Equity capital markets in Indonesia: regulatory overview

A Q&A guide to equity capital markets law in Indonesia.

The Q&A gives an overview of main equity markets/exchanges, regulators and legislation, listing requirements, offering structures, advisers, prospectus/offer document, marketing, bookbuilding, underwriting, timetables, stabilisation, tax, continuing obligations and de-listing.

To compare answers across multiple jurisdictions visit the Equity Capital Markets Country Q&A tool.

This Q&A is part of the global guide to equity capital markets law. For a full list of jurisdictional Q&As visit www.practicallaw.com/equitycapitalmarkets-guide.


Main equity markets/exchanges

1. What are the main equity markets/exchanges in your jurisdiction? Outline the main market activity and deals in the past year.

Main equity markets/exchanges

The Indonesia Stock Exchange (IDX) (www.idx.co.id) is the sole surviving securities market in Indonesia. The main securities traded on the IDX are shares (including rights) and bonds. Some share options and futures trading are also carried out, but not to any significant extent.

To date, no foreign companies have sought a listing on the IDX. However, in 1997, the market regulator (the Capital Markets and Financial Institution Supervisory Board (Badan Pengawas Pasar Modal-Lembaga Keuangan) (Bapepam-LK), now superseded by the Indonesian Financial Services Authority (Otoritas Jasa Keuangan) (OJK)), introduced rules allowing the issuance of Indonesian depositary receipts by foreign companies considering a dual listing, or even an initial public offering (IPO), in Indonesia. The Indonesian capital markets regulations make no provision for "safe havens" of the type established by Regulation S and Regulation S/Rule 144A of the US Securities Act 1933, although discussions are currently ongoing as to the possibility of providing different treatment to sophisticated investors with a view to providing an exemption similar to that provided by Rule 144A.

With regard to the upcoming ASEAN Economic Community (AEC), the biggest challenge for Indonesia may be to allow foreign companies to be listed on the IDX. Once the AEC commences, foreign companies should be able to offer their shares on the IDX and to be listed on the bourse. There is currently no supporting regulation for this plan.

The Indonesian Capital Markets Law 1995 does enable foreign firms to be listed on the country's bourse. It also bars cross-border offerings, stating that for a company to offer shares on the bourse, its prospectus must be audited by an auditing commission recognised by Indonesia's financial authority. This is the main hurdle blocking foreign firms from entering Indonesia's bourse.

Market activity and deals

According to the OJK Capital Market Statistic 2015:

  • The stocks total trading value decreased by 39% from IDR1,453.39 trillion in 2014 to IDR1,389.57 trillion in 2015.

  • The daily average stock trading value during 2015 decreased by 3.95% from 2014 to IDR5,768.35 billion per day.

  • The stock total trading volume in 2015 increased by 6.97% to 1,419.48 billion shares, with a daily average volume of trading standing at 5,942.88 million shares per day.

  • The stock total trading frequency was 53,538.27 thousand transactions in 2015, with a a daily average frequency of 223,038.20 transactions.

  • In 2015, there were 15 companies that conducted IPOs totalling IDR11,273.29 billion and 19 companies conducted rights issues with the total amount of cash raised of IDR37,428.74 billion.

2. What are the main regulators and legislation that applies to the equity markets/exchanges in your jurisdiction?

Regulatory bodies

Capital markets in Indonesia are regulated by the Financial Services (OJK) (www.ojk.go.id). The following are self-governing bodies:

  • Indonesia Stock Exchange (IDX) (www.idx.co.id).

  • Indonesian Central Securities Depository (PT Kustodian Sentral Efek Indonesia) (KSEI) (www.ksei.co.id).

  • Indonesian Clearing and Guarantee Corporation (PT Kliring Penjaminan Efek Indonesia) (KPEI) (www.kpei.co.id).

Since the enactment of the Indonesian Capital Markets Law 1995, Indonesia has applied scripless trading. To facilitate this, a collective depository was established (now known as the KSEI). Despite being a civil law jurisdiction that, in common with other civil law jurisdictions, generally does not recognise the distinction between legal and beneficial ownership, the Indonesian Capital Markets Law provide for such separation. As a result, an investor holds its securities beneficially in a security account maintained by the KSEI through the investor's custodian, with the KSEI acting as the legal owner of the securities. In the case of equity, the KSEI acts as global custodian and is recorded in the register of members of the relevant issuer. Investors also maintain a cash account into which payments related to their securities are made (for example, dividend distributions, coupon payments or payments related to the sale of securities).

Legislative framework

The main legislation that applies to the equity markets/exchanges in Indonesia includes the:

  • Indonesian Capital Markets Law (Law No. 8 of 1995 on Capital Markets).

  • Financial Services Authority Act 2011 (Law No. 21 of 2011 on Financial Services Authority).

  • OJK rules and regulations (including regulations issued previously by Bapepam-LK).

  • IDX rules on listing, trading, and membership requirements.

  • KSEI regulations.

  • KPEI regulations.


Equity offerings

3. What are the main requirements for a primary listing on the main markets/exchanges?

Main requirements

The Indonesia Stock Exchange (IDX) maintains two boards:

  • The main board.

  • The development board.

The main board is intended for prospective issuers and issuers of big companies that have track records, while the development board is intended for companies that have not yet fulfilled the listing requirements of the main board and companies that are in the state of reorganisation.

In order to secure a listing on either the main board or the development board, the following general requirements must be complied with:

  • The listing company must have limited liability.

  • Its registration statement must have been declared effective by Bapepam-LK or the Financial Services Authority (OJK).

  • 30% of the company's supervisory board must consist of independent members.

  • It must have at least one independent director.

  • It must have established an audit committee.

  • It must have an internal audit unit.

  • It must have a corporate secretary.

  • The par value of its shares must be at least IDR100 per share.

  • The directors and supervisory board members must be of good character and reputation, and qualified to hold corporate office.

There are also additional requirements, which differ depending on whether a listing on the main or development board is sought by the issuer. These additional requirements are the following:

  • The company must have engaged in its core business for at least 36 consecutive months as of the date of application for a listing on the main board, or 12 consecutive months for a listing on the development board.

  • The company must satisfy certain financial reporting requirements (see below, Trading records and accounts).

Minimum size requirements

Main board. The company must have at least 1,000 shareholders who hold securities accounts with stock exchange members.

Development board. The company must have at least 500 shareholders who hold securities accounts with stock exchange members.

Trading record and accounts

Main board. To list on the main board, the company must show audited financial statements for at least the last three fiscal years, provided that those for the last two fiscal years and the latest interim audited financial statements (if any) have received unqualified opinions. Additionally, the company must have net tangible assets of IDR100 billion, according to the most recent auditor's report.

Development board. To list on the development board, the company must show audited financial statements for at least the last year, and the latest interim audited financial statements (if any), all of which must have received unqualified opinions. The company must also be able to show net tangible assets of IDR5 billion, according to the most recent auditor's report.

Minimum shares in public hands

Main board. The number of shares held by non-controlling and non-principal shareholders after the initial public offering (IPO) before the listing must be at least 300 million shares and account for at least:

  • 20% of the total paid-up capital of a company with a total equity prior to the IPO of less than IDR500 billion.

  • 15% of the total paid-up capital of a company with a total equity prior to the IPO of between IDR500 billion and IDR 2,000 billion.

  • 10% of the total paid-up capital of a company with a total equity prior to the IPO of more than IDR2,000 billion.

Development board. The number of shares held by non-controlling and non-principal shareholders after the initial public offering prior to the listing must be at least 150 million shares and account for at least:

  • 20% of the total paid-up capital of a company with a total equity prior to the IPO of less than IDR500 billion.

  • 15% of the total paid-up capital of a company with a total equity prior to IPO of between IDR500 billion and IDR2,000 billion.

  • 10% of the total paid-up capital of a company with a total equity prior to the IPO of more than IDR2,000 billion.

4. What are the main requirements for a secondary listing on the main markets/exchanges?

Main requirements

After the initial public offering (IPO) is over, investors can buy or sell stocks and other listed securities in the secondary market. The defining characteristic of the secondary market is that the investors trade among themselves, which means the transfer of previously issued shares happen without any involvement from the issuing company.

All transactions in the Indonesia Stock Exchange (IDX) are processed in a facility called the Jakarta Automated Trading System (JATS). Only the exchange members, who also become the members of Indonesian Clearing and Guarantee Corporations (KPEI), can input the orders into the JATS. The exchange members are responsible for every transaction they make in the IDX.

Under IDX Rule No. III-A, in order to fulfil the requirements to obtain approval as an exchange member, the candidate must first submit an application letter and attach documents, including:

  • A copy of a business licence as broker-dealer or underwriter from the Financial Services Authority (OJK).

  • A company chronology covering the chronology of company shares ownership.

  • A chronology of change of members of board of directors and members of board of commissioners.

  • Short-term, middle-term and long-term business plans.

Exchange members have the responsibility to settle all the transactions they have made, as stated in the Exchange Transaction List (DTB), including the transactions that occur because of:

  • Errors made by the supporting equipment or remote trading applications of the exchange member, except for the errors made by the JONEC software that was provided by the bourse.

  • Mistakes caused by the carelessness of the traders when inserting the purchase and sell orders into the JATS.

  • Mistakes caused by the carelessness of the IT Officer-RT when operating their supporting equipments or applications.

  • Invalid access into the exchange member's supporting equipments or applications.

The transfer of shares in a publicly listed company must obtain the prior consent or permission of the relevant authorities. This is a requirement under the applicable legislation governing capital markets, including the Indonesian Capital Markets Law 1995 and Bapepam-LK and/or OJK rules and regulations issued under the Indonesian Capital Markets Law 1995.

A transfer of shares must be proven by specified documents signed by or in the name of the person who transfers the rights and by or in the name of the person who receives the transfer of the respective shares (Regulation No. IX.J.1). The transfer documents for rights to shares must be in the form determined by, or agreed to by the board of directors. The form and method of transfer of rights to shares traded in the capital markets must comply with the provisions of legislative regulations governing the capital markets sector. The transfer of rights to shares that are included in collective custody can be done by book entry settlement from one securities account to another at the central securities depository, custodian bank, and securities company.

Under OJK Regulation 60/POJK.04/2015, after a transfer of shares is conducted, each director or commissioner of an issuer or public company must report to the OJK with regard to their ownership and the changes of ownership within a period of no later than ten days from the transaction date. This responsibility also applies to shareholders that have an ownership of 5% or more of the paid-up capital in the company, whereby the report must at least include the:

  • Name, address and nationality of the insider or shareholder.

  • Number of shares purchased or sold.

  • Purchase and selling price.

  • Date of the transaction.

  • Purpose of the transaction.

Minimum size requirements

The minimum size requirements for primary listing also apply to secondary listing.

Trading record and accounts

The trading record and accounts requirements for primary listing also apply to secondary listing.

Minimum shares in public hands

Under IDX Rule No. I-A, existing listed companies must ensure that their minority shareholders hold no less than 50 million shares and 7.5% of its total issued and paid-up capital. However, under Regulation No. IX.H.1, in the event of an acquisition of a listed company, the new controlling shareholder will have two years after the completion of the mandatory tender offer to divest some of its shares and ensure that the public's shareholdings are not less than 20%, and are held by not less than 300 parties (see Question 3). Under IDX Rule No. I-A, the existing listed company must, at all times, maintain its minimum 7.5% minority shareholdings. IDX Rule No. I-A does not specify that the two-year divestment period under Regulation No. IX.H.1 can exempt the existing listed company from the minority shareholding requirements under IDX Rule No. I-A.

5. What are the main ways of structuring an IPO?

Most initial public offerings (IPOs) in Indonesia are aimed at wholesale or institutional investors. In addition to straightforward IPOs, initial offerings are frequently packaged together with offerings by shareholders under Rule IX.A.12, or with international offerings made in accordance with Reg. S or Reg. S/Rule 144A under the US Securities Act of 1933.

6. What are the main ways of structuring a subsequent equity offering?

The principal ways in which subsequent offerings take place are through rights issues or a capital increase without pre-emptive rights. The regulations do not provide for shelf registration of equity offerings, although shelf registration for debt offerings was introduced in 2010.

The listing of additional shares derived from the capital increase without pre-emptive rights excluding ESOP/MSOP can be listed on the Indonesia Stock Exchange (IDX) on fulfilment of the following requirements:

  • The exercise price of the new issued share must at least equal the average closing price of the shares of the relevant listed company for 25 consecutive exchange days on the regular market prior to the listed company advertising an announcement concerning the summon of the general meeting of shareholders of the listed company with an agenda concerning capital increase without pre-emptive rights.

  • The newly issued stocks must be common stocks having the same right as a common stock of the listed company which has already been listed on the IDX.

  • The newly issued stocks cannot be traded on the IDX for at least one year subsequent to listing for the purpose of protecting the interests of non-controlling shareholders.

7. What are the advantages and disadvantages of rights issues/other types of follow on equity offerings?

One alternative used by the company to raise funds is by way of rights issue and capital increase without pre-emptive rights.

The rights issue process is more complicated than a capital increase without pre-emptive rights. The process for rights issue is the same as the initial public offering (IPO) procedure, except that there is no bookbuilding process.

On 16 December 2015, OJK issued the following regulations regarding rights issues:

  • Rule No 32/POJK.04/2015 on Capital Increases in Public Companies with Pre-emptive Rights (POJK No 32/2015). This Rule, which revokes Bapepam Rule No IX.D.1 on Pre-emptive Rights (Rule No IX.D.1), came into effect on 22 December 2016 and is aimed at enhancing good corporate governance, and improving the quality of information disclosure in connection with rights issues.

  • Rule No 33/POJK.04/2015 on the Content and Form of Prospectuses in Relation to Increases of Capital by means of Pre-Emptive Rights Issuance. This Rule, which came into effect on 22 December 2016, expressly revokes Bapepam Rule No IX.D.3 (Bapepam Chairman's Directive No KEP-09/PM/2000).

Although POJK No 32/2015 essentially reiterates what is contained in Rule No IX.D.1, it also incorporates a number of changes and new requirements that are applicable to public companies, as described below.

Payment of shares. 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 it is related to the use of the proceeds, and 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 six 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.

Disclosure of information. 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. Such disclosure must encompass, at a minimum, the following information:

  • The maximum number of shares with pre-emptive rights that will be issued, including accompanying securities such as warrants or convertible bonds resulting from the exercise of the pre-emptive rights.

  • Estimated timeframe for completion of the capital increase.

  • An analysis on the effects of the capital increase on the public company's financial condition and on its shareholders.

  • General elaboration on the proposed use of proceeds.

  • Information on in-kind contributions, including appraisal reports.

The announcement must be placed in at least one daily newspaper with nationwide circulation or be posted on the Stock Exchange website, and be posted on the company's website.

General meeting of shareholders (GMS). 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 must 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.

Registration statement. 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 either:

  • Upon the elapse of 45 days subsequent to the submission of the registration statement to the OJK, or 45 days subsequent to the submission of any changes and/or additional documents to the OJK.

  • Upon a declaration by the OJK that no further changes and/or documents are required.

Commitments by standby buyer, majority shareholder, and prospective assignees of rights. 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.

Currently, the rights issue process is combined with placement whereby the majority shareholders sell their rights to a standby buyer and then the standby buyer exercise the rights and place the new shares on the market. In this scenario, the company has two benefits, that is, proceeds from the rights issue and increasing the public shares.

The capital increase without pre-emptive rights process is simpler than a rights issue as the issuer does not have to file a registration statement. The capital increase without pre-emptive rights only requires disclosure to the public on the same day as the announcement of the general meeting of shareholders. However, there is a limitation on the number of shares to be offered (that is, 10%).

8. What are the main steps for a company applying for a primary listing of its shares? Is the procedure different for a foreign company and is a foreign company likely to seek a listing for shares or depositary receipts?

Procedure for a primary listing

In the context of an IPO, the listing company first submits a listing application using the prescribed form to the bourse and pays an application fee of IDR 15 million. The application must be accompanied by, among other things:

  • The company's deed of establishment/articles of incorporation.

  • Information on:

    • the company's structure;

    • directors and supervisors' backgrounds;

    • the company's finances and prospects;

    • shareholders;

    • proposed number of shares to be offered and use of proceeds;

    • material transactions; and

    • business ratios.

The application must also be accompanied by:

  • A legal opinion.

  • An independent appraiser's report.

Additional information is required in the case of companies operating in specific sectors, such as mining.

After submitting the application, the company must then make a presentation on its plans to the stock exchange based on which decision will be made as to whether the application should be accepted or rejected. This must be notified to the applicant within ten trading days from receipt of the completed application by the bourse.

The next step is the signing of a preliminary listing agreement that states the company's plan to list its shares on the IDX, by the company and the stock exchange. This agreement is valid for up to six months, and can be extended, subject to prior approval from both parties.

After the registration statement submitted to the OJK is declared effective, the company must submit a number of documents to the stock exchange, including evidence of the registration statement's effectiveness, copies of the prospectus, and a declaration stating the company's willingness to abide by capital market and IDX rules and regulations.

If all of the requirements are fulfilled, approval for listing must be given by the stock exchange within no more than five days. The IDX will announce the listing of the new securities at least one exchange day prior to the commencement of the shares trading.

Indonesian capital markets rules establish a "same size fits all" regime, and make no distinction between non-reporting issuers, unseasoned issuers, seasoned issuers, and well-known seasoned issuers, unlike under US Securities and Exchange Commission (SEC) rules.

Procedure for a foreign company

The same procedures apply to foreign companies as for an Indonesian company, provided that the foreign company is not listed on another exchange. If a foreign company seek a listing on the IDX, then it must be by way of Indonesian depositary receipts. However, there are currently no foreign companies or depositary receipts listed on the Indonesian bourse.


Advisers: equity offering

9. Outline the role of advisers used and main documents produced in an equity offering. Does it differ for an IPO?

As in every other jurisdiction, the legal adviser plays a pivotal role in an equity offering in Indonesia. It is the legal adviser who, after conducting legal due diligence, decides whether the transaction can proceed or whether it must be cancelled due to legal difficulties. In normal practice, the legal adviser is required to confirm the legality of the transaction through the delivery of an opinion. If not, then the parties to the transaction will not agree to proceed.

The legal adviser's role also involves identifying any issues that could prejudice public shareholders. During the drafting of the prospectus, the legal adviser will review the documents and provide comments to ensure that the information it contains is accurate and not misleading. Additionally, the legal adviser also negotiates and drafts agreements related to the IPO (for example, the underwriting agreement, international co-ordination agreement, and agreement with the Share Registrar).

A very important part of the legal adviser's remit is doing "housekeeping work" as part of due diligence, such as ensuring that all the requirements of company law have been fulfilled, and changing the company's capital structure to comply with listing requirements.

In addition, key roles are played in the process by accountants, tax consultants, registrars, PR consultants and underwriters. In general, such roles closely correspond to those played by their counterparts in the US and other leading jurisdictions.

The principal documents produced during an equity offering are as follows:

  • Underwriting agreement (see Question 17).

  • Listing application (see Question 8).

  • Preliminary listing agreement (see Question 8)

  • Registration statement. This is the document by which the company seeks approval from the OJK for the offering. The company and all related parties are liable for the accuracy and comprehensiveness of the information contained in the registration statement and its supporting documents, which consists of:

    • the legal due diligence report;

    • financial statements;

    • appraisal report; and

    • prospectus.

  • Preliminary prospectus (see Question 10).

  • Effective statement. This is a statement from the OJK signalling that the company's registration statement is now effective.

  • Final prospectus (see Question 10).


Equity prospectus/main offering document

10. When is a prospectus (or other main offering document) required? What are the main publication, regulatory filing or delivery requirements?

Prospectus (or other main offering document) required

A prospectus is required for every equity offering, save for a private placement (see Question 11), and is submitted to the OJK as part of the registration statement. After the OJK declares that the issuer can publish the prospectus, the company issues a preliminary prospectus, which is abridged from the registration statement. It sets out information regarding the company and the offering, except for the offering price, and is used for bookbuilding purposes (see Question 16). It must be issued not more than two days after the OJK authorises the company to launch a bookbuilding process, and must be published in at least one nationally circulating Indonesian language daily newspaper.

Main publication, regulatory filing or delivery requirements

Following the statement of effectiveness from the OJK, the company will then issue the final prospectus. This supersedes the preliminary prospectus, and includes detailed information on the number of shares to be offered, the offering price, and underwriting commitments.

Prospectuses are normally distributed by the underwriters.

11. What are the main exemptions from the requirements for publication or delivery of a prospectus (or other main offering document)?

A prospectus is not required if the offering is conducted by way of private placement, that is, where securities are offered to less than 100 potential buyers or sold to less than 50 buyers.

12. What are the main content or disclosure requirements for a prospectus (or other main offering document)? What main categories of information are included?

A prospectus must provide:

  • Information on the offering.

  • Information on the company and its subsidiaries, consisting of information on the:

    • establishment;

    • capital structure and shareholding composition;

    • composition of the board of directors and board of supervisors;

    • employees;

    • assets;

    • material agreements binding on the company and its subsidiaries;

    • related party transactions; and

    • litigation involving the company and its subsidiaries.

  • Information on the company's business and future prospects.

  • Risk factors.

  • Management discussion and analysis based on the company's financial statements for the last three years prepared in accordance with the Indonesian Accounting Standards.

  • Summary of financial highlights and shareholders' equity.

  • Dividend policy.

  • Underwriting commitments.

  • Mechanism for subscribing to the shares being offered.

The financial statements must be prepared in compliance with the Indonesian Accounting Standards.

13. How is the prospectus (or other main offering document) prepared? Who is responsible and/or may be liable for its contents?

The prospectus is prepared by the lead underwriter and the company. In doing so, the lead underwriter invites the company, legal adviser and accountant to discuss as part of the due diligence process. The lead underwriter then prepares the prospectus based on responses from the company to the questions posed, as well as other information supplied by the company.

In addition to the company, the company's legal adviser and accountant also provide input and comments during the process. In an international offering, the company usually also appoints an industry consultant to assist the company in preparing the "industry section" part of the offering document.

The OJK has been encouraging the drafting of prospectuses to be handed over to lawyers to make prospectuses more akin to legal rather than marketing documents. Consequently, it is expected that lawyers will assume the lead role in writing prospectuses within the next five years.

Under the Capital Markets Law, any of the following will be liable for any losses:

  • Party who signs the registration statement.

  • Board of directors (BOD) and board of commissioners (BOC) at the time the registration statement is declared effective.

  • Lead underwriter.

  • Supporting professional, whose statement or information was included in the prospectus.


Marketing equity offerings

14. How are offered equity securities marketed?

Marketing is mainly carried out through bookbuilding, and the number of retail investors participating in Indonesian IPOs is generally very small, taking up on average only between 10% and 20% of offered equity. There has been discussion among market players, retail investors generally and the regulatory authorities as to how the level of participation of retail investors can be increased, such as through requiring minimum allocations for retail investors, to encourage broader participation and therefore improve market liquidity. However, underwriters' confidence in retail participation continues to be quite low.

15. Outline any potential liability for publishing research reports by participating brokers/dealers and ways used to avoid such liability.

Research reports are governed by Rule IX.A.9. While this rule does not prohibit the promotion of securities, including through research reports, it sets out clear guidance as to what is allowed and what is not. Therefore, it is prohibited to:

  • Provide inaccurate or misleading information.

  • Fail to disclose material facts.

  • Provide a false or misleading picture so that the unsophisticated investor may be persuaded to believe that the securities discussed in the report are a suitable investment instrument, although such investor lacks the capacity to bear the risks inherent in such securities.

If a research report gives a buy or sell recommendation, it must state the date of the recommendation, market price of the security on the date of recommendation, the party making the recommendation, and information on whether such party has an interest in the securities. In the context of a public offering, such reports must also state that interested parties should read the offering documents before making any purchases.

Violations of the above prohibitions give rise to both civil and criminal liability under the Indonesian Capital Markets Law.



16. Is the bookbuilding procedure used and in what circumstances? How is any related retail offer dealt with? How are orders confirmed?

Bookbuilding is the process carried out by the company together with the lead underwriter to offer the securities. The bookbuilding result will be used by the company and lead underwriter to determine the fixed offered shares and offering price. The application to subscribe for the securities can only be made during the offering period (that is, after the registration statement is declared effective by the OJK).

There are no specific regulations in place governing how the bookbuilding process should be carried out. However, Rule IX.A.2 provides that the issuer and underwriter can only commence bookbuilding after the OJK has confirmed that the preliminary prospectus can be issued, and continues for a minimum of seven working days. As the Rule requires a company to submit its final offering price and number of shares at the latest 21 business days after the bookbuilding statement is issued, it is therefore possible to conclude that the maximum period allowed for bookbuilding is 21 working days.

Retail allocations in Indonesia are normally minimal as, essentially, the retail market is less cost-effective for underwriters.


Underwriting: equity offering

17. How is the underwriting for an equity offering typically structured? What are the key terms of the underwriting agreement and what is a typical underwriting fee and/or commission?

As Indonesia is a civil law jurisdiction, the underwriting agreement is made in the form of a notarial deed (that is, a deed given under seal) prior to the filing of the registration statement. At this stage, the underwriting commitment is still conditional on the occurrence of a number of events, including an agreement on the price of the offered securities (which has yet to be determined). This makes it easier for both the issuer and underwriter as pricing can be a very subjective matter. The agreement can be amended if the OJK, following its review of the registration statement, requires such an amendment. After the completion of bookbuilding and as soon as the underwriter and issuer agree on the price of the securities, the underwriting agreement is amended for the last time. By this stage, both the issuer and underwriter will have a very limited window to get out. In practice, it is very common to find underwriters attempting to widen the window for possible exit by setting broad conditions for the effectiveness of the underwriting commitment, including favourable market conditions, breach of underwriting agreement, material change relating to the issuer and so on. The OJK (under Rule IX.A.2) only permits termination or postponement of the offering up to the end of the offering period, and in the case of events of force majeure in the form of:

  • A 10% drop in the composite index over three consecutive days.

  • Natural disaster, war, riot, labour strike or fire, where such event has a significant impact on the issuer's business.

  • Other events that have a significant impact on the issuer's business, as determined by the OJK.

The key terms of the underwriting agreement consist of the following provisions, among others:

  • Underwriting portion for each of the underwriters.

  • Commitment from each of the underwriters (usually on a full commitment basis).

  • Indemnity.

  • Fees.

Underwriter fees consist of:

  • Management fees to be paid only to the lead underwriter.

  • Underwriting fees to be paid to each underwriter based on its underwriting portions.

  • Selling fees to be paid to each underwriter.

The above fees are usually deducted from the proceeds of the equity offering.


Timetable: equity offerings

18. What is the timetable for a typical equity offering? Does it differ for an IPO?

For purposes of clarity, the initial offering process will be used to explain the timetable for a typical equity offering in Indonesia. An IPO commences with the presentation of the prospective issuer's plans to the IDX. This is followed by the preparation of the prospectus and agreements related to the public offering, such as a securities underwriting agreement, and agreements with the stock exchange, stock custodian and stock administration bureau.

The registration statement is submitted to the OJK, and is assessed by the regulator over a maximum period of 20 working days, during which time requests for further information and clarification may be made to the issuer. After this 20-day period, if everything proceeds as planned, the OJK will grant permission to the issuer to publish the abridged prospectus. The company must then publish the abridged prospectus within no more than two working days, and must convey proof of publication to the OJK within a further two working days at the maximum. Bookbuilding commences immediately after the publication of the abridged prospectus, and this will continue for a minimum of seven working days and a maximum of 21 working days.

The next stage is the issuance of the statement of effectiveness by the OJK, after which a maximum of one working day is allowed for any last minute corrections or additions to the abridged prospectus. The public offering period must commence no more than two working days after the statement of effectiveness by the OJK, and runs for a minimum of one and a maximum of five working days. After the end of the public offering period, allotment of the securities must take place within two working days at the maximum, followed by the distribution of the securities or refunds, as the case may be, within another two working days at the maximum. Finally, listing must take place not more than one working day after the distribution of the securities.

For a rights issue process (see Question 7) the registration statement was to be submitted simultaneously with the announcement of the general meeting of shareholders (GMS) for a rights issue. Under POJK No 32/2015, the registration statement should be submitted only after the GMS. After the EGMS the company has one year to obtain the OJK effective letter for the rights issue.

Below are some key dates in respect of a rights issue process:

  • The effective date of the rights issue will be the date that the OJK issues a letter declaring the registration statement effective.

  • The last date on which shares (which would have an entitlement to rights under the rights issue) may be traded by the holder of such shares to a third party (rights cum date) to allow settlement on or prior to the record date will be:

    • in respect of trading on the regular market and the negotiated market, no later than five business days after the registration statement effective date, and

    • in respect of trading on the cash market, no later than eight business days after the registration statement effective date.

  • The record date for determining the shareholders who are entitled to receive rights for the purposes of the rights issue will be no later than eight business days after the registration statement effective date. The date on which the rights are distributed to the shareholders who are entitled to receive rights (Distribution Date) will be no later than one business day after the record date.

  • The trading period during which shareholders and rights holders can trade or exercise the rights under the rights issue (Trading Period) will start on the first business day after the rights distribution date and will end no earlier or later than the date that will be stipulated in the prospectus.

  • The last date for payment for excess new shares (Tanggal Pembayaran untuk Pemesanan Efek Tambahan) by the rights holders who have applied for such excess new shares in the event that the new shares offered in the rights issue are not fully subscribed by the rights holders (Last Payment Date) will be at the latest two business days after the end of the trading period.

  • The allotment date will be the date that is one business day after the Last Payment Date.

  • The refund for unfilled orders will be done two business days after the allotment date.



19. Are there rules on price stabilisation and market manipulation in connection with an equity offering?

Article 94 of the Indonesian Capital Markets Law, in conjunction with Regulation No. XI.B.1, permits an underwriter or broker during the public offering period to offer to purchase, or purchase, securities for the purpose of maintaining their market price, subject to the following conditions:

  • The stabilisation price cannot differ from the official public offering price.

  • Stabilisation must continue throughout the offering period and cannot be extended beyond that period.

  • The possibility of stabilisation measures being taken must be disclosed in the prospectus.

  • An underwriter or broker selling or purchasing the securities during the stabilisation period for the benefit of a third party must ensure that such third party has received, or has had the opportunity to read, a written statement to the effect that stabilisation purchases will be, are being, or have been made.

As regards the role played by the stabilisation agent during the stabilisation period, the OJK has ruled in previous IPO deals that stabilisation can only be carried out through purchases on the secondary market.

The lead underwriter must give notice to the OJK as to the date and time when the public offering and stabilisation period started and ended.

The minimum information that must be provided to the OJK and must be disclosed in the prospectus includes:

  • How the stabilisation process was carried out.

  • When the stabilisation process began and ended.

  • The number of shares purchased during each intervention.

  • The total number of shares purchased during the stabilisation period.

In addition, the IDX also requires the stock broker involved in the stabilisation activities to report any stabilisation activities on a daily basis.


Tax: equity issues

20. What are the main tax issues when issuing and listing equity securities?

The listing of equity securities clearly provides a significant advantage for shareholders in terms of capital gains tax. For transfer of non-listed shares, capital gains tax is charged at the normal rates, with the maximum rates being 30% for an individual taxpayer, while a flat rate of 25% is charged in the case of corporate taxpayers (collectively referred to as the "normal rates") based on the difference between the acquisition cost of the securities and the transaction value. However, in the case of listed securities, a flat/final tax of 0.1% of the sales value applies. For founders of a company, a one-time tax of 0.5% is also charged.

Private placements and share purchase agreements entered into prior to listing will not be subject to the 0.1% final tax mentioned above as the 0.1% final tax is applicable only to transactions on the bourse. Therefore, the revenue authority will apply the normal rates of tax as elaborated above to private placements and shares acquired under share purchase agreements entered into prior to listing.


Continuing obligations

21. What are the main areas of continuing obligations applicable to listed companies and the legislation that applies?

There are two types of disclosures required by the OJK and the IDX, that is, periodical report and incidental report. A periodical report is a report required to be submitted by the issuer or listed company in a certain period (for example, annual report, financial statements, and report on the use of proceeds). An incidental report is required to be submitted by the issuer if there is any material or important fact that affects its share price. Under OJK Regulation No 31/POJK.04/2015, an incidental report includes, among others, mergers, acquisitions, distribution of a dividend and so on, and must be filed no later than two business days after the occurrence of the material information or fact. In addition to that, the OJK also requires a public company to upload material information or important facts to the IDX website and the company's website.

A periodical report includes, among others, financial information in the form of audited financial statements, interim financial statements and financial documents. Finally, the annual report must be submitted no more than four months after the close of the company's books for the year in question. An annual report consists of a summary of material financial data, a general analysis of the company's operations and prospects, audited financial statements, and a management report. In addition, since the issuance of new OJK regulations, the annual report must also include:

  • A charter that binds each member of the board of directors (BOD) and board of commissioners (BOC) of the issuer (OJK Regulation No. 33/POJK.04/2014).

  • A report to the OJK on the appointment or termination of their corporate secretary, as well as the implementation of corporate secretary function and training (OJK Regulation No. 35/POJK.04/2014).

  • With regard to the nomination and remuneration committees, the issuer must include a statement that it has established committee guidelines in accordance with OJK Regulation No. 34/POJK.04/2014 and a brief explanation of the implementation of the committee's duties and responsibilities in that financial year.

If listed companies do not establish a nomination and remuneration committee, they must disclose the information in their annual report and website, stating, at least:

  • The reasons for not establishing the committees.

  • An explanation of the implementation of the nomination and remuneration functions by the BOC in that financial year.

The issuer is responsible for the veracity and accuracy of the information disclosed to the public, and any breaches of the duties imposed by the regulations in this regard are punishable by administrative fines and criminal sanctions.

Under Bapepam-LK regulations, an issuer is required to disclose material information on transactions involving related parties and conflicts of interest. A related party transaction is a transaction between an issuer or a controlled company and an affiliate or an affiliate of the majority shareholder, a director or a member of the supervisory board. Such a transaction requires an independent appraisal as to the reasonableness of the transaction and must be disclosed to the public and the OJK no later than two business days after the date of the transaction, except where the transaction is between the issuer and a wholly owned subsidiary, or where it forms part of the principal business operations of the company, or is conducted in support of the principal business operations of the company.

Subject to a number of exceptions, an issuer must also disclose transactions involving a conflict of interest. Such transactions must be approved by independent shareholders at an extraordinary general meeting. An independent shareholder means a shareholder who does not have a conflict of interest in respect of the transaction.

A material transaction is defined as a transaction whose value amounts to 20% or more of the company's equity. If the value of the transaction is between 20% and 50% of the company's equity, it will only require disclosure to the public and the OJK within two business days of the date of signing of the transaction agreement, and the submission of a certificate of reasonableness from an appraiser. If the transaction is worth more than 50% of the company's equity, it will require shareholder approval.

Except for conflict of interest transactions that require the attendance and approval of independent shareholders at the general meeting of shareholders, there are no voting restrictions imposed by Indonesian law. The precise voting mechanisms for specific classes of corporate action are set out in the Indonesian Companies Act No. 40 of 2007.

Under OJK Regulation No. 32/POJK.04/2014, an announcement of a general meeting must be given to shareholders at least 14 days prior to the issuance of invitation of a general meeting of shareholders (excluding the date of the announcement and the date of the invitation) by placing an advertisement in at least one Indonesian daily newspaper, which must be published in the Indonesian language and has a national circulation in Indonesia, as well as on the IDX website and the listed company's website. Invitation to the shareholders must also be published by newspaper advertisement in the same manner, comprising, among others, the agendas of the meeting, at the latest 21 days before the date of a general meeting of shareholders (excluding the date of the invitation and the date of the meeting).

In general, the quorum for general meetings of shareholders consists of shareholders and/or their duly authorised proxies representing more than 50% of the issued and voting shares. If the meeting fails to reach such quorum, a second meeting can be called with a lower quorum requirement, and if this lower quorum is not reached, then on request of the BOD, the chairman of the OJK can determine any new quorum requirements based on the application from the listed company.

22. Do the continuing obligations apply to listed foreign companies and to issuers of depositary receipts?

There are currently no foreign companies or depositary receipts listed on the Indonesian bourse. However, if the situation were to change in the future, the same requirements would apply as to Indonesian listed companies.

23. What are the penalties for breaching the continuing obligations?

The penalties include a range of administrative and criminal sanctions under the Indonesian Capital Markets Law. The administrative sanctions include, among others, written warnings and fines.


Market abuse and insider dealing

24. What are the restrictions on market abuse and insider dealing?

Restrictions on market abuse/insider dealing

The Capital Markets Act provides a restriction on insiders to conduct a transaction with regard to the issuer's shares.

An insider is also prohibited from:

  • Influencing other parties to purchase or sell the company's securities.

  • Providing inside information to other parties.

The Capital Markets Act also provides a restriction for any party from making false statements on material facts, failing to reveal material facts or produce misleading statements on the actual situation at the relevant moment, with the aim of making profits or evading losses for the relevant party or other parties, or with the aim of influencing other parties to buy or sell securities.

Penalties for market abuse/insider dealing

Market abuse and insider dealing are liable to a maximum imprisonment of ten years and a maximum fine of IDR15 billion.



25. When can a company be de-listed?


The rules governing de-listing are set out in IDX Rule No. 1-I, which envisages two types of de-listing:

  • Voluntary, that is, at the request of the company concerned.

  • Forced, which is where the company is de-listed by the bourse to protect the interest of shareholders of the de-listed company.

Voluntary de-listing. In the case of a voluntary de-listing, the company must have been listed for a minimum of five years, the de-listing must be approved at the GMS, and the shares of those who voted against the de-listing must be purchased by the company or a third party designated by the company.

Voluntary de-listing procedures. In order to de-list, the company must submit a de-listing plan to the IDX providing the following information:

  • Reasons for the de-listing.

  • The intending purchasers of any shares that are to be sold by shareholders.

  • Estimated purchase price of the shares.

Preliminary disclosure to the public must then be made in at least one nationally circulating daily newspaper at the same time as the announcement of the GMS, and a report submitted to the IDX. If the GMS approve the de-listing, the company must detail the share buyback procedures in at least one nationally circulating daily newspaper. The company then submits a de-listing application, share buyback report and legal opinion by independent counsel stating that the buyback process has been completed in compliance with the prevailing laws and regulations. The IDX then suspends trading in the company's shares, and the de-listing becomes effective after the company has fulfilled its obligations to the IDX (including financial and reporting obligations). In practice, Bapepam-LK (currently OJK) requires a voluntary de-listing to be approved by independent shareholders.

Forced de-listing. Under IDX Rule No. 1-I, the IDX can de-list a listed company if either of the following conditions is satisfied:

  • The company has experienced a condition or event, whether financial or legal, that has a significant and direct adverse influence on the continuity of the company's business or its status as a listed company, and the company is unable to show any indication that it will be able to overcome the difficulties it faces.

  • As a result of a suspension on the regular or cash market, the company's shares have been traded solely on the negotiable market for the preceding 24 months at least.

Forced de-listing procedures. The IDX first holds a hearing with the company in question. If the IDX decides that it has no other choice but to de-list the company, it will inform the company of its decision, along with the de-listing schedule. If deemed necessary, the IDX can suspend the company's shares for five trading days, after which they can be traded on the negotiable market for 20 trading days prior to the effective date of de-listing, which occurs on the date stated in the de-listing resolution issued by the IDX.

It should be noted that a company's de-listing does not necessarily mean that it is no longer a listed company. As long as it continues to have at least 300 shareholders, it will continue to be subject to the requirements of the Indonesian Capital Markets Law.

Recent de-listings. In 2015 there were three companies that were delisted from the IDX (PT Davomas Abadi Tbk, PT Bank Ekonomi Raharja Tbk and PT Unitex Tbk). Except for PT Bank Ekonomi Raharja Tbk, which conducted a voluntary delisting, the IDX had de-listed the companies due to concerns regarding business sustainability.


The IDX can suspend shares and bonds of a listed company for the following reasons:

  • The listed company's audited financial statements receive a disclaimer opinion for two consecutive years, or an adverse opinion for one year. In this case, the listed company must submit a written explanation to the IDX, detailing the reasons behind the audit opinions.

  • The listed company is declared bankrupt by its creditors, or the listed company voluntarily requests a suspension of debt payment.

  • The listed company fails to properly disclose important and relevant information, which may have materially significant impacts on share prices and investment decisions.

  • The share price significantly increases or decreases, or there are irregular trading patterns.



26. Are there any proposals for reform of equity capital markets/exchanges? Are these proposals likely to come into force and, if so, when?

The Financial Services Authority (OJK) is one of the most active Indonesian governmental institutions and regularly updates and reviews its rules, regulations and policies. In doing so, the OJK frequently consults with practitioners, issuers, investors and the public at large. There have been quite a number of newly issued OJK rules to ease compliance with the regulatory framework, and this trend is likely to continue.

In late 2015, the OJK issued new regulations on rights issues, Sukuk insurance, public companies' websites, venture capital, use of proceeds reporting obligations and disclosures of material information for public companies. The OJK is still working on certain regulations to tighten up the rules governing the articles of incorporation of prospective issuers and listed companies, and the ratings assigned to debt securities, and so on.


Contributor profiles

Putu Suryastuti, Partner

Assegaf Hamzah & Partners

T +62 21 25557800
F +62 21 25557899
E putu.suryastuti@ahp.co.id
W www.ahp.co.id

Professional qualifications. Advocate, Indonesia

Areas of practice. Capital markets.

Mohammad Renaldi Zulkarnain, Senior Associate

Assegaf Hamzah & Partners

T +62 21 25557800
F +62 21 25557899
E mohammad.zulkarnain@ahp.co.id
W www.ahp.co.id

Professional qualifications. Advocate, Indonesia

Areas of practice. Capital markets.

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