name of the Issuer and may not be collateralized.
The previous Bapepam Rule No. X.K.4 (Bapepam Chairman’s Directive No. KEP-27/PM/2003) is silent as to when a change in the use of proceeds should be reported to the OJK. By contrast, under POJK No. 30/2015, an Issuer or public company should report a proposed change in the use of proceeds at the same time as the notification of the GMS’s agenda to the OJK.
B.3 Rule No. 31/POJK.04/2015 on the Disclosure of Material Information or Facts by Issuers and Public Companies (“POJK No. 31/2015”)
The key changes in POJK No. 31/2015 relate to the following:
a. Types of material information or facts that must be disclosed;
b. Timing for disclosure of material information or facts;
c. Scope of material information or facts; and
d. Means of disclosing material information or facts.
POJK No. 31/2015, which came into effect on 22 December 2015, sets out extensive rules on the obligations of Issuers and Public Companies to report to the OJK and promptly disclose material information or facts to the public by no later than the end of the 2nd business day after such material information or facts arise, including but not limited to information or facts related to:
However, there is no threshold given for “material value” in respect of the information or facts that must be reported to the OJK and disclosed to the public. Thus, it is up to the Board of Directors of the Issuer or Public Company to determine whether the particular information or facts are material.
Generally, an Issuer or Public Company is required to report to the OJK and disclose any material information or fact by no later than 2 business days after the emergence of the material information or fact. However, if the material information or fact has become known a third party who is not an insider2 of the Issuer or Public Company (“Third Party”), the Issuer or Public Company should promptly report to the OJK and make disclosure to the public.
POJK No. 31/2015 expands the scope of material information and facts so as to encompass not only material information and facts that arise in the Issuer or Public Company itself, but also material information or facts related to a Controlled Company3 of the Issuer or Public Company. In the event that material information or facts, as listed in POJK No. 31/2015 (with the exception of information or facts related to (i) a stock split or merger, (ii) distribution of interim dividend, (iii) delisting or relisting on the Stock Exchange, (iv) change of Trustee, and (v) change of Securities Administration Bureau), arise in a Controlled Company whose financial statements are consolidated with the Issuer or Public Company, and such Controlled Company is not an Issuer or a Public Company, then the Issuer or Public Company should report to the OJK and disclose such material information or facts to the public. However, if the Controlled Company is also an Issuer or Public Company under the Capital Market Law, then the Controlled Company itself must report the material information or facts to the OJK and make disclosure to the public.
The previous rule, Bapepam Regulation No. X.K.1 on Information to be Promptly Disclosed to the Public (Bapepam Chairman’s Directive No. Kep-86/PM/1996, dated 24 January 1996), is silent on the means by which material information or facts should be disclosed to the public. By contrast, POJK No. 31/2015 provides that the announcement disclosing the information to the public should be (i) posted on the Issuer or Public Company’s website in both Bahasa Indonesia and a foreign language, provided that, in the case of the foreign language version, the announcement shall at least be made in English, and (ii) in the case of an Issuer or Public Company whose shares are listed on the Stock Exchange, it should be posted on the Stock Exchange website or published in 1 (one) Bahasa Indonesia daily newspaper with nationwide circulation. For an Issuer or Public Company whose shares are not listed on the Stock Exchange, the announcement disclosing material information or facts should be (i) posted on the Issuer or Public Company’s website in both Bahasa Indonesia and a foreign language, provided that, in the case of the foreign language version, the announcement is at least made in English, and (ii) published in 1 (one) Bahasa Indonesia daily newspaper with nationwide circulation.
POJK No. 31/2015 requires that the public disclosure shall, at a minimum, contain information on: (i) the date of the relevant event, (ii) the nature of the material information or facts, (iii) a description of the material information or facts, and (iv) the impact of the material information or facts.
The material information or facts must be reported to the OJK using the standard form appended to POJK No. 31/2015, and be submitted by a Director or the Corporate Secretary of the Issuer or Public Company. However, the form may only be submitted by the Corporate Secretary based on a written power of attorney granted by the Director.
AHP Client Alert is a publication of Assegaf Hamzah & Partners. It brings an overview of selected Indonesian laws and regulations to the attention of clients but is not intended to be viewed or relied upon as legal advice. Clients should seek advice of qualified Indonesian legal practitioners with respect to the precise effect of the laws and regulations referred to in AHP Client Alert. Whilst care has been taken in the preparation of AHP Client Alert, no warranty is given as to the accuracy of the information it contains and no liability is accepted for any statement, opinion, error or omission.