Indonesian Government Introduces New and Integrated Submission Procedure for Companies’ Annual Financial Report
On March 19, 2020, the Minister of Trade (“MOT”) issued MOT Regulation No. 25 of 2020 on Annual Company Financial Reports (“MOT Reg. 25/2020”). MOT Reg. 25/2020 revokes the previous regulatory framework stipulating the annual financial report submission, i.e., Minister of Industry and Trade Decree No. 121/MPP/Kep/2/2002 dated February 25, 2002 (“Decree 121/2002”) and has entered into force on the date of its promulgation.
MOT Reg. 25/2020 sets forth a new procedure for business entities (that fulfill certain criteria to submit their annual financial reports to MOT) in submitting their annual financial reports based on the original requirement under Decree 121/2002. This new procedure is in line with the Indonesian Government’s intention to establish seamless submission of licenses and compliances process into the integrated Online Single Submission (“OSS”) system.
- SUBMISSION REQUIREMENT
MOT Reg. 25/2020 requires Companies to submit Annual Financial Report (“LKTP”) to the Ministry of Trade through the Directorate General of Domestic Trade (“Directorate General”). Companies under the MOT Reg. 25/2020 are defined as any type of business with permanent and continuous activities having the aim to obtain profit, undertaken by individuals or business entities in the form of legal or non-legal entities, as well as being established and domiciled within the territory of the Republic of Indonesia.
Based on the definition of Companies as above, MOR Reg. 25/2020 requires all Companies with the following status to submit LKTP:
- Limited Liability Companies (or PT) having fulfilled either one of these criteria:
- Being a Publicly Listed Company;
- Having a line of business in managing public funds;
- Issuing a letter of acknowledgement of indebtedness;
- Having total assets of at least Rp25,000,000,000 (twenty five billion Rupiah); or
- Being a debtor required to submit annual financial report to banks for audit purpose;
- Foreign Companies, having a domicile and running its business in the territory of the Republic of Indonesia, including their branch offices, auxiliary offices, subsidiary companies, agents, and representatives of such companies having authority to enter into agreements;
- State-Owned Companies (PERSERO), Public Service Companies (PERUM), and Region-Owned Companies (“Companies”).
Previously, Decree 121/2002 only required submission of LKTP to be conducted by head offices. MOT Reg. 25/2020 seems to broaden the definition and try to clear some uncertainty on categories of companies being required to submit LKTP.
Similar with Decree 121/2002, Companies are required to submit its LKTP after it has been audited by a public accountant and approved by the General Meeting of Shareholders or any of the authorized company organ based on laws and regulations. Submission of LKTP must be conducted at the latest six months after the financial year of a Company ends.
- THE NEW AND INTEGRATED SUBMISSION SYSTEM
Under MOT Reg. 25/2020, Companies having obtained their Business Identification Number (“NIB”) are required to submit their LKTP online through the Licensing Information System (“SIPT”) which has been integrated to the OSS system. In turn, the Directorate General will issue an LKTP Submission Receipt (“LKTP Receipt”) within 5 (five) days of the LKPT being duly submitted. In the previous regime, the Companies had to perform submission of their LKTP physically to the Directorate of Business Development and Company Registration at the MOT.
Furthermore, MOT Reg. 25/2020 also acknowledges LKTP submission required by other institutions. Therefore, if a Company has submitted its LKTP to: (i) regulators, (ii) authorities regulating submission of financial reports, (iii) Minister of State-Owned Enterprises, and/or (iv) Minister of Finance, the Company will be deemed to have submitted its LKTP. Companies will be required to submit the submission receipt through SIPT in order to obtain the LKTP Receipt.
- THE OPENNESS AND TRANSPARENCY OF COMPANIES’ FINANCIAL INFORMATION
The LKTP data submitted by the Companies constitutes open information and accessible to the public by submission of written request and payment of certain fees pursuant to regulations. The foregoing is also applicable to any ministerial body and/or state institution without the requirement to pay any fees.
- ADMINISTRATIVE SANCTIONS
Any incompliance with respect to the obligation to submit LKTP will be subject to administrative sanction of 3 (three) written warnings, each given with a period of 14 (fourteen) days in between each warning. Failure to comply with such warnings will result in revocation of business license for the Companies operating in trade sector, or recommendation of revocation of business license for the Companies with non-trade sector businesses.
Furthermore, if the Companies fail to submit LKTP in a complete and valid manner, the Companies will also be subject to administrative sanction of 3 (three) written warnings, each given with a period of 14 (fourteen) days in between each warning and followed by the revocation of the LKTP Receipt. Should the Companies fail to correct the submission within 14 (fourteen) days after the LKTP Receipt revocation, the Director General will impose an administrative sanction of license revocation or recommendation of license revocation, as relevant.F
April 27, 2020
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Are INGOs’ Operations Exempted From PSBB?
- On Large-Scale Restriction Measures
Due to the current outbreak of the novel corona virus disease (“Covid-19”), the Government of Indonesia recently implemented the Large-Scale Social Restrictions (Pembatasan Sosial Berskala Besar or “PSBB”) with the issuance of the Minister of Health (the “MOH”) Regulation No. 9 of 2020 dated April 3, 2020 on Guidelines for Large-Scale Social Restrictions for the Acceleration of the Management of the Covid-19 (“Regulation 9/2020”).
Law No. 6 of 2018 dated August 8, 2018 on Health Quarantine (“Law 6/2018”) defines the PSBB as the restriction of certain activities of the residents in an area suspected to be infected by a disease (in our case, the Covid-19) and/or an area that is contaminated to a certain degree, in order to prevent the possibility of the spreading of the disease or the contamination (in this case, the Covid-19).
Following Regulation 9/2020 and MOH Decree No. HK.01.07/MENKES/239/2020, the Regional Government of DKI Jakarta Province implements the PSBB measures within the territory of DKI Jakarta based on the Governor Regulation No. 33 of 2020 dated April 9, 2020 on the Implementation of Large-Scale Social Restrictions for the Management of the Covid-19 in the DKI Jakarta Province (“Regulation 33/2020”). Under the DKI Jakarta Governor Decree No. 380 of 2020 dated April 9, 2020 on the Enforcement of the Implementation Large-Scale Social Restrictions for the Management of the Covid-19 in the DKI Jakarta Province (“Decree 380”), the PSBB is effective as of April 10, 2020 until April 23, 2020. The PSBB may be extended by the DKI Jakarta Governor for 14 (fourteen) days. Under the DKI Jakarta Governor Decree No. 412 of 2020 dated April 22, 2020, the PSBB in Jakarta is now extended until May 7, 2020 and shall be extended until May 21, 2020 in the event that there are still new cases of Covid-19.
The implementation of the PSBB includes: (i) schools and workplaces closure; (ii) restrictions of religious activities; (iii) restrictions of activities at public places or facilities; (iv) restrictions of activities in social and culture; (v) restrictions of modes of transportation; and (vi) restrictions of other activities specifically related to defense and security. Accordingly for the DKI Jakarta Province, under Regulation 33/2020, all “non-essential” businesses are required to temporarily suspend their activities at the workplaces. Regulation 33/2020 further elaborates that during the workplace closure, an employer shall replace the working process from workplace or offices to working from home.
There are certain categories that constitute “essential” businesses which are exempted from the workplace closure under Regulation 33/2020. One of the businesses which is exempted from the workplace closure is local and international social organizations (organisasi kemasyarakatan) that engage in the disaster and/or social sectors. In other words, local and international social organizations that engage in the disaster and/or social sectors whose offices are located within the DKI Jakarta Province may continue their operations, subject to certain protocols elaborated below.
- Workplace Closure Exemption for International Non-Governmental Organizations
Please note that Regulation 33/2020 does not define or determine the scope of (i) local and international social organizations, and (ii) the disaster and/or social sectors.
Social organizations (organisasi kemasyarakatan) are defined in Law No. 17 of 2013 dated July 22, 2013 on Social Organizations as lastly amended by Government Regulation In Lieu of Law No. 2 of 2017 dated July 10, 2017 on Amendment of Law No. 17 of 2013 on Social Organizations (“Law 17/2013”) as organizations which are established and formed voluntarily by the society based on common aspiration, wills, needs, interests, activities, and objectives to participate in the development to achieve the objective of Republic of Indonesia based on Pancasila. Law 17/2013 specifies that social organizations shall be voluntary, social, independent, non-profit, and democratic in nature.
With regard to foreign social organizations, Government Regulation No. 59 of 2016 dated December 6, 2016 on Social Organizations Established by Foreign Nationals (“GR 59/2016”) clarifies that foreign social organizations shall consist of:
- A foreign foundation, or a similar form, headquartered in a country that has diplomatic relations with Indonesia. The foreign foundation may be (a) an International NGO to implement its activities with its own funding, or (b) an implementing agency to implement a certain program on behalf of a foreign donor or any development agency; and
- A foundation (yayasan) (i.e., the Foreign Foundation) established under Indonesian laws by any foreign party (an individual or an entity) with or without any Indonesian party (an individual or an entity).
Foreign social organizations noted above are required to obtain principal permits issued by the Ministry of Foreign Affairs and the operational permits. Based on the above, it appears that international social organizations referred to in Regulation 33/2020 are foreign social organizations under GR 59/2016.
Let us now discuss the definition of disaster and social sectors. Pursuant to Article 1 point 1 of Law No. 24 of 2007 dated April 26, 2007 on Management of Disasters, a disaster is defined as an event or a series of events that is threatening and disturbing the community life and livelihood, caused by natural and/or non-natural as well as human factor which results in human fatalities, environmental damage, loss of material possession, and psychological impact. On the other hand, we note that there is no specific definition on the word of “social” under the laws. In this regard, we refer to the definition of “social” provided by the official dictionary of the Ministry of Education and Culture which defines social as something related to the society. In practice, we understand that social sector involves any activities for the interest of human. Therefore, such definition may be interpreted in a broad manner.
- Further Provisions on Exemption of Workplace Closure
Based on the above, foreign social organizations in DKI Jakarta Province may open their offices in Jakarta as they are eligible for the exemption of workplace closure under Regulation 33/2020. In continuing the operation of their offices, INGOs that are exempted from the workplace closure are subject to certain health protocols set out in Regulation 33/2020.
Further to the above, the Department of Manpower, Transmigration, and Energy (Dinas Tenaga Kerja, Transmigrasi, dan Energi or “Disnakertrans”) of DKI Jakarta Province recently issued Decree No. 837 of 2020 dated April 17, 2020 on Technical Guidelines for Implementation of Large-Scale Restriction (PSBB) on Working Activity in Workplace (“Decree 837/2020”). In general, Decree 837/2020 provides the measures regarding technical implementation of the PSBB on working activity and the reporting requirement for offices/workplaces that are exempted from the workplace closure.
Any violation of the above may subject the INGOs to sanctions under prevailing laws and regulations. Decree 837/2020 is effective for the period of implementation of the PSBB is effective in the DKI Jakarta Province.
April 27, 2020
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Precautionary Steps Taken to Maintain the Stability of Indonesian Financial Systems During COVID-19
The Novel Coronavirus Disease (“COVID-19”) pandemic has caused the country’s economic growth to slow down and the financial system to worsen. As an effort to maintain stability of the financial system and the national economy, the Government of Indonesia issued the Government Regulation in lieu of Law No. 1 of 2020 dated March 31, 2020 on the State Financial and the Financial System Stability Policies in Relation to the Handling of the Coronavirus Disease 2019 (COVID-19) Pandemic and/or to Overcome Threats that are Potentially Harmful to the National Economy and/or the Financial System Stability (“Perppu 1/2020”)
Perppu 1/2020 sets out policies which, among others, expand the authority of the relevant authorities in Indonesia that supervise and make policies to create the safety net for the financial and monetary conditions of the country, including, KSSK, BI, OJK, and LPS (all terms as defined below).
In this Newsflash, we focus on the financial system stability policy set out under Perppu 1/2020. Please visit our website for our Newsflash with regard to the tax policy set out under Perppu 1/2020 that we have discussed separately.
- FINANCIAL SYSTEM STABILITY COMMITTEE’S LEGAL IMMUNITY
Initially, the Financial System Stability Committee (Komite Stabilitas Sistem Keuangan — “KSSK”) was formed under Law 9/2016 (defined below). KSSK consists of the Minister of Finance, the Governor of Bank Indonesia (“BI”), the Chairman of the Board of Commissioners of the Financial Services Authority (Otoritas Jasa Keuangan — “OJK”) and the Chairman of the Board of Commissioners of Indonesian Deposit Insurance Corporation (Lembaga Penjamin Simpanan — “LPS”), each of them represents their respective institutions to supervise, control and handle any Systemic Bank issues during both normal or financial crisis situations.
Under Perppu 1/2020, KSSK’s authority under Law No. 9 of 2016 on Prevention and Control of Financial System Crisis effective on April 15, 2016 (“Law 9/2016”) is expanded. Under Perppu 1/2020, KSSK is now authorized to determine any scheme for incentives from the Government to tackle issues in financial institutions and issues with regard to the stability of the financial systems that threaten the national economy.
Article 27 of Perppu 1/2020 provides one interesting point. This provision grants legal immunity to KSSK’s members and its member institutions in performing the tasks prescribed in Perppu 1/2020 in good faith regardless of the amount of expenditure spent for the actions stipulated under Perppu 1/2020. In fact, under Perppu 1/2020 such expenditure will not be considered state’s loss. Therefore, no civil or criminal legal action may be conducted against KSSK’s decision. Any decision or action by KSSK will neither be considered an administrative court object of assessment. We note that this provision is being challenged at the Constitutional Court.
Perppu 1/2020 further grants each of KSSK’s member institutions various forms of authority intended to help maintain the stability of Indonesia’s financial system.
- BI REGAINS SOME CRUCIAL AUTHORITIES
Perppu 1/2020 now grants BI several authorities that were previously revoked by Law 9/2016, as follows:
- to provide a short term loan or funding to banks based on the sharia principles, both to Systemic or non-Systemic Banks based on BI and OJK’s assessment of banks’ soundness level and solvability — assessed by OJK, as well as banks’ collateral sufficiency and repayment ability — assessed by BI and OJK;
- to provide a special emergency liquidity loan (pinjaman likuiditas khusus) to a Systemic Bank that does not meet the requirement for the foregoing short term loan and or funding with the approval from KSSK; and
- to buy Government Bonds (Surat Utang Negara — “SUN”) and/or Government Sharia Bonds (Surat Berharga Syariah Negara “SBSN”) from the primary market issued for particular purpose, specifically in relation to COVID-19 pandemic.
In addition to the foregoing, Perppu 1/2020 allows BI to do the following actions:
- to purchase or repurchase (repo) of government securities owned by LPS to fund the cost of handling solvability issues for Systemic or non-Systemic Banks;
- to regulate the obligation to receive and use foreign exchange for residents including provisions regarding the foreign exchange’s delivery, repatriation, and conversion in order to maintain macroeconomic and financial system stability; and
- to provide funding to corporate or private sectors by repurchasing (repo) SUN or SBSN owned by corporate or private sector via banks.
Previously during the economic crisis in 2008, Bank Century’s bailout by BI cost the Government trillions of Rupiah. Learning from this, the Government had limited BI’s authority in giving incentives for banks. BI was only allowed to provide short term loans and or funding for Systemic Banks with a very high threshold. In addition to receiving such funding from BI, Systemic Banks must also provide high-quality collateral in the form of high-rating securities that are liquid or loan assets rated as Current. Further, BI used to only be allowed to purchase or conduct repo transactions of Bovernment bonds owned by LPS. Also, buying SUNs and SBSNs from the primary market was prohibited.
- MORE POWER GRANTED TO OJK
Perppu 1/2020 provides a more significant role to OJK. On top of holding the crucial role in deciding to provide short term loans or funding for banks, OJK is allowed to give written orders to financial institutions to perform mergers, consolidations, acquisitions, integrations, and/or conversions.
In respect of the capital markets, OJK is authorized to determine exemptions for certain parties from performing the disclosure obligation as a part of the effort in preventing and handling the financial crisis. Further, OJK may enact regulations concerning the use of information technology for holding General Meetings of Shareholders or other meetings that are mandatory for financial service business actors. This policy is also in line with policies issued by OJK on similar issues under OJK Circular Letter No. S-92/D.04/2020 dated March 18, 2020 on the Relaxation on the Reporting Obligations and the Implementation of General Meetings of Shareholders.
- LPS’ EXTENSION OF AUTHORITY
Perppu 1/2020 also expands LPS’ authority during the COVID-19 pandemic by allowing LPS to:
- undertake joint preparation by conducting exchange information and/or conduct joint inspection with OJK against banks that are suspected to have solvability issues;
- take the following actions:
- perform sell or conduct repo of Government bonds to BI,
- issue bonds,
- receive loans from another party, and/or
- receive loans from the Government,
in case LPS is considered to have liquidity issues in handling failing banks;
- decide to save or not to save failing banks that are non-Systemic by considering, among others, the economic condition, availability or appetite of investors, banks’ complexity of issues and the efficacy in handling those issues, including but not limited to the consideration on the least cost test; and
- regulate and implement deposit insurance policies for a group of customers based on the source of fund and/or implement such policy with regard to a particular savings portfolio with a predetermined insured amount, that will be regulated in a Government Regulation.
***
Perppu 1/2020 is valid as of March 31, 2020. However, in accordance with the Constitution and applicable laws, the House of Representatives (Dewan Perwakilan Rakyat or “DPR”) will decide on its next hearing whether to approve Perppu 1/2020 into a law. If the DPR decides to cancel Perppu 1/2020, then Perppu 1/2020 will immediately be cancelled.
April 24, 2020
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Minister of Finance Further Regulates Approvals for Tax Allowances
On February 11, 2020, the Minister of Finance (the “Minister”) enacted Minister Regulation No. 11/PMK.010/2020 of 2020 dated February 11, 2020 on the Implementation of Government Regulation No. 78 of 2019 on the Income Tax Allowances for Investments in Certain Industries and/or Certain Regions (the “Minister Regulation”). The Minister Regulation revokes the Minister Regulation No. 89/PMK.010/2015 of 2015 dated April 28, 2015 on Procedures to Impose Income Tax Concessions for Investment in Certain Field and/or Regions, Including Transfer of Assets and Sanctions for Domestic Taxpayers Receiving Concessions. The Minister Regulation acts as an implementing framework of Government Regulation No. 78 of 2019 dated November 13, 2019 on Granting of Income Tax Allowance for Investments in Certain Industries and/or Regions (“GR 78”).
As elaborated on our Newsflash concerning GR 78, GR 78 encompasses the provisions on (i) forms for the granting of the income tax allowances (the “Tax Allowance”), (ii) requirements for the granting of the Tax Allowance to corporate taxpayers (the “Taxpayers”), and (iii) requirements to apply for and obtain the Tax Allowance. Please find below the salient points of the Minister Regulation.
v Requirements and Procedures for Determination of Tangible Fixed Asset Values
The Minister Regulation re-addresses the requirements for tangible fixed asset as a basis for the calculation of the Tax Allowance set out in GR 78. In addition, the Minister Regulation stipulates that the relevant assets do not include tangible fixed assets acquired by way of operating lease or financial lease before the option right over such asset is executed.
Further, GR 78 provides that provisions on the procedure to determine tangible fixed asset will be further regulated in a Minister regulation, where in fact, the Minister Regulation assigns this matter to the Director General of Taxation (the “Director General”). Until now, the Director General has not issued the relevant regulation on this issue.
v Procedures for Applications to Obtain Tax Allowance
GR 78 sets out an updated list of the business activities that are eligible to apply for the Tax Allowance. The updated lists comprises 183 business sectors. GR 78 also introduces the simplified procedures for applying for and obtaining the Tax Allowance through the Online Single Submission (“OSS”) System.
According to the Minister Regulation, the OSS System will notify an applicant if its business activity is eligible to obtain the Tax Allowance. If the Taxpayer is eligible, it must submit the following requirements through the OSS System prior to the Commercial Production Starting Date:
a. a digital copy of the shareholder’s fiscal statement letter; and
b. a digital copy of the fixed asset’s details in the capital investment value plan.
Once the required documents have been completely submitted in the OSS System, the Minister will issue the decision to grant the Tax Allowance within 5 (five) business days since the receipt of documents.
v Utilization of Tax Allowance
The utilization of the Tax Allowance is subject to its form, as follows:
|
Form of Tax Allowance |
Utilization of Tax Allowance |
|
Deduction of net income by 30% of the investment value in the form of tangible fixed assets, including the land used for the main business activities, granted in 6 (six) years divided into 5% each year. |
A Taxpayer must apply in order to utilize this form of the Tax Allowance by applying through the OSS System. The Utilization of this Tax Allowance shall be stipulated by the Director General, subject to a field investigation. |
|
Accelerated depreciation over tangible fixed assets and accelerated amortization over intangible assets obtained for the investment, granted within certain period and tariff. |
The utilization of this form of Tax Allowance shall be conducted in accordance with the Income Tax Law. |
|
Income tax over the dividends paid to foreign Taxpayers other than permanent establishments in Indonesia at the rate of 10% (ten percent) or lower, subject to the applicable tax treaty. |
The utilization of this form of Tax Allowance shall commence as of the decision to approve the Tax Allowance is issued and shall expire when the Taxpayer no longer meets the requirements in the relevant decision. |
|
Compensation for losses suffered for more than 5 years but less than 10 years. |
A Taxpayer shall apply to the Director General through the OSS System in order to utilize this form of Tax Allowance. The Director General will issue the decision to compensate for losses after conducting the relevant field investigation. |
***
April 24, 2020
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Recent Land Related Services due to the COVID-19 Outbreak
To implement series of instructions issued by the Government of the Republic of Indonesia as well as to prevent the spread of the Covid-19 in Indonesia, Minister of Agrarian Affairs and Spatial Planning/Head of National Land Agency (the “Minister”) issued Circular Letter No. 3/SE-100.TU.03/III/2020 dated March 20, 2020 on Land Services for the Prevention of the Spread of Corona Virus Disease 2019 (Covid-19) (“Circular Letter”). The Circular Letter was also issued to ensure and maintain the continuity of various land related services provided by the Land Offices (Kantor Pertanahan) in Indonesia during the Covid-19 outbreak. Such land related service procedures should be implemented by taking into account the actual condition of the relevant Land Office as well as policies implemented by the local government.
- Type of Land Related Services
During the Covid-19 outbreak, Land Offices will be providing the following land related services under certain conditions:
- Mortgage (i.e., registration, transfer, deletion (roya), change of name and/or data correction), Land Value Zone (Zona Nilai Tanah), certificate checking and/or Statement Letter of Land Registration (Surat Keterangan Pendaftaran Tanah, SKPT) services, shall be conducted electronically, which is basically in line with the provisions under (i) Minister of Agrarian Affairs and Spatial Planning/Head of National Land Agency Regulation No. 5 of 2017 dated April 25, 2017 on Electronically Land Information Services and (ii) Minister of Agrarian Affairs and Spatial Planning/Head of National Land Agency Regulation No. 9 of 2019 dated June 21, 2019 on Electronically Integrated Mortgage Services.
- Any other land related services (e.g., registration of data maintenance services and any other land information) will be conducted through Online Service Counter Application (Aplikasi Layanan Loket Online). The submission of the required documents will observe the schedule determines by the relevant Land Office.
- Any particular and urgent land related applications that are not yet available to be submitted through the Electronic Service and/or Online Service Counter Application, may be submitted physically to the relevant Land Office by observing the safety procedures.
- Any land related services which requires ground attendance and physical interaction will be ceased or limited depending on the actual situation on the ground.
- Any land activities (e.g., counseling, socialization, etc.) that involves society gathering will be ceased or limited depending on the actual situation on the ground.
- Effective Date
The Circular Letter was initially valid until April 5, 2020 and may be extended. As a further implementation, the Minister further issued Letter No. TU.03/554-100/III/2020 dated March 27, 2020 confirming that the Circular Letter is still valid.
- Implementation of the Land Related Services
Although the Minister through the Circular Letter has applying these procedures to the Land Offices (e.g., several land related services may be processed through an electronic system, physical application to Land Offices is still possible), it is important to note that there might be several Land Offices that are yet to implement these procedures. For instance, we understand that there are several Land Offices that are completely closed due to Covid-19 outbreak or do not have a fully integrated electronic system to support the relevant online land related services.
In order to avoid any interruption on the relevant land related service applications, it is recommended to coordinate with the Land Deed Official (Pejabat Pembuat Akta Tanah, PPAT) to ensure that the relevant land related services application is feasible to be conducted to the relevant Land Office during this Covid-19 outbreak.
***
April 23, 2020
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Handling COVID-19 Outbreak in Construction Services Sector
On March 27, 2020, the Minister of Public Works and Housing (“MOPWH”) issued the MOPWH Instruction No. 02/IN/M/2020 on Protocol of Prevention of the Corona Virus Disease 2019 (COVID-19) Outbreak in Construction Service Works (the “MOPWH Instruction”). This MOPWH Instruction serves as a follow up to President Joko Widodo's direction on March 15, 2020 related to the mitigation efforts and determination of COVID-19 as an Extraordinary Event (Kejadian Luar Biasa or “KLB”) by the Minister of Health.
The MOPWH Instruction mainly revolves around the question on the continuity of construction work. The MOPWH Instruction stipulates that construction works may be suspended due to force majeure only if:
-
- it is considered high-risk due to its location being near the epicenter of the outbreak,
- there has been a confirmed case of COVID-19 and/or a worker having the status as patient under surveillance (Pasien Dalam Pengawasan or “PDP”) for COVID-19, or
- there has been a regulation from the local or central government suspending the construction work due to force majeure.
However, if construction work is deemed crucial to continue due to its nature and urgency in handling social and economic impacts from COVID-19, such work may continue if:
-
- it obtains an approval from the MOPWH,
- it implements the protocol of COVID-19 prevention with high discipline and submits a periodical report to the COVID-19 Prevention Task Force, and
- it must suspend its operation if a worker is found to be infected with COVID-19 or become a PDP.
Further, the MOPWH Instruction stipulates key policies as follows:
- The Scheme for Protocol on Prevention of COVID-19 in Construction Service Works
Based on the MOPWH Instruction, the following points are the protocol scheme that must be conducted during construction work:
-
- the establishment of a COVID-19 Prevention Task Force;
- the identification of potential risks of COVID-19 in the field;
- the provision of health facilities in the field; and
- the implementation of COVID-19 prevention in the field. For ease of reference, below is the protocol mechanism on prevention of COVID-19 outbreak for construction services:
- The Actions to Take for Suspended Contracts
The MOPWH Instruction provides that in the event a construction contract is suspended due to force majeure, the following conditions shall apply:
- Establishing the mechanism for work suspension;
- Establishing the mechanism for changes in contract specifications; and
- Compensation in the form of fulfilling (i) the payroll of the construction workers during the suspension period, and (ii) the payment obligation to sub-contractor, producer, and supplier during the suspension period. This requirement is in line with the Minister of Manpower Circular Letter No. M/3/HK.04/III/2020 dated March 17, 2020 on the Employee Protection and Business Sustainability on the Prevention of COVID-19 (the “Circular Letter”) which emphasizes that workers/employees are still entitled to receive their payroll during the COVID-19 outbreak situation.
The MOPWH Instruction further provides that if a construction contract needs to continue due the work’s nature and urgency, the implementation of COVID-19 prevention in the field can be proposed as part of an additional cost for the implementation of Construction Safety Management System (Sistem Manajemen Keselamatan Konstruksi or “SMKK”) through an addendum of the construction contract.
- The Protocol on Prevention of COVID-19 for Goods/Services Procurement in Construction Services
For goods/services procurement in construction services, the MOPWH Instruction further provides for ease and expansion access through both online and offline procurement process. This provision is intended to minimize the risk of spreading the virus by taking into account requirements on goods/services procurement in the construction services sector.
We note that while the MOPWH Instruction is indeed issued during the COVID-19 outbreak in Indonesia, this instruction also enables the implementation of construction services to run more effectively and efficiently even after the pandemic period has passed. Overall, this MOPWH Instruction addresses the concern on performing construction work during COVID-19 outbreak so that this issue will not interfere with the infrastructure development in Indonesia.
***
April 23, 2020
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KPPU: Law Enforcement Through Electronic Means
On April 6, 2020, the Indonesia Business Competition Supervisory Commission (Komisi Pengawasan Persaingan Usaha or “KPPU”) issued the (i) KPPU Regulation No. 1 of 2020 dated April 6, 2020 on Case Handling Electronically (“KPPU Reg. 1/2020”); and (ii) KPPU Decree No. 12/KPPU/Kep.1/IV/2020 dated April 6, 2020 on Case Handling in the event of an Emergency Disaster due to the COVID-19 Outbreak in Indonesia (“KPPU Decree 12/2020”). These two policies are issued by KPPU in relation to the Large-scale Social Restrictions (Pembatasan Sosial Berskala Besar or “PSBB Policy”) ordered by the Indonesian Government due to the COVID-19 outbreak in Indonesia.
These two policies aim to address concern over limitations for KPPU in conducting supervision and law enforcement duties due to the issuance of the PSBB Policy. Pursuant to KPPU Reg. 1/2020 and KPPU Decree 12/2020, KPPU has the ability to implement supervision and law enforcement through Electronic Media. KPPU Reg. 1/2020 defines Electronic Media as all electronic interaction facilities used by KPPU, not limited to the visual teleconference and electronic mail (e-mail).
We also note that while KPPU Reg. 1/2020 is indeed issued during the COVID-19 outbreak in Indonesia, this regulation enables KPPU to further conduct its law enforcement effort through electronic means outside the context of this pandemic, which allows more efficiency in the competition law sector.
Important issue contained in KPPU Decree 12/2020 is as follows:
- Recommencement of Law Enforcement Activities by KPPU while Prioritizing the Use of Electronic Media
The KPPU Decree 12/2020 revokes two previous decrees: KPPU Decree 10/2020 and KPPU Decree 11/2020, which were issued to suspend the law enforcement activities by KPPU from March 17 to April 6, 2020. The revocation of these two Decrees recommences all previously suspended law proceeding at KPPU upon the issuance of KPPU Decree 12/2020 on April 6, 2020.
In conjunction with the recommencement of law enforcement activities, KPPU Decree 12/2020 further mandates for law enforcement activities to prioritize the use of electronic media. While the use of electronic means is in line with the PSBB Policy for physical distancing, because the mandate under this KPPU Decree 12/2020 is only to prioritize but not migrate all law enforcement activities to electronic media, KPPU may still be able to conduct face-to-face legal proceedings.
Meanwhile, key policies contained in KPPU Reg. 1/2020 are as follows:
- Notification Assessment and Partnership Supervision
Through KPPU Reg. 1/2020, all written notification to be submitted to KPPU may be conducted by way of Electronic Media. These notifications consist of written consultation notification, assessment, KPPU opinion, notice stipulation, as well as partnership supervision. All rules concerning these written notifications will still refer to the KPPU regulations on assessment for post-acquisition/merger notification obligation as well as regulations on partnership supervision currently in force.
- Implementation of Legal Proceedings for Anti-Trust Matters through Electronic Media
KPPU Reg. 1/2020 further provides mechanisms to conduct legal proceedings for examination of late submission for mergers and acquisition notification requirement, examination of alleged violation of partnership agreements, and other anti-trust cases through Electronic Media. In conducting these legal proceedings, KPPU introduces Electronic Domicile, where KPPU regards an e-mail address as official domicile for parties involved in legal proceedings with KPPU. This determination of Electronic Domicile allows KPPU to send hearing summons and conduct other hearing correspondences to and using this Electronic Domicile. Further, hearings will be conducted through the Electronic Media.
Although KPPU Reg. 1/2020 does not specify the Electronic Domicile of KPPU in conducting examination of late submission for M&A notification requirement, examination for alleged violation of partnership agreement, as well as other anti-trust cases, KPPU website does provide guidance that submission of report for alleged violations to be submitted through ‘pengaduan@kppu.go.id’, while clarification and consultation to be submitted through ‘infokom@kppu.go.id’.
KPPU Reg. 1/2020 also provides that the panel of judges in a legal proceeding may render its decision through Electronic Media, and that any decision rendered using this method is legally deemed to have been read in a public hearing that is attended by the parties. After announcement of KPPU decision for a particular proceeding, KPPU may publish the copy of its decision and conduct enforcement of such decision through Electronic Media as well.
- Issues
The KPPU Reg. 1/2020 is a highly appreciated initiative from KPPU to allow a more efficient conduct of its authorities and the process of its law enforcement activities especially during this pandemic situation. However, as in many other new systems being developed, there will be questions from both practical and theoretical aspects in performing legal proceedings through electronic means. One of them, for example, is the procedure for cross-examinations during the proceedings. For this reason, it will be crucial for KPPU at this stage to provide further guidance on the procedures as well as good communication to ease the legal enforcement process using the Electronic Media, so that the intention of the KPPU Reg. 1/2020 can be well delivered.
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April 15, 2020
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Bank Indonesia Provides an Incentive for Banks During COVID-19 Outbreak
In order to mitigate the uncertain economic situation due to the COVID-19 outbreak in Indonesia, Bank Indonesia (“BI”) issued a new Regulation No. 22/4/PBI/2020 dated March 26, 2020 on the Incentives for Banks Granting Provision of Funds For Specific Economic Activities to Support the Handling of Economic Impacts due to Corona Virus Outbreak (“BI Reg. 22/2020”).
Through BI Reg. 22/2020, BI provides an incentive (as described below) for conventional banks, sharia banks and sharia business units (altogether “Banks”) carrying out certain funding activities.
- Type of Funding Activities
Banks will be entitled to receive an incentive as stipulated under BI Reg. 22/2020 if it carries out the following funding activities:
- Export activities (e.g., export credit or financing);
- Import Activities (e.g., productive import credit or financing);
- L/C;
- Micro, small and medium business activities (e.g., micro, small and medium credit or financing); and/or
- Other prioritized economic activities as stipulated by BI.
- Type of Incentive
BI will grant the incentive in the form of a relaxation on the fulfillment obligation of daily Minimum Statutory Reserves (Giro Wajib Minimum) in Rupiah and foreign currency that must be fulfilled by Banks (the “Incentive”). The Incentive will be granted to Banks on a monthly basis and will commence on April 16, 2020. The granting of the Incentive will be valid until December 31, 2020.
- Procedure of the Incentive Granting
For BI to determine the eligibility of Banks in receiving the Incentive, Banks need to provide the relevant data with respect to the above funding activities to BI on a monthly basis. The relevant data may be sourced from:
- Conventional banks’ monthly report;
- Monetary and financial system monthly stability report of sharia banks and sharia business units;
- Conventional banks’ integrated report; and/or
- Other reports or data as stipulated by BI.
BI will use the reported data as a basis in granting the Incentive to Banks. BI may also liaise with the government and/or the Financial Services Authority (Otoritas Jasa Keuangan, OJK) in granting the Incentive to the Banks.
More detailed provisions on BI Reg. 22/2020 will be further regulated in a Regulation of Members of Board of Governors.
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April 14, 2020
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DKI Jakarta Implements PSBB Measures to Minimize Further Spread of COVID-19 Outbreak
On April 9, 2020, the Governor of DKI Jakarta issued Regulation No. 33 of 2020 (the “Regulation”) and Decree No. 380 of 2020 (the “Decree”), both regarding the Implementation of Large-Scale Social Restrictions in Handling Coronavirus Disease (Covid-19) in DKI Jakarta.
The Regulation and the Decree are the follow-up to the approval issued by the Minister of Health who approves the implementation of the Large-Scale Social Restrictions (Pembatasan Sosial Berskala Besar – “PSBB”) in DKI Jakarta in order to minimize further the spread of the Covid-19 outbreak.
Based on the Decree, the PSBB measures are effective as of April 10, 2020 until April 23, 2020 and may be further extended if necessary.
We set out below the key provisions of the PSBB based on the Regulation.
- General Restrictions
During the implementation of the PSBB, everyone must implement a Clean and Healthy Behavior (Perilaku Hidup Bersih dan Sehat) and use a mask outside his or her house. In addition, the Regulation limits outdoor activities during the PSBB as follows:
- schools and/or educational institutions activities will be temporary suspended and replaced by learning activities through long distance learning methods;
- workplaces closure which means that activities at workplaces are temporarily suspended, and employers must implement the work-from-home system;
- religious activities in houses of worship are temporarily suspended;
- public places or facilities shall temporarily be closed;
- social and cultural activities that draw crowds are temporarily suspended; and
- use of modes of transportation of people and goods will be limited.
- Workplaces Closure
As part of the implementation of the PSBB, all “non-essential” businesses are required to temporarily suspend their activities at the workplaces. The Regulation stipulates certain categories that constitute “essential” businesses which are exempted from the workplaces closure, as follows:
- all offices/government institutions, either central or regional;
- foreign country representative offices and/or international organizations carrying out diplomatic functions;
- state/regional-owned enterprises participating in the handling of Covid-19 and/or fulfillment of basic needs;
- workplaces in the following sectors:
- health;
- food/beverage;
- energy;
- communication and information technology;
- finance;
- logistics;
- hospitality/hotel activities;
- construction;
- strategic industries;
- basic services, public utilities and industries which are deemed certain vital national objects; and/or
- daily needs.
- local and international non-governmental organizations engaging in the disaster and/or social sectors.
However, the businesses that are exempted above shall comply with the obligation to conduct the health protocols set out in the Regulation.
- Limitation on the use of Modes of Transportation
During the implementation of the PSBB, all movement of people and/or goods are limited to the fulfillment of basic needs and activities that are permitted during the implementation of the PSBB. For ease of reference, below is the relevant limitations:
- Criminal Sanctions
Under Law No. 6 of 2018 dated August 8, 2018 on Health Quarantines, any violation of the PSBB which causes a public health emergency may be subject to an imprisonment of up to 1 (one) year and/or a monetary fine of up to Rp100,000,000 (one hundred million Rupiah).
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April 13, 2020
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KSEI Introduces the Requirements and Mechanism of E-Proxy for E-GMS
On March 26, 2020, the Indonesian Financial Service Authority (“OJK”) has issued Circular Letter No. S-92/D.04/2020 dated March 18, 2020 on the Relaxation on the Report Obligation and the Implementation of General Meeting of Shareholders (“GMS”) (such letter, “OJK Letter 92/2020”) which governs, among others, the implementation of the electronic GMS (“e-GMS”). We have previously discussed such letter in our previous newsflash on OJK Letter 92/2020.
As a follow up to OJK Letter 92/2020, on April 3, 2020, the Indonesia Central Securities Depository (Kustodian Sentral Efek Indonesia or “KSEI”) issued Letter No. KSEI-4164/DIR/0420 on the Enforcement of the KSEI Electronic General Meeting System (eASY.KSEI) Facility as a Mechanism for Electronic Authorization in the Process of GMS for Issuers Which Are Public Companies Whom Shares Are Stored in the Collective Depository of KSEI (“KSEI Letter No. 4164”). In KSEI Letter No. 4164, KSEI elaborated several points related to the technical implementation of e-GMS and electronic authorization (“e-Proxy”).
Below are the key points from KSEI Letter No. 4164 on the implementation of e-GMS and e-Proxy.
- KSEI System for E-GMS
KSEI has provided a system in order to facilitate the holding of the e-GMS under the name of “eASY.KSEI” which consists of 2 (two) stages of implementation, namely:
- E-Proxy, is a system that facilitates and integrates the power of attorney from the shareholders to the authorized recipients electronically; and
- E-Voting, is a system that facilitates the attendance and voting process of voting in a e-GMS to enable the shareholders to participate in the GMS without the need for physical presence.
- E-Proxy Mechanism
Public Companies are required to provide alternative for the provision of power of attorney for its shareholders so that it can be carried out electronically by using e-Proxy in eASY.KSEI, with the following conditions:
- Public Companies that intend to hold a GMS after the date of this KSEI Letter No. 4164 (April 3, 2020) with the date of GMS invitation after April 20, 2020, must note the following:
- In the event that the GMS announcement has been made to the shareholders through a Public Company’s website, Indonesian Stock Exchange (“IDX”), or mass media before April 20, 2020 and the GMS invitation is scheduled between April 21, 2020 and May 13, 2020 – such GMS announcement that has been announced must be put into eASY.KSEI no later than 1 (one) day before the date of the said GMS announcement; and
-
- In the event that the GMS announcement is made on April 20, 2020 and onwards, then a Public Company is required to input the GMS announcement into eASY.KSEI on the same day with the GMS announcement.
- Public Companies that intend to hold a GMS after the date of this KSEI Letter No. 4164 (April 3, 2020) with the date of GMS invitation before April 20, 2020 (along with the 2nd and 3rd GMS, as applicable) are only required to use e-Proxy in the eASY.KSEI for the next GMS.
- Required Document and Information for E-Proxy
Public Companies are required to carry out the following actions and to submit certain information and documents, in order to use eASY.KSEI:
- Filling out and submitting the form of power of attorney/appointment of an authorized official (using the format provided in the Attachment 2 of KSEI Letter No. 4164) to update the information of the following proxies:
-
- Who will represent the said Public Company in signing the Equity-Type Securities Registration Agreement between the said Public Company and KSEI including any of its amendments (categorized as Group A in the form); and
-
- Who will represent the said Public Company in signing any documents, provide instructions, and carry out other activities relating to the registration of Equity-Type Securities to KSEI, the implementation of Corporate Actions of the said Public Company, as well as who will be responsible over the access to the KSEI system, including eASY.KSEI (categorized as Group B in the form).
If the individuals mentioned in the Group A in the form is the individuals appointed based on the power of attorney from the board of directors of the said Public Company, a copy of such power of attorney must be submitted to KSEI.
- Submitting corporate deeds stipulating: (i) the latest management (board of directors and board of commissioners) composition along with its evidence of notification to the Ministry of Law and Human Rights (MOLHR) and (ii) the current articles of association along with the evidence of approval for its amendments by MOLHR;
- Providing information on the nearest intended GMS including the date of the relevant GMS announcement and invitation;
- Signing Equity-Type Securities Registration Agreement with KSEI (using the format provided in the Attachment 3 of KSEI Letter No. 4164), by the authorized individual in accordance with the power of attorney/appointment as mentioned in point (a) above;
The documents/information as mentioned in point (a) to point (d) above shall be submitted to KSEI with the following manners:
- Scanned documents for point (a) to point (c) shall be delivered via email to KSEI on: peksei.co.id and ubakum@ksei.co.id no later than April 17, 2020;
- The original document for point (a) shall be delivered to KSEI at the latest every Friday until 11:00 West Indonesian Time Zone (WIB) before the date of the RUPS, addressed to Securities Management Unit of KSEI; and
- For Equity-Type Securities Registration Agreement, it shall be delivered to the said Public Company in physical form, and to be signed and returned to KSEI in the form of a scanned file no later than 5 (five) business days before the said Public Company holds the relevant GMS. The physical form of the said agreement must be returned to KSEI no later than 11.00 WIB of the next Friday after the said GMS being held.
KSEI will issue a separate letter or announcement stipulating the requirements and mechanism of the use of e-Voting in eASY.KSEI system.
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April 9, 2020
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