“The above mentioned law and principles are expected to protect the public interest (investing public) from harmful and illegal practices and ensure the Indonesia’s Capital Market conducted in an orderly and fair manner.”
Public Offering: What to know
Public Offering in Indonesia is governed by Law Number 8 of 1995 on Capital Market (“Capital Market Law”). Public Offering refers to an offering of Securities that takes place within a certain time and within specified amounts, either within the territory of Indonesia, or to Indonesian citizens abroad, and offered either through the mass media, or otherwise to more than 100 (one hundred) Persons, or resulting in sales to more than 50 (fifty) Persons.
When a Company has decided to enter Public Offering, they must fully aware that it will not only change their company status from a Non-Publicly to become a Public Company, in addition there will be several obligation of the Company to satisfy the Capital Market Law, there are 3 (three) fundamental principles in the Indonesian Capital Market Law, which are:
a. Transparent (Full Disclosure);
b. Appropriate (Fair); and
c. Independent.
The above mentioned law and principles are expected to protect the public interest (investing public) from harmful and illegal practices and ensure the Indonesia’s Capital Market conducted in an orderly and fair manner.
Further, in order to be able conducting Public Offering, Company should form as a Limited Liability Company (PT) and has operated for at least 12 (twelve) months, domiciled in Indonesia, has Net Tangible Assets value at least IDR 5,000,000,000 (five billion Rupiah) with annual audit report opinion status is “Unqualified Opinion” from public accountants registered at Indonesian Financial Service Authority (OJK).
The Parties and the Procedures
Firstly, the preparation step. The Company should conduct a General Shareholders Meeting (“Rapat Umum Pemegang Saham” or “RUPS”) regarding to the acceptance from the shareholders for Initial Public Offering (IPO), to change their Article of Association as a Public company. After accepted, the company will choose the preference underwriter, accountant, legal consultant, notary, appraisal and appoint Company’s Bureau of Securities Administration (“Badan Administrasi Efek” or “BAE”).
The underwriter is the party who will engage to help the company for issuing shares. The underwriter will be in charge of Public Offering activities as stated in the prospectus (A prospectus is written information that is intended to induce another Person to buy Securities in a Public Offering), responsible for the payment resulted from Public Offering to the Company and including providing report to the OJK.
Second, the Company has to prepare emission documents, such as initial contract with Indonesia Stock Exchange (IDX), public expose to the public, signing the emission agreements, and will be required to submit a Registration Statement (“Pernyataan Pendaftaran”) to The Financial Services Authority (“OJK”).
The documents required for submitting a Registration Statement for example, are;
a. Public offering schedule.
b. Prospectus.
d. Financial report from the Public Accountant.
f. Legal Due Diligence and Opinion from Legal Consultant which already registered at OJK.
After the registration statement has been effective, the Company then able to offer their securities to the public. IPO will be held for 5 (five) working days at the maximum.
After the IPO process has been finished, the shares will be registered at IDX. The share registration will be divided into two registration board, namely the Main Board and the Development Board.
The Main Board is destined to the big scale Company, specifically, for those who has Net Tangible Assets minimum value IDR 100,000,000,000 (one hundred billion Rupiah), as for The Development Board is for those who does not meet the requirements for the Main Board, as the minimum for The Development Board is Net Tangible Asset value IDR 5,000,000,000 (five billion Rupiah).
The Legal Consequences
Please note that public company will have an obligation to provide full disclosure regarding their business activity, particularly any important and concerning events, incidents or data that may affect the price of a security on an exchange or that may influence the decisions of investors, prospective investors or others that have an interest in such information (Material Information) e.g. financial report.
Moreover, The Company should also add the abbreviation “Tbk” after their Company name and should also have or appointed Corporate Secretary in their Company structure.
Author: Widya Rahmadhani / Arif Gaffar
Gaffar & Co., Indonesian Boutique Law Firm which specializing and focus on commercial law areas includes capital market and financial services.
For further queries and information, contact us:
+62- 5080 6536 | info@gaffarcolaw.com | www.gaffarcolaw.com
