Newsflash Archives - Page 29 of 35

Procedures for Land Freeze and Land Seizure

On August 9, 2017, the Minister of Agrarian Affairs and Spatial Planning (“Minister”)/Head of the National Land Agency (“Head of BPN”) issued Regulation No. 13 of 2017 on Procedures for Land Freezes and Land Seizures to administer and record Land Freeze or Land Seizure during disputes affecting land title.

♦ Land Freeze

Land Freeze is a temporary action performed by the Head of BPN to stay legal action involving land title during criminal or civil dispute. No change to land title can be conducted during the Land Freeze period. Details on Land Freeze are outlined in the table below.

♦ Land Freeze Procedure

The procedure for initiating Land Freeze is outlined in the chart below:

♦ Land Seizure

Land Seizure is an action performed by the Head of BPN to record seizures that are authorized by investigators, judicial bodies and other authorities. Land Seizure cannot be applied upon state/regional assets. During Land Seizure, the title to the land cannot be mortgaged or transferred, although title can be amended, extended or become the subject of a mortgage discharge application. Details on Land Seizure are outlined in the table below.

♦ Land Seizure Procedure

The procedure for initiating Land Seizure is outlined in the chart below:

September 2017

by Bonar

Newsflash on Permanent Establishment for Foreign OTT Providers

On February 6, 2017, the Director General of Tax stipulated Circular Letter No. 04 of 2017 on the Determination of Permanent Establishments for Foreign Tax Subjects Which Are Providers of Applications and/or Content Services Through the Internet. This Circular Letter is intended to provide guidance and uniformity in determining Permanent Establishment status as regards Foreign Tax Subjects that provide Over-The-Top (“OTT”) Services in Indonesia.

♦ OTT Services

OTT Services comprise internet-based applications and content services, which are defined as follows:

Internet Based Application Services (Layanan Aplikasi Melalui Internet) is the utilization of software that allows communication services in the form of short texts, voice calls, video calls, electronic mail, chatting/instant messaging, financial and commercial transactions, data storage and retrieval, games, social media networks, and their derivatives that utilize Internet access through a telecommunications network provider; and
Internet Based Content Services (Layanan Konten Melalui Internet) is the provision of digital information, which may be in the form of writings, voices, images, animation, music, video, film, games, or a combination or parts of all of the above, including in forms that are streamed or downloaded by utilizing telecommunications services through a telecommunications network provider.

♦ Permanent Establishments Under the Income-Tax Law

A Permanent Establishment is an enterprise that is used by an individuals who are not domiciled in Indonesia, individuals who are domiciled in Indonesia for not more than 183 days within a 12-month period, and corporations that are neither established nor domiciled in Indonesia, but that operate businesses or activities in Indonesia. Permanent Establishments can take three forms:

The treatment of Income Tax for Permanent Establishments is the same as that of Domestic Tax Subjects set out under Article 17 of the Income-Tax Law, which is currently 25%. Income Tax may be withheld, as regulated under Article 26 (1), (2) and (2a) of the Income-Tax Law, regardless of the physical presence of the Foreign Tax Subject’s Permanent Establishment within the territory of Indonesia.

♦ Double Taxation Treaties

In general, under the Avoidance of Double Taxation Treaties between the Government of Indonesia and Partnering Countries, profits that are received or accrued from a Foreign Tax Subject’s businesses or activities may only be taxable in Indonesia if the Foreign Tax Subject’s businesses or activities are operated through a Permanent Establishment in Indonesia. A Permanent Establishment is a fixed place of business through which all or part of a business is carried on. This definition outlines the following requirements:

A place of business, which may be in the form of premises, facilities, or installation;
the place of business is fixed or permanent in nature; and
such fixed place of business is used to operate business or activities in Indonesia.

Determination of a Permanent Establishment in the form of servers in Indonesia may be implemented as long as the Foreign Tax Subject operates business or activities through such servers. A Permanent Establishment may take the form of services provision in any medium and be performed by employees or other parties in Indonesia, subject to fulfillment of the time test requirements under the applicable Double Taxation Treaty between Indonesia and the Partnering Country, or their dependent agents in Indonesia, which have the authority or perform activities regulated under the Double Taxation Treaty. Determination of a Permanent Establishment in Indonesia shall consider that the business or activities performed by the Foreign Tax Subject are not preparatory or auxiliary activities.

♦ Permanent Establishment for Foreign Tax Subjects providing OTT Services

A Permanent Establishment for a Foreign Tax Subject who provides OTT Services may be in the form of:

May 2017

by Bonar

New Minimum Wage for Certain Sectors for DKI Jakarta Province

The Governor of DKI Jakarta Province stipulates a new provincial sectoral minimum wages (“UMSP”) that apply to certain sectors in DKI Jakarta Province under the Governor Regulation No. 20 of 2017 dated February 14, 2017 on Provincial Sectoral Minimum Wages for 2017 (the “Regulation”). The Regulation stipulates 3 (three) following sectors that have to comply with the UMSP which shall be applied retroactively as of January 1, 2017:

Chemicals, Energy, and Mining;
Metals, Electronics, and Machinery; and
Pharmaceuticals and Health.

It is mandatory for every employer in DKI Jakarta Province that engages in the abovementioned sectors to comply with the UMSP under the Regulation for all employees whose work period is less than 1 year. If the work period is more than 1 year, the monthly salary shall be determined between the employee and the employer.

Pursuant to the Regulation, the abovementioned sectors wage in DKI Jakarta Province are adjusted upward from the previous monthly wages under the Governor Regulation No. 8 of 2016 dated January 13, 2016 on Provincial Sectoral Minimum Wages for 2016, as elaborated in the following table.

March 29, 2017

by Bonar

Tax Amnesty Reporting Provisions Changed

On September 23, 2016, the Ministry of Finance issued Regulation Number 141/PMK.03/2016 (“Amendment”) amending Regulation Number 118/PMK.03/2016 (“MOF Reg. 118/2016”) concerning the Implementation of Law Number 11 of 2016 on Tax Amnesty. Tax Amnesty is designed to increase State revenues by facilitating payment of back taxes. The purpose of the Amendment is to further encourage the reporting of undeclared assets by easing certain reporting obligations.

♦ Change of Reporting Period

Pursuant to Article 38(2) of the Amendment, taxpayers participating in Tax Amnesty shall submit annual reports for a period of three years following:

transfer and investment realization of additional assets from foreign countries; and
placement of additional assets within the territory of the Republic of Indonesia.

The purpose of the reports is to track the assets and ensure they are not transferred outside the jurisdiction of Indonesia to avoid taxation. Previously, under MOF Reg. 118/2016, reports were to be submitted semiannually.

♦ Submission to Tax Office and Reporting Period

Reports shall be submitted to the Tax Office where the taxpayer is registered using the forms provided in attachments L and M of MOF Reg. 118/2016. Submission deadlines are the same as for the Yearly Income Tax Notification Letter (Surat Pemberitahuan Tahunan Pajak Penghasilan), as follows:

Individuals: (i) March 31, 2017, (ii) March 31, 2018, (iii) March 31, 2019
Business Entities: (i) April 30, 2017, (ii) April 30, 2018, (iii) April 30, 2019.

Taxpayers who participate in the last batch of the Tax Amnesty program (with deadline of March 31, 2017), shall be obliged to submit the reports in 2018 and 2019.

♦ Sanctions for Delay

The Amendment does not change the applicable sanctions for delay or failure to file annual Tax Amnesty reports.

Pursuant to Article 40(4) of MOF Reg. 118/2016, the Directorate General of Tax through the Head of the local Tax Office will first issue a warning letter. After receiving the warning letter, the taxpayer must reply with the delayed report within 14 working days, failing which, the taxpayer will be eliminated from the Tax Amnesty program and will be sanctioned in the amount of 2% of the total income tax owed for 2016.

March 28, 2017

by Bonar

Gross Split Production Sharing Contracts

On January 16, 2017, the Minister of Energy and Mineral Resources issued Regulation No. 8 of 2017 dated regarding Gross Split Production Sharing Contracts (“MEMR Reg. 8”). MEMR Reg. 8 partially revokes MEMR Regulation No. 38 of 2015 regarding Acceleration of Non-Conventional Oil & Gas Business, which remains in force, except for provisions related to Production Sharing Contracts (“PSCs”) using a Gross Split sliding scale.

As opposed to the long-existing cost-recovery model for PSCs, under which oil and gas contractors are entitled to recover certain production expenses before sharing the revenues with the Government, the Gross Split approach determines the allocation of production sharing between the Government and a contractor from the beginning (base split).

♦ Minimum Requirements and Provisions for Gross Split PSCs

Gross Split PSCs must adhere to the following principles:

Ownership of oil and gas resources must be retained by the Indonesian Government up to the delivery point;

Operational management shall be controlled by the Special Task Force for Upstream Oil and Gas Business Activities (“SKK Migas”); and

The contractor must bear the entire capital investment and risk of the project.

There are 17 basic provisions that must be stipulated in a Gross Split PSC, including the following:

Government’s take;
Work Area and relinquishment;
Expenditure obligations;
Transfer of ownership of produced oil and gas;
Environmental protection;
Workplace health and safety;
Prioritization of Indonesian manpower and domestic goods and services;
Community development; and
Domestic market obligation.

♦ Production Sharing Allocation

In an oil Gross Split PSC, the Government share is 57%, while 43% belongs to the contractor. In a gas Gross Split PSC, the Government share is 52%, while the contractor receives 48%.

The production sharing allocation may be adjusted depending on “variable” and “progressive” components that may impact business prospects. The variable components consist of, among others, the status of the Working Area, the site location, availability of supporting infrastructure, and the physical content/quality of the oil or gas reserves; while the progressive component consists of oil price and cumulative oil and gas production.

In order to incentivize production when investment returns might be low, the government can award the contractor an additional 5% allocation. On the other hand, if returns exceed certain economic criteria, the Government will be entitled to an additional 5%.

♦ Revenue Calculation

The Government’s take under the contract shall be calculated with respect to the Government’s share of the oil and gas proceeds, bonuses, and direct and indirect taxes paid by the contractor.

The contractor’s take includes the contractor’s proportion based on the gross production percentage, after being deducted by income tax. Whereas operational costs are deducted off the top in a cost recovery method PSC, under the Gross Split system, operational costs may only be used to reduce the contractor’s taxable income.

♦ Domestic Market Obligation

PSC contractors must hand over 25% of their oil/gas production to the Government for domestic use, which will be repaid by the Government based on the recent Indonesian crude oil price as the benchmark.

♦ Transfer of Ownership

After a Gross Split PSC ends, all of the assets held by the contractor that had been used to carry out its activities under the contract must be transferred to, and will be managed by, SKK Migas. Those assets will then be state-owned assets. This includes all lands that had been acquired by the contractor, except for lands under a land lease arrangement.

♦ Obligation to Use Gross Split Method

Using the Gross Split method in a PSC is not mandatory for existing PSCs; rather it becomes mandatory for new PSCs and expiring PSCs that are not being extended by the parties. The obligation to enter into a Gross Split PSC applies to future contractors that will operate the same Work Area. For expiring PSCs that want to be extended, the Government will determine whether to use cost-recovery or to convert to the Gross Split method.

Expired PSCs that were extended before the issuance of this regulation may continue using an existing cost recovery method. The decision to use the Gross Split method will be up to the contractor. The same applies to new PSCs that had been executed before the issuance of MEMR Reg. 8.

by Bonar

Foreign NGOs Regulated Further

To further regulate the permits and validation of nongovernmental organizations (NGOs) established by foreign parties, as stipulated under of Law No. 17 of 2013 on Social Organizations, the Government of Indonesia has issued Regulation No. 59 of 2016 on Social Organizations Established by Foreigners.

♦ Regulated Organizations

The regulation applies to organizations established by foreigners that are formed as:

Foreign Foundations, or similar designation, headquartered in a country that has diplomatic relations with Indonesia. These may either manage their funds independently or serve as Implementing Agencies to implement programs on behalf of a foreign donor.
Indonesian foundations (yayasan) established by foreign citizens or foreign citizens together with Indonesian citizens.
Indonesian foundations (yayasan) established by foreign entities.

Both independent Foreign Foundations and Implementing Agencies shall be registered at the Ministry of Foreign Affairs (“MOFA”). They will be assigned to cooperate with a specific technical ministry or government institution. For example, an organization working on deforestation may be assigned to cooperate with the Ministry of Environment and Forestry.

♦ Permits Required

In order to operate in Indonesia, Foreign Foundations must obtain the following permits:

A principal license issued by the MOFA after obtaining consideration from the Permit Team, which consists of various ministries and government institutions. A principal license is valid for up to three years and can be extended; and
An operational license based on a memorandum of understanding (MOU) between a Foreign Foundation and the technical ministry/institution designated by the Permit Team and an annual work plan with the local government. The work plan is not required for Foreign Foundations whose only work will be with the cooperating ministry/institution. Foreign Foundations that already have an MOU and annual work plan with the local government shall be deemed to have an operational license. The validity of an operational license may not exceed the validity period of the principal license.

Indonesian foundations formed by foreign citizens (with or without Indonesian citizens) or by foreign legal entities must obtain a consideration from the Permit Team before being registered as legal entities with the Ministry of Law and Human Rights. The point of requesting the consideration is to ensure that the organization’s purpose and objectives align with the welfare of Indonesians and social good.

♦ Limitations on Personnel

A Foreign Foundation may assign a maximum of three foreign national staff members to support its activities in Indonesia. Prior to the assignment, the Foreign Foundation shall submit an application for assignment of foreign staff to the ministry/government institution designated by the MOFA. The assignment of foreign staff shall not exceed five years, which may be extended, subject to the provisions of prevailing laws and regulations on manpower and immigration.

Indonesian foundations established by foreign citizens (with or without Indonesian citizens) or by foreign legal entities that intend to employ foreign personnel shall adhere to prevailing laws and regulations on manpower and immigration.

March 2, 2017

ARFIDEA KADRI SAHETAPY-ENGEL TISNADISASTRA

by Bonar

Electronic Information Law Amended

The House of Representatives has passed a bill amending Law No. 11 of 2008 on Electronic Information and Transactions (“EIT Law”) in order to address issues that have developed in the electronic information sector over the past year.

The main amended provisions are as follows:

Definition of Electronic Systems Provider;
Use of electronic information and documents as evidence in court;
Protection of privacy;
Protection from illegal distribution and transmission of electronic information and documents;
Law enforcement;
The Government’s role; and
Amended sanctions.

♦ Electronic Systems Provider Defined

An Electronic Systems Provider is an individual or entity, whether individually or jointly, that provides, manages and/or operates electronic systems for self-use and/or the interests of other parties. Previously, only Electronic Systems Organisation was defined.

♦ Law Enforcement

Electronic information and documents are increasingly being submitted as evidence in criminal and civil proceedings. The amendment strengthens this by clearly stipulating the admissibility of electronic information and documents as long as they are relevant.

Electronic information and documents obtained through interception or wire-tapping must have been gathered in the framework of law enforcement based on a request from the police or other authorized institution, in conformity with the prevailing laws on criminal procedure. Procedures for interception will be regulated under a law. The requirement to regulate interception and wire-tapping in a law was stipulated in Constitutional Court Decision No. 5/PUU-VIII/2010.

♦ Right to be Forgotten

The amendment introduces a new concept to the EIT sector in Indonesia, the Right to be Forgotten (the “RTBF”). The RTBF was first introduced in the European Union Regulation on General Data Protection (“EU Regulation”) to ensure that individuals reserve the right to request the removal of hearsay or irrelevant information about themselves that has been previously disclosed through the internet.

The EIT Law stipulates that private data cannot be used or distributed unless previously permitted by the respective person. Now, people can use a subpoena to request that Electronic Systems Providers erase certain private information and may claim for damages incurred due to its disclosure.

However, the amendment does not specify the types of personal information that may be requested to be erased. In light of this, certain parties, especially the media, have voiced concern over the enforceability of this concept and that it may be abused by other parties. The EU Regulation excluded media journalism as a subject for the RTBF concept. Further provisions on RTBF will be regulated in a Government Regulation. We are not aware whether that regulation will be integrated with the currently deliberated Bill on Data Privacy.

♦ Government to Take Action Against Prohibited Content

To prevent circulation and usage of electronic information and documents that contain content prohibited by law, the Government is able to cut access directly or order the Electronic Systems Provider to cut access to such content.

♦ Sanctions

Any unauthorized party that intentionally distributes, transmits or provides access to electronic information or documents that contain gambling, indecency, blackmail, or threats will be subject to a maximum of 6 years’ imprisonment and maximum fine of Rp1 billion, while content containing defamation or slander is subject to a maximum of 4 years’ imprisonment and maximum fine of Rp750 million. Defamation and slander are considered complaint-based felonies.

Parties intentionally disseminating misleading information that results in losses for consumers or advocates hatred or hostility towards certain ethnic, religious, or racial groups are subject to 6 years’ imprisonment and fine of up to Rp1 billion. Any unauthorized party who transmits physical or psychological threats, material losses, or bullying is subject to 4 years’ imprisonment and maximum fine of Rp750 million.

November 3, 2016

by Bonar

Government Proposes Regulation for Internet-Based Applications and Content Services

Rapid growth in the telecoms sector, mainly triggered by the penetration of Internet usage, will continue and certainly accelerate in the future. The emergence of Over-The-Top (“OTT”) services, i.e., online content, applications and services, has rapidly allowed telecoms customers to access numerous services in addition to basic fixed and mobile telephony. At the same time, the legal sector is hard-pressed to keep up with the fast growing developments.

On March 31, 2016, the Ministry of Communications and Informatics (the “MoCI”) issued Circular Letter No. 3 of 2016 on Provision of OTT (the “Circular Letter”) aiming to provide clarity on the obligations of OTT service providers, as well as prohibitions attaching to the sector.

In an effort to introduce a new regulatory environment for OTT service providers, the MoCI opened a public consultation in relation to its proposed OTT regulation on April 29, 2016 (the “Draft Regulation”). Interested parties had until May 12, 2016 to submit comments. However, to date, the Draft Regulation has not been issued by the government.

The key provisions in the Draft Regulation are as follows:

♦ Regulatory Framework for OTT Services

Under the Draft Regulation, OTT services comprise internet-based applications and content services, which are defined as follows:

Internet Based Application Services (Layanan Aplikasi Melalui Internet) is defined as the utilization of software that allows communication services in the form of short texts, voice calls, video calls, electronic mail, chatting/instant messaging, financial and commercial transactions, data storage and retrieval, games, social media networks, and their derivatives that utilize Internet access through a telecommunications network provider; and
Internet Based Content Services (Layanan Konten Melalui Internet) is provision of digital information, which may be in the form of writings, voices, images, animation, music, video, film, games, or a combination or parts of all of the above, including in forms that are streamed or downloaded by utilizing telecommunications services through a telecommunications network provider.

OTT service providers may be Indonesian or foreign, either individuals or business entities. Despite this, Indonesian service providers are able to establish a corporation or non-corporate entity, whereas foreign service providers must be registered as a Permanent Establishment (Bentuk Usaha Tetap – the “BUT”) in accordance with the prevailing tax laws and regulations.

Whether individuals or business entities, OTT services providers must register a business form and its activities with the Indonesian Telecommunications Regulatory Body (Badan Regulasi Telekomunikasi Indonesia – “BRTI”) not later than 30 working days before the launch of their OTT services in Indonesia. Registration requirements include a Deed of Establishment and its amendments Minister of Law and Human Rights approvals and notification receipts for business entities, Principal License or Permanent Business License issued by the Investment Coordinating Board (Badan Koordinasi Penanaman Modal – “BKPM”) for foreign entities, copy of appointment as a BUT for foreign entities, Taxpayer Registration Number (Nomor Pokok Wajib Pajak – “NPWP”), Certificate of Domicile (Surat Keterangan Domisili – “SKDP”), type of OTT service, and center for contact in Indonesia.

♦ OTT Service Provider Obligations

The Draft Regulation sets forth several obligations that must be followed by OTT service providers. This includes provisions on monopoly and unfair business competition practices, trade, consumer protection, intellectual property rights, broadcasting, films, pornography, anti-terrorism, taxes, transportation and logistics, tourism and hospitality, finance, and health, among others. OTT service providers must carry out data protection and data privacy, content filtering and censor mechanism, utilize/integrate national payment gateway system by Indonesian legal entities for paid OTT services, use Indonesian internet protocol numbers, grant access for lawful interception by authorized government institutions, and include information and guidelines to use the service in Indonesian language.

♦ Content Restriction

In addition to the above obligations, OTT service providers are restricted from providing services or content that: conflict with the Indonesian Constitution and prevailing laws and regulations; threaten the unity of the Republic of Indonesia; may raise conflicts between groups, ethnicities, races, religions and sects; degrade, harass, or tarnish religious values; encourage the public to engage in unlawful acts, violence, narcotics, psychotropic and other addictive substances; degrade human dignity; violate decency; or constitute pornography, gambling, humiliation, extortion or threats, defamation, hate speech, or copyright infringement. If the contents are not directly provided by the relevant OTT service provider, the said provider must inform or socialize such matters relating to the restriction of such content to partners or direct providers of such content.

♦ Center for Contact Information

OTT service providers are obliged to provide center for contact information, which at least include a phone number, email address for complaints, and/or user’s service site. The center must have a facility to service questions and complaints from users.

♦ Data Storage

OTT service providers must record all transactions and service traffic for at least 3 months. For legal proceedings, OTT service providers must maintain all data that are directly involved with a given court proceeding based on the request of law enforcement until such proceedings reach a legally binding decision.

August, 2016

by Bonar

OJK Regulation on Disclosure of Material Information

The Indonesian Financial Services Authority (Otoritas Jasa Keuangan – “OJK”) issued OJK Regulation No. 31/POJK.04/2015 on December 22, 2015 regarding Disclosure on Material Information or Facts by Issuers or Public Companies (“POJK No.31/2015”). POJK No.31/2015 replaces the previous regulation issued by the Head of Capital Market Supervisory Body (“Bapepam”) under the Decision No. KEP-86/PM/1996 regarding Disclosure of Information That Must Be Immediately Announced to Public (“Regulation No. X.K.1”).

Compared to Regulation No. X.K.1, POJK No.31/2015 provides additional list of material information and/or facts that need to be disclosed by an Issuer, as well as elaboration on disclosure requirements.

♦ Material Information and Facts under POJK 31/2015

Similar with the previous Regulation No. X.K.1, under the new regulation material information and facts defined as important and relevant information or facts in any events or regarding any facts which may affects (i) the listedshares price and/or (ii) the decision of shareholders, prospective shareholders, or any other party who has an interest of such information or facts (the “Material Information”).

Material Information as stipulated in POJK No. 31/2015 includes:

A merger, separation of business, consolidation, or formation of a joint venture;
An offer to purchase any other company’s listed shares;
Sale and purchase of shares of an Issuer which has material value;
Distribution of interim dividends;
Delisting or listing of shares in the Stock Exchange;
A share split or combination of shares;
Entering into or disposition of any important contract/agreement;
New findings or new product invention that give an additional value to the Issuer;
Change of the Board of Directors or Commissioner composition of an Issuer;
Sale and purchase of material assets of an Issuer;
Any dispute against an Issuer and its Board of Directors and Board of Commissioners as well as any labor dispute that may disrupt the operation of an Issuer;
Replacement of an accountant auditing an Issuer;
Replacement of a Trustee (Wali Amanat);
Replacement of a Securities Administration Bureau (Biro Administrasi Efek);
Amendment of an Issuer’s financial year;
Debt restructuring;
An Issuer is under the supervision of a relevant regulator which may affect the business of the Issuer;
Business restriction of an Issuer by a relevant regulatory agency; or
Any material event which may cause additional financial obligations or cause a disrupt to an Issuer’s revenue.

♦ Reporting and Announcement Procedures

An Issuer shall provide a report to OJK and make an announcement to the public of the occurrence of any Material Information. The announcement shall include the following: (i) the date of an event, (ii) types of Material Information, (iii) description on the Material Information, and (iv) the impact caused by such Material Information.

POJK No.31/2015 provides a standard template for the reporting of Material Information and such report shall be submitted by a Director or if authorized under the power of attorney by the Board of Directors, by the Corporate Secretary of an Issuer.

Based on POJK No.31/2015, the announcement obligation to the public falls under two categories, namely:

for a listed company, the announcement shall be made through its website (in Indonesian and English language, and any other foreign language (optional)), the Indonesian Stock Exchange’s (IDX) website, as well as at least 1 (one) national newspaper; and
for a non-listed company, the announcement shall be made through its website (in Indonesian and English language, and any other optional foreign language (optional)) as well as at least 1 (one) national newspaper.

With regard to the language provisions as mentioned above, the Indonesian version of the announcement prevails should there be any discrepancy between the Indonesian and English versions.

Moreover, the report and announcement shall be submitted by the end of 2^nd (second) business day after findings of such Material Information.

If any consolidated subsidiary of an Issuer conducts any event listed as Material Information, except for the (i) share split or combination of shares, (ii) distribution of interim dividends, (iii) delisting or relisting of shares in the Stock Exchange, (iv) replacement of a Trustee, or (v) replacement of a BAE, the obligation of reporting and announcing to the public under the POJK No. 31/2015 shall apply to the relevant Issuer.

For any of the Material Information known by a third party and has not been reported nor announced by an Issuer, the Issuer shall report and announce such Material Information as soon as possible.

♦ Sanctions

If an Issuer does not carry out its obligations under POJK No.31/2015 or if any party violates POJK No.31/2015, OJK has the right to impose administrative sanctions in the forms of:

Warning letters;
Fines;
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 jointly and in any particular order, as OJK may impose separate sanctions depending on the non-compliance of an Issuer.

February 22, 2016

by Bonar

New OJK Regulation on Rights Issue

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 2^nd (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.

♦ Sanctions

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;
Fines;
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.

February 19, 2016

by Bonar

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