MATERIALTRANSACTIONS ANDCHANGES OF MAINBUSINESS LINEHEAD OF BAPEPAM-LK REGULATION NO. IX.E.2By: Alfa Dewi Setiawati and Gabriella Ticoalu
LEGAL BASIS• Law No. 8 of 1995 on Capital Market Law• BAPEPAM-LK Regulation IX.E.2 of 2011• BAPEPAM-LK Regulation IX.E.2 of 2009• BAPEPAM-LK Regulation IX.H.1• BAPEPAM-LK Regulation IX.E.1• BAPEPAM-LK Regulation X.K.1• BAPEPAM-LK Regulation IX.J.1
KEY ISSUES• Why Regulate Material Transactions• Definitions• Key Changes between the 2009 and 2011 Regulation No. IX.E.2• Common Provisions • Disclosure of Information • Material Transactions with Affiliations• Material Transactions • Definition • Classification • Object • Time Framework Requirements• Determination of Price in for Shares as Object of Material Transactions• Exceptions• Changes of Main Business Line
WHY REGULATE MATERIAL TRANSACTIONS?• To ease Public Company to obtain financing in order to enhance business progress• Effect to financial performance of Public Company• Rights of Public Shareholders to be informed
DEFINITIONS• The “Company” Issuers who have conducted a Public Offering of Equity Securities or Public Company• “Controlled Company” A company controlled, directly or indirectly, by the Company• “Main Business Line” Business activities as listed in the articles of association of the Company and has been running by the Company
KEY CHANGES• Additional provision regarding bond issuance which has value of more than 50% of Public Company’s equity in which the buyers have not already been known• Revision and one new provision regarding exemptions on obligation of disclosure of information as well as the guarantee for Material Transactions of receiving loan from financial institutions• New provision regarding Changes of Main Business Line conducted by subsidiary company• Revision on the timeframe requirement for notification after the Material Transaction
DISCLOSURE OF INFORMATION• Description of the Transactions• Explanation, Consideration, and Reason of Transaction• Summary of Appraisal Report• Statement from BOD and BOC stating that all information has been disclosed and are not misleading• Contactable domicile and address to obtain information on the Material Transactions
AFFILIATED TRANSACTIONSAdditional information that shall be disclosed:• the affiliate relationship and the nature of the relationship with the Company; and• Explanation, consideration and reason of the affiliated transaction and comparison with the same transaction with unaffiliated.
MATERIAL TRANSACTIONS• Placement in business entity, projects and/or certain business;• Purchase, sales, transfer, exchange, of assets or business segments;• Lease of assets;• Borrow and lend of money;• Provision of assets as collateral; and/or• Provision of corporate guarantee;With value of 20% (twenty percent) or more than the equity ofthe Company, through a single or series of transaction for acertain purpose or activity.
MATERIAL TRANSACTIONS(contd.)• 20% - 50%• >= 50%• >= 50% through Bonds• >= 50% through Acquisition• Material Transactions through Tender
OBJECTS OF MATERIAL TRANSACTION• Shares• Assets other than shares• Business segments• Lend or borrowed money• Secured assets• Corporate guarantee
TIME FRAMEWORKREQUIREMENT• Material Transaction shall be executed within the period of 12 (twelve) months after the GMS approval
DETERMINATION OF PRICEIn the event the object of Material Transaction is publiccompany’s shares:For unlisted and untraded shares:• In terms of selling, the value of the shares shall be at least the reasonable market price or more than the reasonable market price determined by the appraisal, which one is the higher; or• In terms of buying, the value of the shares shall be the reasonable market price at the most or less than the reasonable market price determined by the appraisal, which one is the lower.
DETERMINATION OF PRICE(contd.)For listed and traded shares, but not traded within 90 daysbefore the Material Transaction:• In terms of selling, the value of the shares shall be at least the reasonable market price or more than the reasonable market price determined by the appraisal or at least the average price of the closing price of the daily trade at the stock exchange as of 12 months before the last trading day, which one is the higher; or• In terms of buying, the value of the shares shall be the reasonable market price at the most or less than the reasonable market price determined by the appraisal or more than the average price of the closing price of the daily trade at the stock exchange as of 12 months before the last trading day, which one is the lower.
DETERMINATION OF PRICE(contd.)For listed and traded shares:• In terms of selling, the value of the shares shall be at least the average price of the higher price of the daily trade at the stock exchange for the last 90 days before: - material transaction date; or - GMS announcement date.• In terms of buying, the value of the shares shall be maximum of the average of the highest price from the daily trade at the stock exchange for the last 90 days before: - material transaction date; or - GMS announcement date.
EXCEPTIONS1. Material Transaction with Controlled Company;2. Corporate guarantee over transaction made by Controlled Company with minimum ownership of 99%;3. Loan from either domestic or foreign bank, venture capital company, financing company, or infrastructure financing company;4. Guarantee for either domestic or foreign bank, venture capital company, financing company, or infrastructure financing company over loan obtained by the public company or the Controlled Company;5. Material transaction as the main business activity;
EXCEPTIONS (contd.)6. A material transaction conducted by the public company with respect to assets that are: i. directly used for the production process or the main business activity of the public company; and/or ii. used to directly support the production process or the main business activity of the public company;7. Issuance of securities other than equity securities, through a public offering;8. Material transactions which has fulfilled the necessary requirements and information which has been disclosed in the prospectus;9. An increase or decrease of capital participation by the public company to maintain percentage of its shares in other companies, provided that the terms of the capital participation is at least one year;
EXCEPTIONS (contd.)10. Material Transaction by a bank which have obtained loan from Bank Indonesia or other government institution in the amount of more than 100% of paid-up capital or other conditions which may cause the bank to be restructured by the authorized governmental institution;11. Material Transaction conducted by public companies other than bank which have had a negative balance of its working capital and negative equity;12. Direct release or acquisition of assets as results of court decision/stipulation; and or13. Material Transaction for fulfilling obligations set out in the laws and regulations.
CHANGE OF MAIN BUSINESS LINE• Requires a prior approval from the GMS• The agenda of the GMS shall include a special agenda on the feasibility study of the change of main business line of the company• The prior approval from the GMS is not required for the change of main business line that decreasing the main business lines of the company with certain conditions which are as follows: 1) The main business line experienced losses 3 years in a row based on the annual financial statement; 2) Decreasing of the main business line will not affect the business operation of the company; and 3) Announce to the public and report to Bapepam-LK within the period of 2 days after the decision to change the main business line.
CHANGE OF MAIN BUSINESS LINE(contd.)• In the event the Change of Main Business Line conducted by: a. A non-public Controlled Company whose financial statement is consolidated with a public company, then the public company must conduct the procedures stipulated in this regulation; b. A public Controlled Company whose financial statement is consolidated with a public company, then only the Controlled Company must conduct the procedures stipulated in this regulation in the extent that the revenues of the Controlled Company contributes 20% or more of the revenues of the public company based on: 1) Consolidated annual financial statement of the public company; or 2) Proforma consolidated financial information of the public company which has been reviewed by accountant if the financial statement of the Controlled Company has not been consolidated in the annual financial statement of the public company.