The Indonesian Financial Service Authority (Otoritas Jasa Keuangan –"OJK") issued OJK Regulation No. 32/POJK.04/2015 regarding Increase of Capital for Public Companies with Rights Issue ("POJK No. 32/2015"). On December 22, 2015, the new rule replaces two previous regulations regarding rights issue that were issued by the Head of Capital Market Supervisory Body ("Bapepam"): (i) Decision No. KEP-26/PM/2003 regarding Rights Issue ("Regulation No. IX.D.1"), and (ii) Decision No. KEP-08/PM/2000 regarding Guidelines of Registration Statement Format and Contents for Rights Issue ("Regulation No. IX.D.2").
POJK No. 32/2015 stipulates the procedures to conduct rights issue as well as the format of the required documents for such action. It also provides a detailed timeline of the steps to conduct rights issue as stated under its Appendix.
♦ Rights Issue under POJK 32/2015
POJK No. 32/2015 defines rights issue as the right attached to the shares which gives the opportunity for an existing shareholder to subscribe shares and/or other Equity Stock that may be converted into shares or provides the right to subscribe shares, before such shares is being offered to the other party ("Rights Issue"). Rights Issue is granted to each of the shareholders based on their shareholding ratio and percentage, except for the public company carrying out private placement, in which the newly issued shares will be offered directly to a third party (this type of issuance of new shares is regulated specifically under OJK Regulation No. 38/POJK.04/2014 regarding Increase of Capital for Public Companies Without Rights Issue).
♦ Right Issue Implementation Requirements
To carry out the issuance of new shares with the Rights Issue, a Public Company shall fulfill the following requirements:
- An approval from a General Meeting of the Shareholders ("GMS"), for the Rights Issue has been obtained;
- Has provide the Registration Statement and its supporting documents to OJK; and
- The Registration Statement has become effective.
Furthermore, the time period between the date of the approval from the GMS and the effectiveness of the Registration Statement shall not exceed 12 (twelve) months. Different from the previous regulations, POJK No. 32/2015 requires the GMS to be carried out before the Registration Statement is effective.
A Public Company which intends to issue new shares with Rights Issue must submit a Registration Statement to OJK along with its supporting documents such as; (i) A cover letter, in the prescribed form set out in an Appendix of POJK No. 32/2015, (ii) A prospectus; and (iii) other documents as part of such Registration Statement. Further details on the required documents for Registration Statements may be found on Head of Capital Market Supervisory Body Decision No. KEP-690/BL/2011 regarding General Provisions of Registration Statements.
Registration Statements shall be effective after OJK has issued a statement of effectiveness, or if within 45 (forty five) days after the OJK has received a complete Registration Statement and OJK has not issued such statement, then the Registration Statement of the said public company will be deemed effective.
♦ Contribution In-Kind
The shares subscription as the implementation of Rights Issue may be paid other than in cash (contribution in kind), which has to (i) be directly related to the plan of funds utilization and (ii) be subject to an appraisal on the fair value as well as the fairness of such contribution. Furthermore, the shares subscription has to be completed no later than 6 (six) months since the appraisal date.
Shares subscription may be conducted through conversion of loan into shares, under the condition that such loans are stated under the latest audited financial statement of the Public Company.
♦ Reporting and Announcement Obligations
Under POJK No. 32/2015, a Public Company is obliged to announce the information regarding the plan to conduct Rights Issue at the latest when the announcement of the GMS is made, and such announcement shall include:
- The maximum number of the issued shares by Rights Issue;
- An estimation regarding the period of the equity increase implementation;
- An analysis regarding the effect of such equity increase to the financial condition and the shareholders of the Public Company;
- An estimation regarding the utilization of funds; and
- Information regarding shares subscription which is conducted in other form and the appraisal result (if any)
The abovementioned shall be announced in at least 1 (one) national newspaper or the Indonesian Stock Exchange website, and the Public Company website. The proof of the announcement shall be submitted to the OJK no later than the 2nd (second) business days after the date of the announcement.
POJK No. 32/2015 also stipulates that Public Company must appoint an accountant to conduct special examination regarding the implementation of Rights Issue, and the report thereto shall be submitted to the OJK no later than 30 (thirty) days after the completion date of the shares distribution.
If the Issuer does not carry out its obligations under POJK No. 32/2015 or if any party violates to the POJK No. 32/2015, OJK has the right to impose the following administrative sanctions:
- Warning letters;
- Limitation of business activities;
- Suspension of business activities;
- Revocation of business licenses;
- Cancellation of approval; and
- Cancellation of registration.
The above sanctions are not meant to be imposed cumulatively or in any particular order, as OJK may impose separate sanctions depending on the circumstances of the relevant non-compliance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.