More than two years after the enactment of the new company law which limits the ownership period of bought back shares held by the company, the Indonesian Capital Market and Financial Institutions Supervisory Board (Bapepam-LK) has revised Rule No. XI.B.2 (the Rule) on share repurchase. The revised Rule also revokes the 2008 rule concerning buy back shares in the market having potential financial crisis.
The buy back shall be approved by the shareholders and the necessary announcement of the shareholders meeting must also contain certain minimum information including (among others) the background, details of the implementations of the buy back, limitations on pricing and buy back periods. The buy back of shares must be completed within 18 months of the shareholders approval.
If the buy back is done due to a request from certain shareholders (who do not agree with specific corporate actions of the company) for the company to repurchase their shares, the announcement shall include the names of the shareholders whose shares may be repurchased by the company. The report of buy back results shall be filed to Bapepam-LK every six months, in June and December. The bought back shares may be held by the company for up to three years, however, another two year period is given if there are remaining bought back shares which are not re-transferred after the three years elapsed.
Since the bought back shares will not have valid voting rights, the buy back shares may increase the voting power percentage of non-selling shareholders, thus certain non-selling shareholder(s) may become the new controlling shareholder(s). However, the Rule is not clear whether such new controlling shareholder(s) must make a tender offer. The Rule does clarify that the buy back shares transaction will not require the company to comply with the Material Transaction Rule, though the value of the buy back transaction reaches the threshold of Material Transaction. In the event that the buy back transaction constitutes an affiliated party transaction but does not contain a conflict of interest element, the company is not required to comply with the Conflict of Interest and Affiliated Party Transaction Rule.
The treasury stocks which have been retained by the company for 30 days or more can be re-assigned and re-sold, both in and outside of the stock exchange. Various methods and procedural requirements for the transfer of such treasury stocks are contemplated in the Rule which has been in force since April 13 2010.
Oene Marseille & Freddy Karyadi
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