Recently, the Indonesian Capital Market and Financial Institution Supervisory Board (Bapepam-LK) revised its regulations on certain corporate actions by public companies.
The new regulations attempt to improve the definition of conflict of interest by changing it to be "a difference between the economic interests of a company and the personal economic interests of a member of the board of directors, member of the board of the commissioners, or a major shareholder that may inflict a loss to the company". It also expands the coverage of definition of affiliate transaction so it is "a transaction made by a company or controlled company with an affiliate of the company or an affiliate of member of the board of directors, member of the board of the commissioners, or a major shareholder of the company".
Various new types of exemption from imposition of the regulation are also introduced. These include transactions in the company's main business and transactions that support the main business.
Also, the term of a material transaction is now classified into two types. The first is any transaction that has a value of 20% to 50% of the company's equity. The company only has to disclose that to Bapepam-LK. The second is any transaction with a value of more than 50% of the company's equity. Securing prior approval from shareholders is a must.
The regulation introduces new provisions on share price, if the object of the material transaction is shares of a public company. It also broadens the scope of the definition of material transaction to include project participations, rental of assets, lending and borrowing of funds, provision of assets as securities, and provision of company guarantees. Both of the above have been in force since the date of their issue on November 25 2009.
Also, the conditions for a public company to increase its paid up capital without a rights issue are revised by decreasing the lead time from three years to two. The threshold percentage of shares newly issued under this scheme is increased from 5% of the total paid-up capital to 10%.
If a public company is a commercial bank, the other requirements on the mandatory ratio of the loan received from Bank Indonesia or another government institution to total paid-up capital is revised by decreasing from 200% to 100%.
A public company must also now report to Bapepam-LK and publish to the public the time frame for the transaction and the end result. This regulation comes into force as of December 9 2009.
Oene Marseille and Freddy Karyadi