Draft on New IDX Listing Rules

Following the issuance of the Financial Services Authority (Otoritas Jasa Keuangan or “OJK”).  Regulation No.41/POJK.04/2020 dated July 2, 2020 on Implementation of Public Offering Activities of Equity-Type Securities, Debt-Type Securities and/or Sukuk Through Electronic Means (e-bookbuilding) (“OJK Reg. 41/2020”), the Indonesian Stock Exchange (“IDX”) is formulating a new listing rule (“Draft Rule”) to replace the Board of Directors of PT Bursa Efek Indonesia Decree No.Kep-00183/BEI/12-2018 dated December 26, 2018 on the Amendment of Rule No. I-A on Shares and Securities Listing Issued by a Listed Company (“IDX Rule I-A”).

The Draft Rule is in line with the spirit of OJK Reg.41/2020 as the intention is to increase public investor participation in the stock exchange. The Draft Rule reflects several changes to include definitions on public shareholders, requirements of issues, as well as other main board and development board requirements.

There are certain key changes and additions under the Draft Rule highlighted as follows:

  • Public Shareholders and Free Float Requirement

Currently there is no specific definition under the capital market related regulations (including IDX Rule I-A) of what public shareholders are. However, it is generally understood that public shareholders are those who are not a controlling shareholder, nor a main shareholder.  Nonetheless, Controlling Shareholders are defined by the prevailing capital market regulation as  parties who directly or indirectly own more than 50% (fifty percent) of the total voting shares  or have the ability to determine, whether directly or indirectly, by any form, the management and/or policies of the public company. Meanwhile, main shareholders are defined as those who, directly or indirectly, own at least 20% (twenty percent) of the total voting shares issued by a public company or other lesser amounts.

The Draft Rule IDX covers a definition of public shareholders as shares owned by shareholders owning less than 5% (five percent) and is not a controller of the public company, not of scrip shares and not of treasury shares. Looking at this definition, shareholders who hold more than 5% and less than 20% will then not be considered as a public shareholder, nor a main shareholder.

Although this will be quite beneficial for public shareholders, we are of the view that this will affect the free float requirement of 7.5% (seven point five percent) and at least 50,000,000 (fifty million) shares within the public company’s paid up capital reserved for public shareholders. Public companies will have to conform with this new requirement and must allocate more shares to ‘retail’ or public shareholders as defined in the Draft Rule. Failure to fulfill this requirement may affect the public company’s ability to stay listed in the IDX.

  • Listing Requirements

As a measure to increase the number of start-ups and SMEs, the Draft Rule amended several requirements for issuers to become listed in the IDX by broadening the pre-requisites.  As one of the pre-requisites of listing on the main board, instead of requiring prospective companies to have net tangible assets of at least Rp100,000,000,000 (one hundred billion Rupiah) (which is one of the main requirements under IDX Rule I-A), the Draft Rule allows prospective issuers to fulfill one of the below requirements:

Having profits before taxes in the last 1 (one) financial year and net tangible assets of at least Rp250,000,000,000 (two hundred fifty billion Rupiah);

Having an aggregate profit before taxes in the last 2 (two) financial years of at least Rp100,000,000,000 (one hundred billion Rupiah) and market capitalization of at least Rp1,000,000,000,000 (one trillion Rupiah) before the listing date;

Having revenue in the last 1 (one) financial year of at least Rp600,000,000,000 (six hundred billion Rupiah) and market capitalization of at least Rp3,000,000,000,000 (three trillion Rupiah) before the listing date;

Having total assets in the last 1 (one) financial year of at least Rp1,000,000,000 (one trillion Rupiah) and market capitalization of at least Rp2,000,000,000,000 (two trillion Rupiah) before the listing date; or

Having cashflow from cumulative operational activities in the last 2 (two) financial years of at least Rp200,000,000,000 (two hundred billion Rupiah) and market capitalization of at least Rp4,000,000,000,000 (four trillion Rupiah).

As for the development board, previously the IDX Rule I-A requires prospective issuers to fulfill one of the following requirements: (i) having net tangible assets of at least Rp5,000,000,000 (five billion Rupiah), (ii) having profits in the last 1 (one) financial year of at least Rp1,000,000,000 (one billion Rupiah) and market capitalization of at least Rp100,000,000,000 (one hundred billion Rupiah) before the listing date, or (iii) having revenue in the last 1 (one) financial year of at least Rp40,000,000,000 (forty billion Rupiah) and market capitalization of at least Rp200,000,000,000 (two hundred billion Rupiah) before the listing date. Through the Draft Rule, the requirements are broadened to only fulfill one of the following criteria:

Having net tangible assets of at least Rp50,000,000,000 (fifty billion Rupiah);

Having an aggregate profit before taxes in the last 2 (two) financial years of at least Rp10,000,000,000 (ten billion Rupiah) and market capitalization of at least Rp100,000,000,000 (one hundred billion Rupiah) before the listing date;

Having revenue in the last 1 (one) financial year of at least Rp40,000,000,000 (forty billion Rupiah) and market capitalization of at least Rp200,000,000,000 (two hundred billion Rupiah) before the listing date;

Having total assets in the last 1 (one) financial year of at least Rp250,000,000,000 (two hundred fifty billion Rupiah) and market capitalization of at least Rp500,000,000,000 (five hundred billion Rupiah) before the listing date; or

Having cashflow from cumulative operational activities in the last 2 (two) financial years of at least Rp20,000,000,000 (twenty billion Rupiah) and market capitalization of at least Rp400,000,000,000 (four hundred billion Rupiah).

Additionally, the Draft Rule also introduces some new requirements for public companies to stay listed in the IDX. Such criteria are as follows:

must fulfill at least one of the following criteria: (i) have not recorded net losses for 2 (two) years consecutively; or (ii) recorded compound annual growth rate) at least 20% (twenty percent) for the last 3 (three) years;

have not recorded negative equity in the last financial statement;

have a minimum number of shareholders of 750 (seven hundred fifty);

If public shares are more than 10%, then the market capitalization must be more than Rp200,000,000,000 (two hundred billion Rupiah); or if less than 10%, then the market capitalization must be more than Rp1,000,000,000,000 (one trillion Rupiah);

Must fulfill at least one of the following criteria: (i) price to earning ratio must not be more than 3x of the price to earning ratio of the market, (ii) price to book value must not be more than 3x of the price to book value ratio of the market or (iii) having a minimum market capitalization of Rp12,000,000,000,000 (twelve trillion Rupiah).

Have not been imposed with a third written warning from the IDX within the last 1 (one) year; and

The audited financial statement has obtained a fair opinion without modification or have obtained a fair opinion without modification with explanation paragraph for the last 2 (two) financial years, o

  • Main Board and Development Board Movement

Under the Draft Rule, movement from the development board and the main board and vice versa is allowed. Previously, movement between boards can only be done from the development board to the main board.  However, the movement from the main board to the development board will only be done by the IDX in the event the listed company fails to fulfill the requirements of maintaining to be listed in the main board. Movement between boards will only done every 6 (six) months based on audited financial statements of the listed company. Apart from that, the new draft also stipulates new requirements for listed companies from development boards to move to the main board where previously, it is stipulated that one of the requirements is to maintain net tangible assets of at least Rp100,000,000,000 (one hundred billion Rupiah) based on the last audited financial statement, however, under the draft rule, the requirements have been broadened similarly to the pre-requisites of being listed in the main board as explained above.

Kindly note that that the Draft Rule is not in final form and may change and differ with the version enacted. We will provide further updates on the new listing rule once it has been enacted.

***

February 10, 2021

Please contact Abi Abadi Tisnadisastra [atisnadisastra@aksetlaw.com] and Alfa Dewi Setiawati [asetiawati@aksetlaw.com], Faiz Naufaldo [fnaufaldo@aksetlaw.com], and Caleb Kharis Nathanael Sitorus [csitorus@aksetlaw.com] for further information.


Disclaimer:

The foregoing material is the property of AKSET and may not be used by any other party without prior written consent.  The information herein is of general nature and should not be treated as legal advice, nor shall it be relied upon by any party for any circumstance.  Specific legal advice should be sought by interested parties to address their particular circumstances.

Any links contained in this document are for informational purposes and are available and relevant at time this publication is made.  We provide no liability whatsoever in respect of any information or content in such links.

Copyright © 2021 AKSET. All rights reserved.