Significant Reforms on Shares Ownership and Encumbrance Reporting Obligation in Public Companies: A Guide to OJK Regulation No. 4 of 2024
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Overview
In August 2024, Indonesia’s financial regulatory landscape will undergo significant transformation with the introduction of a new regulation by the Financial Services Authority (Otoritas Jasa Keuangan - OJK). The newly enacted OJK Regulation No. 4 of 2024 regarding Reports on Ownership of or Any Ownership Changes in Public Company Shares and Reports on Activities of Guaranteeing Public Company Shares (“OJK Reg 4/2024”) marks a pivotal development in the governance of public companies. This regulation specifically addresses the reporting requirements for ownership changes and share pledging activities. By aligning Indonesia’s practices with international standards, OJK Reg 4/2024 aims to enhance the supervision of financial activities and promoting a more transparent market environment.
This regulation not only revises but also replaces the previous OJK Regulation No. 11/POJK.04/2017 regarding Reports of Ownership or any Changes to the Ownership of Shares in Public Companies (“OJK Reg 11/2017”), setting a new precedent for the management and reporting of share ownership and related activities within public companies.
Reporting Obligation Based on Voting Rights
In essence, OJK Reg 4/2024 revised the criteria for entities required to submit ownership reports, which were previously outlined in OJK Reg 11/2017. Although the focus has shifted from the number of shares to the voting rights, OJK Reg 4/2024 maintain similar ownership reporting procedure as those under OJK Reg 11/2017.
Under this new enacted regulation, the following parties must report to the OJK within 5 working days of changes in the ownership of voting rights:
- Each director or commissioner of a public company holding any voting rights, directly or indirectly, in the relevant public company; and
- Each party with a direct or indirect ownership of:
- At least 5% of voting rights; and
- Control over the public company.
- Each party with at least 5% of voting rights decreases its shares to be less than 5%.
Parties mentioned in point (ii) above shall notify any changes in its voting rights, rounded down to the nearest whole percentage. Additionally, if the said parties are part of a structured group, one designated shareholder can submit the report on behalf of the group.
Compared to the previous OJK Reg 11/2017, the current OJK Reg 4/2024 has also expanded the mandatory information that is required to be set out in the ownership reports which should now include the following additional information:
Types of transaction;
- Number of shares and voting right percentage before and after the transaction;
- Name of shareholders who grant the power of attorney, in the event that the ownership report submission is delegated to another party;
- Classification of shares;
- The details of the organised group, if relevant;
- Information regarding control of the public company, in the event that the ownership changes conducted by the controlling shareholders.
Reporting Exemptions
It shall be noted that the Article 3 of the OJK Reg 4/2024 exempts parties from the reporting obligations in the event that any changes in public company’s shares ownership is due to the following corporate actions:
- Capital increase by the public company, with or without granting the pre-emptive rights, that causes shares ownership dilution; and
- Corporate actions undertaken by the public company without any transaction undertaken by the shareholders, such as shares buyback.
Reporting of Pledged Public Company’s Shares
OJK Reg 4/2024 introduces new provisions regarding the reporting obligation for pledged shares, even if such encumbrances do not result in ownership changes. According to this regulation, any shareholders involved in activities involving shares in public companies with minimum voting rights of 5% must submit pledging reports to the OJK no later than 5 business days after signing the relevant security documents. This new framework also clarifies that both ownership reports and pledging reports shall be submitted via an electronic reporting system provided by the OJK.
However, as of the date of this update, the OJK has yet to establish the electronic reporting system which is mandated by the OJK Reg 4/2024. In this regard, should the electronic reporting system will yet to be available at the commencement date of this regulation, the ownership and pledging report will still have to be submitted through printed documents or electronic documents.
Implication for Stakeholders
Given that encumbrances and share pledges involving listed company shares are common in financing transactions, it is crucial for both lenders and shareholders to also be aware of these new provisions as regulated under OJK Reg 4/2024. In such case, lenders may request evidence that the mandatory reporting has been completed prior to the transaction as a condition precedent, or after the transaction as a condition subsequent in the relevant financing agreement.
Possible Sanctions
Any violations to the mandatory reporting under OJK Reg 4/2024 shall be imposed by an administrative sanction, as follows:
- Written warning;
- Fines;
- Restriction, suspension, or revocation of business license;
- Cancelation of approval; and/or
- Cancellation of registration.
Disclaimer:
This client update is the property of ARMA Law and intended for providing general information and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance. ARMA Law has no intention to provide a specific legal advice with regard to this client update.
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