05 Sep 2018
OJK Issues New Regulation on Takeovers of Public Companies


The Financial Services Authority (“OJK”) has issued a new regulation governing takeovers of public companies. The regulation (OJK Regulation No. 9/POJK.04/2018 / “Reg 9/2018”), which entered into effect on 25 July 2018, supersedes Bapepam-LK Rule No. IX.H.1 (the “Previous Regulation”).


Reg 9/2018 introduces a number of significant changes, including the following:


  1. Compared with the Previous Regulation, Reg 9/2018 makes it easier to identify the indirect controller of a public company as it provides that a party’s status as indirect controller may be evidenced by documents or information to this effect. Such documents or information include:


  1. A shareholders’ agreement showing that the party has more than 50% of voting rights;
  2. Provisions of the articles of association or an agreement showing the party’s authority to set the financial and operational policy of the company;
  3. Documents or information showing the party’s authority to appoint or replace the majority of the members of the company’s board of directors and board of commissioners;
  4. Documents or information demonstrating the ability to control a majority of the votes at board of directors’ and board of commissioners’ meetings; and/or
  5. Other documents or information indicating control of the company.


  1. It clarifies the confusion that has arisen over the precise meanings of “control” and “controller” as a result of the differing definitions provided in the sectoral regulations governing the banking industry, insurance industry, etc. Reg 9/2018 stipulates that for the purpose of its application, the definition of “control” and “controller” shall refer to the definition and criteria provided by Reg 9/2018. In other words, the requirements set out in Reg 9/2018 will only be applicable if the transaction satisfies the criteria for “control” and “controller” as defined by Reg. 9/2018.


  1. In line with the Previous Regulation, as well as other OJK regulations, Reg 9/2018 restates the requirement that the beneficial owner of a new controller must be disclosed in the takeover announcement.


  1. As required under the Previous Regulation, a Mandatory Tender Offer (“MTO”) must be made by the new controller. However, more information must now be set out in the MTO announcement, including:


  1. A statement from the new controller that it has sufficient funds to conduct the MTO, as well as information on the source(s) of the funds; and
  2. A plan of development for the company.


  1. With regard to the purchase price for shares under an MTO, Rule 9/2018 contains additional provisions on how this should be determined in the case of a takeover of a public company listed and traded on the stock exchange where such takeover is effected by means of (i) an increase in capital by way of the issuance of new shares with pre-emptive rights (“Rights Issue”) or (ii) an increase in capital through the issuance of new shares without pre-emptive rights (“Non-Rights Issue”). In order to calculate the MTO share price in both situations, the minimum MTO price must be:


  1. the average of the highest prices recorded in daily trading on the stock exchange over 90 calendar days prior to (i) the takeover          announcement; (ii) the negotiation of the takeover announcement, (iii) Rights Issue announcement disclosing the identity of the          new controller, and (iv) Non-Rights Issue announcement disclosing the identity of the new controller, as the case may be; or
  2. the exercise price of the takeover;


whichever is the higher.


  1. It is now possible for an MTO to be conducted by a third party appointed by the new controller, provided that more than 50% of the share capital of such party is controlled, whether directly or indirectly, by the new controller.


  1. Unlike under the Previous Regulation, Rights Issues and Non-Rights Issues are no longer exempted from the acquisition announcement and MTO requirements. However, exemptions are still available in the following cases:


  1. The takeover results from a Rights Issue where the existing shareholders acquire the shares by exercising their rights in proportion to their respective shareholdings; and
  2. The takeover results from a Non-Rights Issue which is conducted in order to improve the financial condition of the company.


In addition, Reg 9/2018 sets out new exemptions from the announcement and MTO requirements for takeovers that are announced in an IPO prospectus and are completed within 1 (one) year as of the effective date of the IPO.


ABNR Commentary


Reg 9/2018 provides greater clarity on how to identify “indirect control” and “indirect controller,” something that was not entirely clear from the Previous Regulation. Further, it clarifies the situation where there is a conflict between regulations as regards the meaning of “control” and “controller”, with the definition provided by Reg. 9/2018 now prevailing.


Reg 9/2018 also changes the rules governing exemptions from the takeover-announcement and MTO requirements, with takeovers effected by means of a Rights Issue or Non-Rights Issue now only being exempted from these requirements in circumstances where shareholders exercise their rights in proportion to their existing shareholdings or where the takeover occurs as a result of a Non-Rights Issue that is intended to improve the financial condition of the company. Therefore, takeovers by way of a Rights Issue or Non-Rights Issue are no longer advantageous as they will now also trigger an MTO. By contrast, an MTO would not be automatically triggered in such circumstances under the Previous Regulation.


By Elsie F. Hakim ( and Novario Asca H. (