Buyback is a mechanism that allows companies to repurchase their stocks from their shareholders. There are several reasons why companies would opt to do this, amongst which are to reduce the cost of capital, ownership consolidation, preserving stock prices, undervaluation, and boosting their key financial ratios. The key principle for buyback in Indonesia is that it must be done with transparency and within a certain period of time. Find out more of our insights about this topic in our Legal Brief publication.

1. Legal Brief
Buyback Regulations in Indonesia

2. BACKGROUND
The Influence of Buyback.
The history of buyback (which in another term ‘repurchase of stock/share) activity, formerly reported to 1942 in the United States of
America (“US”) when the first case of an American company buying its own stock. Although familiar, the use of buyback mechanism
was not that widespread until mid 1980s. The period after mid 1980s witnessed an accelerated pace of buyback activity among U.S.
corporations fueled by an explosion in the use of open market repurchase programs. In the year 1998 - and for the first time in the
history of buyback - U.S. corporations distributed more cash to investors through share repurchases than through cash dividends.
101: How Buybacks Stock Works and Why Would Taking Buyback
In stock buybacks, corporations buy their own shares from existing shareholders. This reduces the
number of shares in the market and boosts earnings per share. Often, this can increase share prices given
the rise in earnings growth.
In US, it was not until 1982 that share repurchases became legal, driving wider usage among corporations
as a capital allocation tool.
By comparison, dividends are another common form of distributing capital back to shareholders.
Dividends are bound by strict policies and do not offer the same tax advantages and flexibility as
buybacks. While dividends are taxed as income, buybacks are taxed as capital gains - making them a
preferential choice for investors. Given these advantages, stock buybacks have outpaced dividends over
the last two decades.
Stock Buyback Trends based on S&P
A H R P L e g a l B r i e f
Year
S&P 500 Stock
Buybacks
S&P 500 Dividends
2022 $1.00T $0.54T
2021 $0.88T $0.51T
2020 $0.52T $0.48T
2019 $0.73T $0.49T
2018 $0.81T $0.46T
Based on S&P index, stock buybacks fluctuate more
often than dividends since corporations can turn them
on or off as a business strategic. For example, in
2020, buybacks sharply declined given growing
financial uncertainty. Meanwhile, companies issued
dividends at a steady pace.
Yet unlike the last two recessions in 2008 and 2020,
buybacks have shown notable strength in 2022 in
spite of falling share prices.

3. The provisions for the buyback of shares in Indonesia, as initially regulated under Law Number 1 of 1995 on Limited-Liability
Companies (“Law No. 1/1995”), mark a significant legal framework within the Indonesian corporate law landscape. This
legislative instrument laid down the foundational legal structures for corporate governance, including the mechanisms for share
buybacks within the context of corporate financial management and shareholder rights.
Legal Background
A H R P L e g a l B r i e f
Article 30 of Law No. 1/1995 outlines the conditions under which a corporation may repurchase its issued shares.
It stipulates that such repurchases must be financed from net profits, ensuring that the corporation's net assets do not fall
below the sum of its placed capital (modal disetor) and required reserves as per the stipulations of the law. Furthermore, the
aggregate nominal value of the shares held by the corporation, along with those held by its subsidiaries and in pledge, must not
exceed 10% of the placed capital
Law No. 1/1995
Legal Provision
Legal Rationales
Corporate Flexibility Market Confidence
Shareholder Protection
Allowing companies to buy back
shares offers them a tool to adjust
their capital structure, manage
earnings per share, and optimize
shareholder value.
Buybacks can signal to the market
the management’s confidence in the
company’s intrinsic value,
potentially stabilizing or increasing
the share price.
By regulating buybacks, the law aims to
protect shareholders, ensuring that
buybacks are not executed at the
expense of the company’s financial
health or its ability to fulfill obligations to
creditors and to maintain required
reserves.
Moreover, Article 31 requires that any decision to repurchase shares or their further transfer must be based on a General Meeting
of Shareholders (“GMS”) resolution. This provision underscores the importance of shareholder participation in significant
corporate decisions, ensuring that buybacks are conducted transparently and with shareholder approval
Historical Legal Framework in Indonesia
on Buybacks (1/2)

4. A H R P L e g a l B r i e f
The transition from the provisions on share buybacks in Indonesia from Law No. 1/1995 to Law Number 40 of 2007 on Limited-
Liability Companies (“Law No. 40/2007”) reflects a legislative evolution with the adjustment to market needs and more
modern corporate practices.
Legal Transition
Maximum Ownership Limit
The restriction on the total nominal value of repurchased shares, including those held by subsidiaries and in pledge, not
exceeding 10% of the placed capital remains consistent. However, Law No. 40/2007 clarifies the calculations and conditions
under which these repurchases can occur, ensuring that buybacks do not adversely affect the company's financial health or its
ability to meet its obligations
Amended Legal Provision
Impact on Voting Rights and Dividends
Explicitly addressed in Law No. 40/2007, repurchased shares are disenfranchised and not entitled to dividends. This provision
aims to maintain fairness among shareholders by ensuring that shares held by the company do not influence corporate
decisions or accrue benefits that would otherwise belong to active shareholders​
GMS Approval for Buybacks:
This law provides more detailed regulations concerning GMS approval for buybacks. Specifically, it stipulates that the buyback
of shares or their further transfer can only be carried out with GMS approval unless otherwise specified by capital market
regulations. The decision of the GMS regarding buybacks must be made in accordance with the provisions on meeting calls,
quorum, and the number of votes required for amendments to the articles of association as set forth in this law and/or the
articles of association itself​
Law No. 40/2007
Historical Legal Framework in Indonesia
on Buybacks (2/2)

5. A H R P L e g a l B r i e f
Financial Crisis 2008
The financial crisis of 2008-2009, originating from the collapse of the USA housing bubble and the subsequent global banking
crisis, had widespread economic impacts across the globe, including Indonesia. The crisis led to a significant downturn in global
markets, affecting economies through various channels such as decreased exports, lower commodity prices, and reduced foreign
investment flows.
Impact on Financial Crisis 2008
In response to the financial crisis of 2008 and its impact on the capital market, Indonesia adopted specific policies related to the
buyback of shares by issuers or public companies through the Decree No. KEP-401/2008. This regulation aimed to provide
flexibility to companies facing increased market volatility and to maintain the stability of Indonesia's capital market.
Defining of Market Crisis Conditions
This regulation defines potential market crisis conditions as
situations where the composite stock price index on the
Indonesia Stock Exchange experiences a significant decline
due to unfavorable economic conditions that could have a
systemic impact.
Exception from GMS Approval
Under potential market crisis conditions, issuers or public
companies are allowed to repurchase their shares without
requiring GMS approval, deviating from the normally
required provisions.
Buyback Limitations
The buyback of shares by issuers or public companies is
limited to a maximum of 20% of the paid-up capital and can
only be conducted within a maximum period of 3 months
from the announcement of disclosure information related to
the buyback.
Disclosure of Information
Issuers or public companies are required to disclose
information related to the buyback plan to the Chairman of
the Capital Market and Financial Institutions Supervisory
Agency as well as the Stock Exchange, including the
estimated schedule, costs, and the impact of the share
buyback on the company's revenue and financing costs.
Insider Trading Prohibition
Insiders of the issuer or public companies are prohibited
from transacting the company's shares during the share
buyback period.
Conditions for Resale of Repurchased Shares
Shares repurchased can be resold to directors or employees
through specific schemes or in the open market by adhering
to certain conditions to ensure transparency and fairness.
Decision of the Chairman of the Capital Market
and Financial Institutions Supervisory Agency
Number KEP-401/BL/2008
(“Decree No. 401/2008”)
Impact of The 2008 Financial Crisis in
Indonesia on Buybacks (1/2)

6. Impact of The 2008 Financial Crisis in
Indonesia on Buybacks (2/2)
Decree No. 105/2010
As a Learning Insight of the financial crisis of 2008-2009, Indonesia implemented Decree of Capital Market and Financial Institutions
Supervisory Agency Number KEP-105/BL/2010 (“Decree No. 105/2010”) on April 13, 2010, as a regulatory measure to complement,
exclude, or substitute the provisions for share buybacks initially established in Decree KEP-401/2008. Such Decree and again, refined by
Financial Services Authority Regulation Number 30/POJK.04/2017 OF 2017 (“FSAR No. 30/2017”). Within the same concept, however,
POJK No. 30/2017 emphasizes the transformation of BAPEPAM-LK into OJK and aims to refine the framework for share buybacks under
specific conditions.
Key Differences
FSAR No. 30/2017
Regulatory Authority Transition
Issued by BAPEPAM-LK, the predecessor to OJK, focusing on the
regulatory framework for share buybacks as per the market
conditions of that time.
Reflects the transition of regulatory authority to OJK, aiming to
consolidate and update the regulations governing share buybacks,
providing clarity and contemporary guidelines in line with evolving
market practices.
Scope and Implementation
Provided a framework primarily focused on procedural aspects
and requirements for buybacks, including GMS approval and
disclosure obligations.
Expands the scope to include detailed provisions on the execution
of buybacks, resale of repurchased shares, and specific conditions
under which buybacks can be conducted, such as ensuring market
liquidity and preventing significant reduction in the free float.
Resale and Holding Period of Repurchased Shares
Lacked detailed provisions on the resale or holding period of
repurchased shares.
Introduces specific rules regarding the resale of repurchased
shares, including a mandatory period within which these shares
must be resold or otherwise utilized, aiming to prevent long-term
market manipulation and ensure transparency.
Disclosure and Reporting Requirements
Both regulations emphasize the importance of disclosure and reporting. However, FSAR No. 30/2017 provides more comprehensive
guidelines on the content, timing, and format of disclosures to be made to OJK and the public, enhancing transparency and investor
protection.
Sanctions for Non-Compliance:
FSAR No. 30/2017 Articulates a broader range of administrative sanctions for violations of the regulation, emphasizing OJK’s commitment to
enforce compliance and maintain market integrity.
Financial Services Authority
Regulation Number 29 of 2023
(“FSAR No. 29/2023”)
A H R P L e g a l B r i e f

7. A H R P L e g a l B r i e f
Compliances
Transparency Time Limit Reporting Transfer of Shares
• Public Companies doing
Buybacks must publicly disclose
the matter to its shareholders as
well as publicly inform the
schedule for the GMS.
• For public companies, whose
shares are listed in the Stock
Exchange, the announcement
must at least be done through (i)
the company website and (ii)
Stock Exchange Website.
• For public companies, whose
shares are not listed in the
Stock Exchange, the
announcement must at least be
done through (i) the company
website and (ii) the newspaper
or website provided by the
Financial Authority
The announcement must at least
contain, amongst other things:
• Buyback schedule, share
prices and quantities to be
purchased;
• Time limit on the purchase of
shares;
• Source of fund to be used to
buyback the shares. The
said funds must :
o not significantly affect the
companies’ financial
ability;
o utilize internal fund;
o not utilize funds deriving
from public offerings;
o not utilize funds from loans
and/or debts
Art. 4 Jo. Art. 5 Jo. Art 40 FSAR No. 29/2023
• The buyback must be
completed within 12 (twelve)
months after the GMS approval;
• In the event the buyback is
cancelled, the company must
report the cancelation to the
financial authority and announce
the said cancelation to the
public within 2 (two) days after
the cancellation decision.
• Company must report the result
of the buyback to the financial
authority every 6 (six) months
(on 30 June and 31 December)
• The report must be made on the
15th day of the following month.
• Buyback is prohibited during
periods of significant market
fluctuation. Companies that
engages in buyback during the
said period will be required to
terminate the said buybacks.
Art. 9 FSAR No. 29/2023 Art. 13 FSAR No. 29/2023
• Company must transfer the
shares within 3 (three) years
after the completion of the
buyback.
• The said time limit can be
extended by two years over the
original time limit if:
o the company has
transferred at least 10%
(ten percent) of the shares
bought back;
o the stock price of the Public
Company for the 3 (three)
years following the
completion of the share
buyback shall never exceed
the average repurchase
price of the Public
Company's shares
• If the company does not fulfill
the time limit extension
requirements, the shares must
be transferred within 1 (one
year after the original time
limit.
Transfer of shares can be done
through:
• sale;
• recall via capital reduction;
• company employee and/or
management stock option
and/or purchase plans;
• payment or settlement of
certain transaction;
• conversion of equity
securities;
• proportional distribution of
shares that result from
buybacks to shareholders;
• Other transfer methods, as
approved by the Financial
Authority.
Art. 16, Art. 17, Art. 18., Art. 19 and Art. 21
FSAR No. 29/2023
Administrative Sanctions
Companies breaching the buyback regulation will be subject to the
following administrative sanctions:
• written warning;
• Fine in the form of mandatory payment;
• Limitation on business activities;
• Business license seizure;
• Business license revocation;
• Approval cancellation;
• Registration cancellation;
• Statement of registration cancellation;
• Individual license revocation.
Buyback is regulated under the FSAR No. 29/2023 on Buybacks of Stocks that have been issued by public companies. Public
Companies can buyback the issued stocks by first obtaining the GMS’ approval.
Art. 2 of FSAR No. 29/2023
Normative Overview of Buyback

8. • United States Securities and Exchange Commission (“SEC”)
adopted new rules governing the disclosure requirements
regarding repurchases of an issuer’s equity securities, commonly
referred to as share “buyback” or repurchase programs.
• The SEC share repurchase disclosure requirements will affect all
issuers that have securities listed on a U.S. national securities
exchange or otherwise have a class of equity securities registered
under Section 12 of the U.S. Securities Exchange Act of 1934, as
amended (Exchange Act), but will not be applicable for Canadian
issuers reporting under the Multijurisdictional Disclosure System
(“MJDS”).
• Non-MJDS Foreign Private Issuers (“FPIs”) will be required to
disclose the daily quantitative share repurchase information
quarterly on a new Form F-SR beginning with the first full fiscal
quarter commencing on or after April 1, 2024.
Indian Government regulates the buyback on securities through the
Buy-Back of Securities Regulations of 2018 (‘SEBI”) and Companies
Acet. SEBI provides for 2 (two) main methods of buyback in India:
• Tender offer method: the buyback happens through the letter of
offer given to the shareholders by the company at a fixed price
within a given time frame.
US
India
United Kingdom
The Required Procedure For A Valid Buyback:
• The company must not be restricted or prohibited from doing so by its articles of association;
• The shares must be repurchased either off-market or on-market;
• Shareholder approval is required;
• The shares being repurchased must be fully paid up.
• The consideration for the share buyback must be paid in cash at the time of the purchase;
• The buyback must be financed either out of distributable reserves, the proceeds of a fresh issue of shares or, in the case of a private limited company
only, out of capital;
• Following the repurchase, the shares must be canceled or, if financed out of distributable reserves, they can be held in treasury.
Failure to comply with the required procedure above will result in (i) the acquisition being void; and (ii) an offense being committed by the company and every
officer in default.
Maximum Limit of Buy-Back
The limit imposed by the Stock Exchange is 15%. The restrictions also apply to contracts to repurchase shares, but not to repurchases through partial offers
or advertised tender offers.
Source: Part 18 of the United Kingdom Companies Act 2006. A H R P L e g a l B r i e f
• Open market offer method: buyback happens through the stock
exchange mechanism. The corporation sets a maximum price and
has the option to buy back shares at any price up to that amount.
The conditions of buyback are:
• The buyback of securities must be authorized by the AOA of the
company;
• The buyback of securities must be approved by the Board of Directors if
the buyback is up to 10% of the paid-up capital and free reserve; and
• The maximum limit for the buyback of securities shall be between
twenty-five percent or less of the aggregate of paid-up capital and free
reserves of the company.
Maximum Limit of Buy-Back
The aggregate value of the shares bought back should not exceed 25% of
the company’s paid-up share capital and free reserves.
Source : Section 68 of the Companies Act, 2013 and Regulation 4 of SEBI, 2018.
• Non-FPI issuers that report with the SEC as U.S. domestic companies
will be required to include the quantitative data as an exhibit to, and
provide the narrative disclosure in, their Forms 10-K and 10-Q for the
first full fiscal quarter that begins on or after October 1, 2023.
Forms 20-F, 10-K and 10-Q:
• the objectives or rationales for each share repurchase program and
process or criteria used to determine the amount of repurchases; and
• any policies and procedures relating to purchases and sales of its
securities by its directors and officers during a share repurchase
program, including any restriction on such transactions.
Maximum Limit of Buy-Back
The are limits on the maximum price for which an issuer can bid or buy its
shares. These limits depend on the type of shares being repurchased (e.g.
reported shares, exchange-traded, or NASDAQ). Under these restrictions,
issuers may not place a bid greater than the highest independent published
bid or the last independent transaction price.
Source: SEC, 17 CFR Parts 240, Purchases of Certain Equity Securities by the
Issuer and Others.
Comparative Study: Buyback Regulation between
US, India, and UK

9. A H R P L e g a l B r i e f
Normative Overview of Buyback
Comparative Study: Buyback Regulation between US, India, and UK
Buyback is regulated under the Financial Authority Regulation Number 29 of 2023 on Buybacks of Stocks that have Been Issued by Public
Companies. Public Companies can buyback the issued stocks by first obtaining the GMS’ approval.
The main principles regarding buyback in Indonesia are:
• Transparency: Public Companies doing Buybacks must publicly disclose the matter to its shareholders as well as publicly inform the schedule
for the GMS.
• Time Limit: The buyback must be completed within 12 (twelve) months after the GMS approval.
• Reporting: Company must report the result of the buyback to the financial authority every 6 (six) months (on 30 June and 31 December).
• Transfer of Shares: in general, Company must transfer the shares within 3 (three) years after the completion of the buyback.
Conclusion on Buyback
The regulatory frameworks governing share repurchase programs in the United States, India, and the United Kingdom exhibit notable variations in
approach and requirements.
In the US, the SEC recently introduced new rules mandating comprehensive disclosure of share repurchases by issuers listed on US national
securities exchanges. This move aims to enhance transparency and investor confidence by providing detailed information on the objectives,
processes, and policies guiding buyback programs.
India, regulated by the SEBI and the Companies Act, 2013, offers two primary methods for buybacks: the tender offer method and the open market
offer method. Buybacks must adhere to conditions specified in the Companies Act, including authorization by the articles of association, board
approval for up to 10% of paid-up capital and free reserves, and a maximum limit of 25% of aggregate paid-up capital and free reserves.
In the UK, under the Companies Act 2006, companies must follow strict procedures for valid buybacks, including shareholder approval, payment
consideration in cash, and financing from distributable reserves or fresh share issues. Failure to comply results in void acquisitions and potential
legal consequences for the company and its officers.
Despite differences, all three jurisdictions prioritize investor protection, market integrity, and corporate governance in regulating share repurchase
activities. The US emphasizes transparency and disclosure, India focuses on regulatory compliance and shareholder interests, while the UK
ensures adherence to procedural requirements and financial integrity.
US regulations set limits on the maximum price for share repurchases based on share type. India restricts buybacks to 25% of the company's paid-up
share capital and free reserves. In the UK, the Stock Exchange imposes a 15% limit, with additional restrictions on certain types of repurchases.
Indonesia maintains a consistent 10% limit on the total nominal value of repurchased shares, with clarified guidelines to safeguard financial health and
obligations.
Differences in Buyback Regulations between Indonesia, US, India, and UK

10. We will continue to follow the developments on this topic and provide additional information as it
becomes available. If you have any questions on this topic, please contact:
This publication has been prepared by AHRP for educational and informational purposes only. The information contained in this publication is not
intended and should not be construed as legal advice. Due to the rapidly changing nature of law, AHRP makes no warranty or guarantee
concerning the accuracy or completeness of this content. You should consult with an attorney to review the current status of the law and how it
applies to your circumstances before deciding to take any action.
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