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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

Copyright © 2016 AKSET. All rights reserved.

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.

Copyright © 2016 AKSET. All rights reserved.

February 19, 2016

by Bonar

Introduction to Bonded Storage Areas

In today’s era of seemingly borderless trade, it is important for a country to support the infrastructure sector, so that domestically produced goods can compete with products from other countries. Indonesia is not an exception. The government established the legal framework for Bonded Storage Areas in order to incentivize industrial production and trade across the country.

Bonded Storage Areas, pursuant to Government Regulation No. 32 of 2009, as recently amended by Government Regulation No. 85 of 2015 (“Bonded Storage Regulation”), are areas that fulfill specific requirements which are used to store goods and receive certain facilities.

According to the Bonded Storage Regulation, there are seven types of Bonded Storage Areas:

• Bonded Warehouse (Gudang Berikat).
• Bonded Zone (Kawasan Berikat).
• Bonded Logistics Center (Pusat Logistik Berikat).
• Bonded Exhibition Area (Tempat Penyelenggaraan Pameran Berikat).
• Duty Free Shop (Toko Bebas Bea).
• Bonded Auction Place (Tempat Lelang Berikat).
• Bonded Recycling Zone (Kawasan Daur Ulang Berikat).

This newsflash will discuss the following:

1. Bonded Warehouses, as set out under Minister of Finance Regulation No. 143/PMK.04/2011 regarding Bonded Warehouses (“Bonded Warehouse Regulation”);
2. Bonded Zones, as governed under Minister of Finance Regulation No. 147/PMK.04/2011 regarding Bonded Zones, as lastly amended by Regulation No. 120/PMK.04/2013 (“Bonded Zone Regulation”); and
3. Bonded Logistics Centers, as stipulated under Minister of Finance Regulation No. 272/PMK.04/2015 regarding Bonded Logistics Centers (“Bonded Logistics Regulation”).

♦  DEFINITIONS

Bonded Warehouses, Bonded Zones, and Bonded Logistics Centers have similar purposes: to support industry and to encourage the export of domestically produced goods, as can be seen from their respective definitions.

♦  REQUIREMENTS

Areas that are intended to become a Bonded Warehouse, Bonded Zone, or Bonded Logistics Center must fulfil certain requirements.

♦  FACILITIES AND INCENTIVES

In order to understand the incentives granted to Bonded Warehouses, Bonded Zones, and Bonded Logistics Centers, it is important to elaborate the treatment of taxes and duties on goods when they enter or exit Bonded Storage Areas.

Entering

Upon entering a Bonded Warehouse or Bonded Zone, goods can be provided with one or more of the following:

1. Import duty postponement.
2. Excise waiver.
3. Exemption from Import Taxes (Pajak Dalam Rangka Impor – “PDRI”).

Only certain types of goods can receive these facilities for entering a Bonded Zone:

1. Raw and production auxiliary materials for further processing.
2. Capital goods to be used within the Bonded Zone.
3. Produce of other Bonded Zones to be further processed or used in another Bonded Zone.
4. Goods produced in a Bonded Zone to be processed further or turned into capital goods for production.
5. Goods produced in a Bonded Zone returned from outside the customs area or a Bonded Exhibition Location into a Bonded Zone.
6. Finished goods from outside the customs area to be combined with goods produced in a Bonded Zone specifically for export.
7. Packaging or packaging equipment from outside the customs area and/or another Bonded Zone that will be an integral part of the goods produced in a Bonded Zone.

For Bonded Zones, the following types of goods are granted with exemptions from VAT or Luxury Goods Tax:

1. Goods from other customs areas to be processed further in the Bonded Zone.
2. Goods from another Bonded Zone or other customs area to be processed further under a subcontract arrangement.
3. Machinery and/or moulding returned from another Bonded Zone or other customs area that was loaned from the Bonded Zone.
4. Semi-finished goods from another Bonded Zone or other customs area to be further processed in the Bonded Zone.
5. Goods produced in another Bonded Zone or other customs area that will be combined with goods produced by the Bonded Zone to be exported.
6. Packaging or packaging equipment from other customs areas to be used by the goods produced by the Bonded Zone.

On the other hand, there are various types of facilities for goods entering a Bonded Logistics Center, as elaborated in the following table.

Goods may only enter a Bonded Logistics Center for the following purposes:

1. To support goods from non-customs areas stored in the Bonded Logistics Center
2. Goods needed to carry out certain processes for the goods stored in the Bonded Logistics Center, such as packaging, sorting, standardization, kitting, packing, reassembling/repair, and labelling
3. Goods produced by small and medium scaled industrial companies
4. For export purposes
5. For specific purposes in another customs area

Exiting

Goods produced in a Bonded Warehouse or Bonded Zone to be transported to any other location in Indonesia are imposed with:

1. Import duty that had to be paid when the goods entered the Bonded Warehouse;
2. Excise; and
3. PDRI based on the tariff when the Import Customs Notification for the goods was registered and the value of the goods when the goods were imported into the Bonded Warehouse.

Because of these provisions, the costs are relatively lower when importing goods into a Bonded Warehouse or Bonded Zone and processing them there, as the import duty and taxes imposed are calculated based on when the goods were imported into the Bonded Warehouse or Bonded Zone, not the value of the finished products.

For goods exiting a Bonded Logistics Center, the goods will be granted with a deduction of import duty and PDRI. For goods that were processed in a Bonded Logistics Center, import duty and PDRI will only be imposed on components that were imported from overseas.

Moreover, goods may only exit a Bonded Logistics Center for specific purposes:

1. To support the industrial activities in a Bonded Zone, Special Economic Zone or other economic area determined by the government.
2. To support the industrial activities of a customs area.
3. For other Bonded Logistics Centers.
4. To be exported.
5. To support industrial activities that are granted with Import duty waivers, reductions or refunds.
6. To support industrial activities that have acquired import duty facilities from the government.
7. To support distribution of certain goods domestically.
8. To support small and medium scaled industrial activities in other customs areas.

♦  CONCLUSION

Each type of Bonded Storage Area has its own advantages and disadvantages:

 February 16, 2016

Copyright © 2016 AKSET. All rights reserved.

by Bonar

Implementation of Sharia Principles in Capital Markets

In November 2015, the Financial Authority Services (Otoritas Jasa Keuangan – “OJK”) issued Regulation No. 15/POJK.04/2015 on Implementation of Sharia Principles in Capital Markets (“POJK 15”), replacing Bapepam-LK Regulation No. IX.A.13 concerning Issuance of Sharia Securities (“Bapepam Reg. IX.A.13”).

Compared with Bapepam Reg. IX.A.13, POJK 15 provides more detailed qualifications on the types of capital market transactions that are considered to contravene sharia principles, and elaborates more detailed provisions on sharia principles such as (i) requirements for sharia securities, (ii) types of sharia parties, (iii) Sharia Monitoring Board (Badan Pengawas Syariah – “BPS”), and (iv) reporting obligations, as will be explained further below.

Capital market sharia activities consist of (i) offering of sharia securities, (ii) trading of sharia securities, (iii) management of sharia investments in capital markets, (iv) activities of issuers and public companies in relation to sharia securities issued by them, (v) activities of securities companies conducted under sharia principles, and (vi) the entities and professions relating to sharia securities.

♦  Activities and Transactions that Contravene Sharia Principles

Business activities that contravene sharia principles

• betting and games that are categorized as gambling;
• financial services that constitute usury (riba);
• sale and purchase of risks that consist of uncertainty (ghahar) or gamble (maisir); and
• production, distribution, trading, or procurement of (i) goods/services forbidden based on substance (haram li-dzatihi), (ii) goods/services forbidden not based on substance (haram li-gharihi) as stipulated by the National Sharia Board (Dewan Syariah Nasional – “DSN”) – Indonesian Ulama Council (Majelis Ulama Indonesia - “MUI”), and/or (iii) goods/services that are morally corrupt and mudharat

The qualifications are basically the same as under Bapepam Reg. IX.A.13, however POJK 15 deletes the restriction on acquisition of a company that at the time of acquisition has loans from usury financial entities (lembaga keuangan ribawi) that are greater than its equity.

Transactions that contravene sharia principles

• trading/transaction with fake offering or demand;
• trading/transaction with no delivery of goods or services;
• trading of goods that are not owned;
• insider trading;
• marginal transaction of sharia securities that includes interest (riba);
• trading/transaction with purpose of hoarding (ihtikar);
• trading/transaction that includes the substance of bribery (risywah); and
• other transactions that include speculation (gharar) or fraud (tadiis), including the conceal of defect (ghisysy) and the effort to influence another party that is deceitful (taghrir).

♦  Requirements for Sharia Securities

POJK 15 defines the types of securities that can be deemed Sharia Securities, among others, sukuk, mutual funds, asset backed securities, and any other securities stipulated by OJK.

The securities should be in accordance with the schemes of contract (akad) stipulated under Bapepam-LK Regulation No. IX.A.14 concerning Contracts Used in the Issuance of Sharia Securities in Capital Markets or any other contract (akad) that does not contravene sharia principles, such as:

• Ijarah, the lease of goods or services for a certain period of time, with payment during the lease period;
• Istishna, an arrangement for the seller to sell certain products (istishna objects) to the buyer;
• Kafalah, a guarantee between a borrower and a guarantor to guarantee the liabilities of the borrower;
• Mudharabah (qiradh), cooperation of fund management in a specific business between the fund owner and the fund manager;
• Musyarakah, an agreement between parties to participate in capital either in the form of money or other form, to conduct a business; and
• Wakalah, an agreement between a principal and a proxy for the proxy to conduct certain actions.

♦  Sharia Parties

Three types of parties may conduct sharia activities:

• AOA sharia party: a party that states sharia activities in its Articles of Association;
• Sharia services provider: a party that does not state sharia activities in its AOA, but

- has a sharia business unit;

- is a sharia investment manager;

- is custodian of a sharia investment;

- part of its business activities are conducted in accordance with sharia principles in the capital market; or

- provides other sharia services; and

• Sharia issuer: a party that that is neither of the above, but issues Sharia Securities and/or has the role to support the issuance of Sharia Securities in the capital market.

♦  Sharia Monitoring Board (Badan Pengawas Syariah – “BPS”)

Before the enactment of POJK 15, only AOA sharia parties and sharia investment managers were obliged to form a BPS. After the enactment of POJK 15, sharia services providers must appoint a BPS, director, or person in charge to supervise and monitor the implementation of sharia principles in the company. Sharia issuers are not obliged to form a BPS.

Based on the Company Law (Law No. 40 of 2007), the BPS shall be appointed by the General Meeting of Shareholders (“GMS”), while under POJK 15, the BPS may be appointed by: the GMS, any resolution equal to GMS, or the directors of the company.

The BPS may be an individual or a business entity that has obtained a license as an Expert in Sharia Capital Markets (Ahli Syariah Pasar Modal –”ASPM”) from OJK. An ASPM can be appointed as BPS in up to four companies and can only hold dual-positions as director/commissioner in two other companies engaging in capital markets.

♦  Reporting Obligation

Sharia parties must report their fulfillment of sharia principles to OJK. The reports shall be drafted by the BPS (for AOA sharia parties and sharia investment managers), or a director/person in charge (for sharia services providers, other than sharia investment managers).

The reports shall be submitted to OJK simultaneously with the annual report or annual financial report.

February 12, 2016

Copyright © 2016 AKSET. All rights reserved.

by Bonar

New Regulation Allows Port Concessions through Appointment and Regulates Mandatory Transfer of Facilities

On August 19, 2015, the President enacted Government Regulation No. 64 of 2015 amending Government Regulation No. 61 of 2009 on Ports (the “New Port Regulation”) in order to stimulate investment in port infrastructure by allowing Port Administrators to use direct assignment and appointment to grant port concessions. To implement the New Port Regulation, the Minister of Transportation issued Regulation No. 15 of 2015 on Concession and other forms of Cooperation between the Government and Port Business Entities in the field of Ports, which was later amended by Regulation No. 166 of 2015 (“MOT Reg. 15/2015”).

♦  Assignment and Appointment

As opposed to Government Regulation No. 61 of 2009 (the “Old Port Regulation”), which authorized concessions solely by way of public tender, the New Port Regulation allows Port Business Entities (Badan Usaha Pelabuhan - “BUPs”) to receive concessions by way of assignment or appointment in cases where the land is already owned or controlled by the BUP and the investment is fully covered by the BUP (i.e., does not utilize funds from the State/Regional Budget).

To obtain a concession by assignment or appointment, the BUP applies to the Port Administrator, who forwards the application and preliminary feasibility studies to the Directorate General of Sea Transportation. If the application and feasibility studies are deemed sufficient, the BUP and the Port Administrator can execute a concession agreement. MOT Reg. 15/2015 provides some minimum requirements for concession agreements, such as concession fee, ownership and use of infrastructure, and a clause covering transfer of port facilities to the Port Administrator at the end of the concession period.

The concession fee must be at least 2.5% of the total gross profit during the concession period.

MOT Reg. 15/2015 further provides that concessions for ports that were built, developed and/or operated prior to the enactment of Law No. 17 of 2008 on Shipping shall now be granted by way of assignment/appointment and may be extended in accordance with prevailing laws and regulations. This includes development of facilities that were built or developed by: i) the Government and stipulated as State Capital Participation in Port State-Owned Enterprises (BUMN Kepelabuhanan), ii) BUMN BUPs, and iii) Non-BUMN BUPs.

♦  Post-Concession Transfer of Land and Facilities

Concession land and facilities must be transferred to the Port Administrator by the end of the concession agreement as documented by a Minutes of Transfer (Berita Acara Serah Terima Fasilitas Pelabuhan dan Lahan) and a Handover Document (Dokumen Serah Terima) covering i) condition of the land and facilities being transferred, ii) procedure for transfer, iii) statement that the land and facilities are free from encumbrance, and iv) the BUP’s indemnification of the Government against any third party claims arising prior to the transfer.

♦  Utilization Cooperation

After the land and facilities have been transferred to the Port Administrator, they can again be handed over to a BUP based on a Joint Utilization Cooperation (Kerjasama Pemanfaatan). MOT Reg. 15/2015 provides the minimum contents of a Joint Utilization Cooperation Agreement, including scope of cooperation, initial tariff and adjustment, service standards, use and ownership of assets, and profit sharing scheme.

The New Regulation does not limit the period of the Joint Utilization Cooperation, as opposed to the Old Regulation, which regulated a maximum period of 30 (thirty) years.

January 28, 2016

Copyright © 2016 AKSET. All rights reserved.

by Bonar