This content is from: Local Insights

Indonesia’s new share buyback regulation

Oene MarseilleEmir Nurmansyah
Indonesia's Financial Services Authority (the OJK) has recently issued OJK regulation number: 2/POJK.04/2013 on share buybacks issued by issuers or public companies in significantly fluctuating market conditions (the Regulation). The Regulation came into effect on August 23 2013. The relaxation of regulations is supposedly part of the recent support package put in place to aid the downward pressure on the Indonesian currency and downward adjustment in the Indonesian stock market.

The Regulation aims to reduce the impact of a significantly fluctuating market and the resulting pressure on the domestic stock exchange, by giving flexibility to the issuer or public company (the Company) to conduct share buybacks without having to violate the prevailing laws and regulations.

Significantly fluctuating market conditions are defined as: a cumulative decline of 15% or more to the Composite Share Price Index on the Stock Exchange within three consecutive market days; or, other conditions as determined by the OJK.

In the event of significantly fluctuating market conditions, the Company may conduct the buyback without prior approval of the general meeting of shareholders. The buyback will not be considered as a violation of the provisions on market manipulation and insider trading as stipulated under the articles 91, 92, 95 and 96 of law number 8 of 1995 on capital markets, as long as it is conducted according to the Regulation.

Shares repurchased shall not exceed 20% of the Company's paid-up capital. The Regulation requires the Company to submit disclosure of information to the OJK within seven market days after the occurrence of the significantly fluctuating market conditions. Information to be disclosed consists of, among others: (i) an estimation of schedule, buyback costs and an estimation on the nominal value of shares being repurchased; (ii) a limitation on the share price and the period of the buyback; (iv) the method to be used for the buyback.

The Regulation also stipulates the methods of transferring the repurchased shares and the maximum period of holding the repurchased shares. Previously, the regulations required an extraordinary shareholders' meeting for listed companies for any buyback.

Oene Marseille and Emir Nurmansyah

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