“Please note that Public Offerings from Equity Crowdfunding process will not consider as Public Offerings as defined in Law No. 8 of 1995 on Capital Market if it is matched with the criteria as mentioned in Regulation Number 37/POJK.04/2018 on Information Technology Based Crowdfunding Services via Public Offerings (Equity Crowdfunding).”
Information Technology (IT) development has grown dramatically over this past few years, it resulted many changes includes business landscapes. Nonetheless, is financial industry sector, from fund transfers, to a totally new creative financial business model which based on technology e.g. peer to peer lending or even crowdfunding activity.
Indonesian government trough Financial Services Authority (Otoritas Jasa Keuangan or “OJK”) has issued Regulation Number 37/POJK.04/2018 (“POJK 37/2018”) on Information Technology Based Crowdfunding Services Via Public Offerings (Equity Crowdfunding), the regulation itself has been anticipated by many small-medium or start-up entrepreneur as one of the alternatives to their financial sourcing.
The regulation considered as a breakthrough and believed will encourage small-medium enterprises or start-up company to access capital market and become one of alternative financial sourcing.
Definition of Equity Crowdfunding
Equity Crowdfunding in POJK 37/2018, defined as the implementation of shares public offering services conducted by Issuers to sell shares directly to Investors through an open electronic system network (which provide and manage by a Provider).
Based on POJK 37/2018, there are 3 (three) major parties involve in the Equity Crowdfunding process, which are:
1.The Provider;
2.The Issuer; and
3.Investors.
Before conducting Equity Crowdfunding, the Provider, must firstly apply and obtain business license from The Financial Services Authority (OJK), also, they must register as the Electronic System Provider (PSE) at The Ministry of Communication and Information Technology.
The Provider will play a role to provide, maintain, and to operate Equity Crowdfunding Service system for the Investor and the Issuer.
Equity Crowdfunding Agreement
The Provider and the Issuer will have an agreement before they started the Equity Crowdfunding. The agreement will mention the rights and obligations of both Parties, target of funds raised from the crowdfunding, commission amount for the Provider, and the issuance system of shares certificate (with or without share certificate).
The agreement itself must be formed in a notarial deed. As for the transfer of funds, the Provider should use escrow and virtual account and should provide a virtual account for the Investor.
Issuer’s Criteria
The Issuer at Equity Crowdfunding only allows to offer their shares through one Provider at the same time within 12 (twelve) months period with maximum fund collected in the amount of IDR 10,000,000,000 (ten billion Rupiah).
The Issuer must be a Limited Liability Company, and not a public company or its subsidiaries, and also not a company with assets of more than IDR 10,000,000,000 (ten billion Rupiah) exclude lands and buildings.
Further, please note that the Public Offerings process from Equity Crowdfunding will not consider as a Public Offerings as defined in Law Number 8/ 1995 on Capital Market, if meet and match with these following criteria:
(a) The offering is performed through a licensed Provider by OJK;
(b) The offering is conducted in a maximum 12 (twelve) months: and
(c) The total funds raised do not exceed IDR 10,000,000,000 (ten billion Rupiah) or any other amount determined by OJK.
Please also note that The Issuer will be not considered as a public company under Law Number 8/1995 if the number of shareholders of the Issuer is less than 300 (three hundred) and paid-up capital of the Issuer is less than IDR 30,000,000,000 (thirty billion Rupiah).
Investor’s Criteria
The Investor at Equity Crowdfunding will buy the shares with payment system by transferring their fund to escrow account stated on the agreement from the Provider and the Issuer. After the payment held by the Investor by transferring the fund to an escrow account, the Provider should transfer the fund from the Investor to the Issuer at the latest 21 (twenty-one) working days after the end of the offering.
There are some criteria that should be applied for the prospective Investor who is not a legal entity and did not have any experiences investing in Capital Market:
(a) If their income is maximum IDR 500,000,000 (five hundred million Rupiah) per year, the Investor can buy shares for maximum 5% (five percent) from the maximum income per year; and
(b) If their income is more than IDR 500,000,000 (five hundred million Rupiah), the Investor can buy shares through Equity Crowdfunding maximum 10% (ten percent) from the total income per year.
After the fund is being transferred by the Provider, the Issuer should transfer the shares to the Provider for distribution to the Investor maximum 5 (five) working days after the Issuer receives Investor’s fund transfer from the Provider.
Shares Ownership and Recordation
The Provider should distribute the shares to the Investor within maximum 10 (ten) working days after receiving shares from the Issuer. The distribution can be conducted through electronic system using collective deposit institution/ custodian or sent the certificate physically.
If the distribution intends to be electronically, the distribution will be held through preferable custodian, moreover, please note that the Issuer should firstly have an agreement with Depository and Settlement Institution (Lembaga Penyimpanan dan Penyelesaian “LPP”) and the Investor should have an account at Custodian.
Finally, after the closing of the offering process, the Issuer should register the list of Investor’s shares ownership of the Shares Registration Book of the Issuer with the written Investor’s name.
Author: Widya Rahmadhani / Arif Gaffar
Gaffar & Co. is an Indonesian Boutique Law Firm that focused on commercial law areas includes capital market and financial services.
For further queries and information, contact us:
+62 21 5080 6536 | info@gaffarcolaw.com | www.gaffarcolaw.com
