“OJK issued the Regulation of OJK Number 17/POJK.04/2020 on Material Transactions and Alterations of Business Activities (“POJK 17/2020”). After six months from the POJK 17/2020 comes into force, the Decree of the Head of the Capital Market and Financial Institution Supervisory Agency Number. Kep-614/bl/2011 on Material Transactions and Alteration of Primary Business Activities, along with Rule Number IX.E.2 as its appendix, are replaced and declared invalid.”
On April 2020, Financial Services Authority (“Otoritas Jasa Keuangan” or “OJK”) has stipulated Regulation of OJK Number 17/POJK.04/2020 on Material Transactions and Alterations of Business Activities (“POJK 17/2020”). POJK 17/2020 has amended the prior regulation as stipulated in Regulation of Bapepam-LK (“Badan Pengawasan Pasar Modal dan Lembaga Keuangan” or “Bapepam-LK”) Number IX.E.2 of 2011 on Material Transactions and Alterations of Main Business Activities. The differences of both regulations can be found in the following table:
| Regulation of Bapepam-LK IX.E.2 2011 | POJK 17/2020 | |
| The definition of material transaction | Participation in business entity, project, and/or specific business activity. Buying, Selling, Transferring, Exchanging Assets or Business Segment.Asset’s lease.Fund’s lending and borrowing.Guarantee the asset.Provide the corporate guarantee. | Participation in business entity, project, and/or specific business activity. Buying, Selling, Transferring, Exchanging Assets or Operational Segment.Acquire, release, and/or utilization of service.Asset’s lease.Fund’s lending and borrowing including its transfer.Guarantee the publicly-listed company’s assets and/ or controlled company’s asset upon the loan from the other parties.Provide the corporate guarantee. |
| Specific provisions upon the specific material transaction | Transaction with controlled company.Corporate guarantee upon the controlled company transaction.Loan transaction which directly received form bank, venture capital company, etc.Guarantee transaction to bank, venture capital company, etc. upon the publicly-listed company and controlled company transaction. Transaction material as main business activity. Transaction material upon asset which used for production process or main business activity. Issuance of stock through public offering (excepted from equity stock).Company that have disclose the material transaction information in prospectus.Transaction of increasing or decreasing the equity’s participation.Material transaction in the event of obtaining loan from Bank Indonesia with specific amount. Transaction that conducted by publicly-listed company (non-bank) that have negative net working capital and negative equity.Releasing and acquiring asset according to court’s decision.Transaction that conducted by publicly-listed company to fulfill the regulation obligation.Affiliate/conflict of interest transaction. | Transaction with controlled company.Loan transaction which directly received form bank, venture capital company, etc.Guarantee transaction to bank, venture capital company, etc. upon the publicly-listed company and controlled company transaction. Transaction of increasing or decreasing the equity’s participation.Transaction that conducted according to court decision.Transaction that conducted according to auction process. Transaction that conducted by publicly-listed company (non-bank) that have negative net working capital and negative equity.Transaction of financial service institution (publicly-listed company) that control the sharia financial company. Transaction that conducted by publicly-listed company to fulfill the regulation obligation.Transaction of restructuring the state-owned enterprise (“Badan Usaha Milik Negara” or “BUMN) Transaction of financial service institution (publicly-listed company) with specific condition.Material transaction which classified as business activities and conducted regularlyAffiliate/conflict of interest transaction.Material transaction which potentially disrupt the publicly-listed company’s business continuity. Material dilution of publicly-listed company upon the capital increase by controlled company. |
| Value of transaction that categorized as material transaction | Transactions value equals 20% (twenty percent) or more than the publicly-listed company’s equity. | Transactions value equals 20% (twenty percent) or more than the publicly-listed company’s equity. Transactions of acquiring and releasing of companies or operation segment, which are: transactions value equals 20% (twenty percent) or more than publicly-listed company’s equity;total assets as transaction object divided by total publicly-listed company’s assets are same value or more than 20% (twenty percent);transaction object’s net income divided by publicly-listed company’s net income are same value or more than 20% (twenty percent); ortransaction object’s operating income divided by publicly-listed company’s operating income are same value or more than 20% (twenty percent).Transactions value equals 10% (ten percent) or more of the total assets of publicly-listed company with negative equity. |
| Exception from Information Disclosure Obligation | N/A | Financial service institution (publicly-listed company) that conducted a material transaction with a specific condition. However, it keeps report to OJK. |
| Condition which need General Meeting of Shareholders (“Rapat Umum Pemegang Saham” or “RUPS”) Approval | Material transaction with value more than 50% (fifty percent) from company’s equity. | Material transaction with more than 50% (fifty percent) from as regarded to material transaction value. Material transaction with more than 25% (twenty-five percent) as regarded to material transaction value which conducted by publicly-listed company with negative equity.Appraisal report that report improper material transaction. |
| Approval from Independence Shareholders in RUPS | N/A | Material transaction which contains affiliate transaction, conflict of interest, and potentially disrupt the publicly-listed company’s business continuity. |
| Terms of Publicly-Listed Company’s business activity | Publicly-listed company’s “main” business activity is regarded as stated in article of association and has been performed. | Publicly-listed company’s business activity is regarded as stated in article of association and has been performed. |
| Sanction | Bapepam-LK has authority to impose some sanctions for those who violate and causes violation of the provisions in the regulation. | OJK has authority to impose some administrative sanctions which are concise of: Written warning/caution.Fines.Limitation of business activities.Suspension of business activities.Revocation of business license.Cancellation of approval. Cancellation of registration. |
Author: Kristalia Andiani Puteri
Gaffar & Co., Indonesian Boutique Law Firm which specializing and focus on commercial law areas include capital market and financial services.
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