On 28 February 2024, the Financial Services Authority (“OJK”) issues a newly revamped regulation concerning the ownership of shares in a public company. The so-called regulation is OJK Regulation No. 4 of 2024 on Reports of Ownership or Any Changes to the Ownership of Public Company Shares and Reports on Activities of Encumbering the Public Company Shares (“POJK 4/2024”). POJK 4/2024, which will be effective on 28 August 2024, has revoked the previous OJK Regulation No. 11/POJK.04/2017 of 2017 on Reports of Ownership or Any Changes to the Ownership of Public Company Shares (“POJK 11/2017”).
In short, POJK 4/2024 revamps the regulations that have been previously regulated under POJK 11/2017 but it adds some requirements to be coherent with the good business practices in other countries. Three amendments worth noting under POJK 4/2024 are: (i) the amendment of the reporting obligation of shares ownership in a public company; (ii) the newly reporting obligation of activities of encumbering a public company shares and (iii) electronic submission of reporting.
Amendment of the reporting obligation of share ownership in a public company
Previously, POJK 11/2017 governed that a (i) Director, (ii) Board of Commissioners, and (iii) party who directly or indirectly owns shares with a minimum of 5% of the paid-up capital in the public company (“5% Shareholders”) are required to submit a change of ownership report within 10 days from the occurrence of such changes. POJK 4/2024 made some amendments concerning this, which include:
- Controlling shareholders: Article 2 (2) of POJK 4/2024 further mandated that aside from a (i) Director, (ii) Board of Commissioners and (iii) 5% Shareholders, the controlling shareholders of a public company are also under the obligation to report for a change of ownership of public company shares to OJK.
- Time limit: Article 2 (7) of POJK 4/2024 governs a shorter deadline for the submission of the report, i.e. 5 business days from the time of changes of ownership occurred.
- Decrease of ownership of public company shares: Article 2 (3) of POJK 4/2024 emphasizes that a 5% Shareholders who experiences a reduction in the percentage of ownership of shares with voting rights to less than 5% must report the changes of the ownership of shares to the OJK.
- Organized group: Article 2 (4) of POJK 4/2024 regulates that a 5% Shareholders who is an organized group is also obliged to submit a change of ownership report. The reporting obligation shall be made by one of the shareholders who is appointed to represent the organized group.
Further, POJK 4/2024 also governs in more detail on (i) a party that wished to conduct the reporting obligation through a power of attorney and (ii) exemptions from reporting for the change of ownership that occurs as a result of the entities’ corporate actions.
The newly reporting obligation of activities of encumbering a public company shares
Previously, POJK 11/2017 did not govern the mandatory reporting for encumbering public company shares. Now, POJK 4/2024 governs that a shareholder who encumbers its shares in a public company must also submit a report to the OJK. This obligation shall apply to the encumbrance of shares accounting for 5% of the paid-up capital in the public company. To determine the 5% threshold, the percentage shall be calculated from a one-time transaction or an accumulation of the series of encumbrances.
Similar to the time limit on Article 2 (7) POJK 4/2024, the report must be submitted immediately by no later than 5 business days after the signing of the agreement on the activity of encumbering the public company shares.
Electronic submission of reporting
Before the enactment of POJK 4/2024, POJK 11/2017 did not explicitly state the method to submit a report to the OJK. Now, POJK 4/2024 governs that if the OJK has provided an electronic reporting system, the submission of:
- Report of ownership of any ownership changes in public company shares; and
- Report on activities of encumbering public company shares,
must be submitted to the OJK via an electronic system. The submission shall be conducted within 3 business days after:
- Report of ownership: from the time of changes of ownership occurred.
- Report on encumbering a public company share: after the signing of the agreement on the activity of encumbering the public company shares.
It is also notable that POJK 4/2024 seems to provide a shorter timeline for the electronic submission. The deadline for the electronic submission is three business days after the occurrence of the event while the general deadline provided in the previous articles is five business days.
Conclusion:
The issuance of POJK 4/2024 further clarifies and governs the details of the reporting of ownership and encumbrance of public company shares. POJK 4/2024 has a wider scope compared to POJK 11/2017. We understand that one of the driving factors for such amendments is to increase the quality of information disclosure and supervision by the authority. The POJK 4/2024 also governs the mandatory reporting requirements for encumbrance activities to minimize the potential of default which may cause enforcement of the pledge – which will eventually change the shares ownership. Hopefully, the issuance of POJK 4/2024 may further encourage transparency in Indonesia’s field of investment, resulting in the further advancement of the Indonesian capital market sector.
For Further Information, Please Contact:
MetaLAW, Legal Consultant, Jakarta, Indonesia
general@metalaw.id
