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Print articleIndonesia: BAPEPAM-LK’s New Regulation on Changes to Material Transaction and Main Business Activities
March, 2012 -
On 28 November 2012, the Capital Market – Financial Institutions Supervisory Board (Badan Pengawas Pasar Modal – Lembaga Keuangan or “BAPEPAM - LK”) issued a new regulation on Changes to Material Transactions and Main Business Activities, ie Decree of the Head of BAPEPAM-LK No. KEP-614/BL/2011 (“Regulation IX.E.2”) which revoked Decree of the Head of BAPEPAM-LK No. KEP-413/BL/2009 (“Previous Regulation”) on the same matter.
Regulation IX.E.2 simplifies the definition of Material Transactions to the following:
In principle, the procedures of a material transaction are the same as those provided under the Previous Regulation. A Public Company which performs a material transaction with a transaction value of from 20% to 50% of the company’s equity does not require General Meeting of Shareholders’ (“GMS”) approval, if the company publishes an announcement regarding the material transaction in a complying newspaper and submits the required supporting documents to BAPEPAM-LK within 2 days of the signing of the agreement covering the material transaction. Previously, evidence of an announcement had to be submitted to BAPEPAM-LK by the end of the second business day after the Material Transaction occurred (upon closing).
If the material transaction value is more than 50% of the Public Company’s equity, the Public Company requires GMS approval. Regulation IX.E.2 also regulates Material Transactions involving the issuance of debt securities for both domestic and international offerings through private placement where the buyers are not yet known.
There are 13 exemptions from the requirements under Regulation IX.E.2 mostly the same as those under the Previous Regulation. One additional exemption applies to material transactions conducted between Controlled Companies, 99% of the shares of which are owned by the Public Company. Under Regulation IX.E.2, Public Companies obtaining loans from banks, venture capital companies, financing companies, infrastructure financing companies whether domestic or overseas, are also exempt. Nor do Public Companies which provide corporate guarantees to banks, venture capital companies, leasing companies, or infrastructure financing companies, whether domestic or overseas, for loans obtained directly by the Public Companies or Controlled Companies have to comply. An additional exemption now also applies to material transactions performed by banks with loans from Bank Indonesia or other government entities worth up to 100% of their total issued and paid-up capital or any other conditions which may cause a bank to require restructuring by the authority. Lastly, Regulation IX.E.2 does not apply to Public Companies other than banks which have negative net working capital or negative equity. If a material transaction is exempt from Regulation IX.E.2, the Public Company must still comply with the disclosure obligation imposed under BAPEPAM-LK Regulation X.K.1.
For a Public Company to change its main business activity, Regulation IX.E.2 requires prior GMS approval, with certain exemptions. Regulation IX.E.2 also elaborates on a change of the main business activity of a Controlled Company, which was not covered by the Previous Regulation.
Regulation IX.E.2 simplifies the definition of Material Transactions to the following:
- participating in a business entity, project, and/or certain business activity;
- purchasing, selling, transferring, or exchanging assets or business segments;
- leasing assets;
- borrowing or lending funds;
- encumbering assets, and/or;
- providing corporate guarantees,
In principle, the procedures of a material transaction are the same as those provided under the Previous Regulation. A Public Company which performs a material transaction with a transaction value of from 20% to 50% of the company’s equity does not require General Meeting of Shareholders’ (“GMS”) approval, if the company publishes an announcement regarding the material transaction in a complying newspaper and submits the required supporting documents to BAPEPAM-LK within 2 days of the signing of the agreement covering the material transaction. Previously, evidence of an announcement had to be submitted to BAPEPAM-LK by the end of the second business day after the Material Transaction occurred (upon closing).
If the material transaction value is more than 50% of the Public Company’s equity, the Public Company requires GMS approval. Regulation IX.E.2 also regulates Material Transactions involving the issuance of debt securities for both domestic and international offerings through private placement where the buyers are not yet known.
There are 13 exemptions from the requirements under Regulation IX.E.2 mostly the same as those under the Previous Regulation. One additional exemption applies to material transactions conducted between Controlled Companies, 99% of the shares of which are owned by the Public Company. Under Regulation IX.E.2, Public Companies obtaining loans from banks, venture capital companies, financing companies, infrastructure financing companies whether domestic or overseas, are also exempt. Nor do Public Companies which provide corporate guarantees to banks, venture capital companies, leasing companies, or infrastructure financing companies, whether domestic or overseas, for loans obtained directly by the Public Companies or Controlled Companies have to comply. An additional exemption now also applies to material transactions performed by banks with loans from Bank Indonesia or other government entities worth up to 100% of their total issued and paid-up capital or any other conditions which may cause a bank to require restructuring by the authority. Lastly, Regulation IX.E.2 does not apply to Public Companies other than banks which have negative net working capital or negative equity. If a material transaction is exempt from Regulation IX.E.2, the Public Company must still comply with the disclosure obligation imposed under BAPEPAM-LK Regulation X.K.1.
For a Public Company to change its main business activity, Regulation IX.E.2 requires prior GMS approval, with certain exemptions. Regulation IX.E.2 also elaborates on a change of the main business activity of a Controlled Company, which was not covered by the Previous Regulation.
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