“An Acquisition is held to the passing of control of the Company by acquiring shares. The acquisition can be held through the Company’s Board of Directors or directly through the Shareholder.”
In the event of business interest, Company usually has a strategy to expand their business or accelerate the growth of a Company. One of the ways is by carry out restructuring in the form of acquisition.
1. Definition of Acquisition
Article 1 number 11 Law No. 40 of 2007 regarding Limited Liability Company (“Law 40/2007”) stipulated the definition of acquisition is a legal action taken by a legal entity or individual person to acquire shares in a Company resulting in the passing of control of the Company.
Based on Article 125 Law 40/2007, acquisition shall be done to:
- shares already issued; and/or
- shares to be issued
Particularly, Company shares that can be acquired are subscribed and paid-up share and/or shares that have not been issued or that will be issued (portfolio share).
2. Requirements of Acquisition
As mentioned in Article 126 Law 40/2007, the requirements of Acquisition are the legal actions of Acquisition must be subject to the interests of:
- the company, minority shareholders, the company’s employees;
- creditors and other business partners of the company; and
- the public and sound business competition.
In other word, Acquisition cannot be held if it is harming the interests of certain parties.
3. Procedure of Acquisition
Shares can be acquired via the Company’s Board of Directors or directly through the Shareholders as stipulated in Article 125 paragraph 1 Law 40/2007.
Therefore, the procedure of Acquisition can be divided into 2 (two), which is Acquisition via the Company’s Board of Directors and Acquisition directly through the Shareholders.
4. Procedure of Acquisition via the Company’s Board of Directors
a. The Acquiring Party Must Present its Intention
In the event that the Acquisition is performed through the Board of Directors, the acquiring party must present its intention of performing an Acquisition to the Board of Directors of the Company to be acquired.
b. Compile a Draft of Acquisition Plan
The Board of Directors of the Company to be acquired and the acquiring Company with the approval of their respective Board of Commissioners shall compile a draft Acquisition containing at least:
- name and domicile of the acquiring company and the company to be acquired;
- the reasons and explanations of the board of directors of the acquiring company and the board of directors to be acquired;
- the financial reports for the most recent financial year of the acquiring company and the company to be acquired;
- procedure for valuation and conversion of shares of the company to be acquired into exchange shares if payment for the acquisition is to be made by shares;
- the number of shares to be acquired;
- preparation of funding;
- proforma consolidated balance sheet of the acquiring company after the acquisition compiled in accordance with accounting principles generally applied in Indonesia;
- method of settlement of the status, rights, and obligations of members of the board of directors, board of commissioners, and employees of the company to be acquired;
- estimate of the period of implementation of the acquisition, including the period for granting a power of attorney from the shareholders to the company’s board of directors to assign shares;
- draft any amendment of the Article of Association of the Company resulting from the Acquisition.
c. Approval from General Meeting of Shareholders
Acquisition must get approval from General Meeting of Shareholders (“GMS”) as mentioned in Article 127 paragraph 1 Law 40/2007 with comply. The GMS resolutions shall be adopted on the basis of deliberation to reach a consensus. GMS to approve Acquisition may only be held if:
- in the meeting at least 3/4 of the total number of shares with voting rights present or represented in the GMS; and
- the resolution shall be lawful if approved by at least ¾ of the number of votes cast, unless the Articles of Association of the Company specify a quorum to be present and/or provisions concerning he requirements for adoption of GMS resolution which are higher.
d. Publish a Summary of the Acquisition Plan
Based on Article 127 Law 40/2007, before GMS held, the Company to be acquired and the acquiring Company must publish summary of Acquisition plan with provision as below:
- publish in at least 1 (one) newspaper;
- publish it in writing to the employees of the company;
- publish it no later than 30 (thirty) days before the invitations to the GMS;
The publication must also contain notice that the interested parties may obtain the summary of Acquisition plan at the Company’s office as from the date of its publication to the date on which the GMS is convened.
e. Creditor’s Right to Object
As stipulated in Article 127 Law 40/2007, Creditors may submit objections to the Company within a period of not more than 14 (fourteen) days after the publication as mentioned in point d above.
If within the period of 14 (fourteen) days there are no creditors have submitted any objection, the creditor will be deemed to have approved the Acquisition. However, in the event that a creditor’s objection cannot be resolved by the Board of Directors as of the date on which the GMS is convened, the objection must be presented in the GMS in order to find a resolution. Until the resolution is achieved, the Acquisition cannot be performed.
f. Acquisition Plan is Stated in the Acquisition Deed
Draft of Acquisition plan must made before a notary and stated in notarial deed in the Indonesia language as stipulated in Article 128 Law 40/2007.
g. Notification to the Minister
A copy of the deed of Acquisition of Company must be attached to the delivery of notification to the Minister concerning the amendment to the Article of Association as stipulated in Article 131 paragraph 1 Law 40/2007.
h. Publication of Acquisition Result
Based on Article 132 paragraph 1 Law 40/2007, the Board of Directors surviving an Acquisition must publish the result of Acquisition in 1 (one) or more Newspapers within no more than 30 (thirty) days as from the date the Acquisition comes into effect.
5. Procedure of Acquisition Directly Through the Shareholders
Elucidation of Article 125 paragraph 7 Law 40/2007 stipulated that the Acquisition of Shares of other Companies directly from Shareholders need not be preceded by making a draft Acquisition but shall be done directly through negotiation and agreement by the acquiring party and the Shareholder subject to the Article of Association of the Company to be acquired concerning of the transfer of rights over shares and contracts made by the Company with other parties.
Therefore, procedure of Acquisition directly through the shareholders no need to go through the procedure of the acquiring party must present its intention and compile a draft of acquisition plan but the rest of the Procedure is the same as Procedure of Acquisition via the Company’s Board of Directors.
Furthermore, the Procedure of Acquisition directly through the shareholders as below:
- held direct negotiation and agreement;
- get approval of the acquisition plan from the GMS;
- publish an acquisition deal plan;
- creditor’s right to object;
- acquisition plan is stated in the acquisition deed through GMS;
- notification to the Ministry of Law and Human Rights; and
- publication of acquisition result.
Author: Vania Aqilla Cahyaningrum
Gaffar & Co., is an Indonesian Boutique Law Firm specializing and focusing on commercial law areas e.g. merger and acquisition.
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