The Indonesian Financial Services Authority (Otoritas Jasa Keuangan or “OJK”) recently published Rule No. 11/POJK.04/2017 on reporting share ownership in public companies (“OJK Rule No. 11”) which came into effect on 14 March 2017. This rule replaces OJK Rule No. 60/POJK.04/2015. We have summarised the key changes below.

Reporting Obligation

The reporting obligation applies to any shareholders who directly or indirectly own 5% or more shares in a public company if there is a change of 0.5% or more from their initial ownership as a result of a single transaction or a series of transactions. Previously this obligation only applied to direct shareholders for every change in their share ownership. Under OJK Rule No. 11, indirect ownership includes ultimate beneficial ownership and any intermediary ownership up the chain to the ultimate beneficial owner(s) (pemilik sebenarnya).

As the reporting obligation appears to be triggered by a single transaction (or a series of transactions) resulting in a 0.5% ownership change, existing ownership may not have to be disclosed until a single transaction (or series of transaction) occurs which crosses the 0.5% threshold.

Directors and commissioners of a public company must report to OJK their direct or indirect ownership in such company and every change thereto. Previously this requirement only applied to direct ownership.

In addition, public companies must implement an internal policy for directors and commissioners to report their share ownership to the company within three working days of obtaining ownership or any changes thereto. The implementation of this policy must be disclosed in the company's annual report or on its website.

However, as was the case under the previous regulation, the new reporting obligation does not appear to apply to pure loan/debt arrangements or where a transaction for the sale and purchase of shares has not been completed.

Submission of Report

OJK Rule No. 11 prescribes a form for reporting share ownership which includes the name of the company, the number of shares and shareholding percentage before and after the transaction, the number of shares purchased or sold, the purchase or sale price, the transaction date and purpose and direct or indirect ownership status. In case of indirect ownership, the identity of the registered shareholder must continue to be disclosed alongside the identity of the beneficial owner(s).

Shareholders whose ownership changes by 0.5% must submit the report to OJK within ten calendar days of such change. Further clarity from OJK is required on whether each intermediary in the chain of ownership must also submit a separate report to OJK for its corresponding beneficial ownership change. It is also not yet clear how such chain ownership disclosure will work in practice, particularly where the ownership chain involves a series of offshore companies which have no other connection with the OJK or the Indonesian Stock Exchange.

Shareholders may delegate the report submission to proxies in which case the report and a copy of the proxy's power of attorney must be submitted within five calendar days of the change to share ownership.

Directors or commissioners must submit their reports to OJK within ten calendar days of obtaining ownership or any changes thereto.

Penalties

Violation of OJK Rule No. 11 may subject public companies, shareholders, directors or commissioners to civil penalties (e.g., written warnings, fines or license revocation) and other penalties at OJK's discretion (e.g., delay in the issue of an effectiveness statement for the company's next corporate action).

Conclusion

OJK has signalled clearly that it intends to make share ownership disclosure more stringent. There is now effectively a requirement to aggregate all direct and indirect share ownership held by beneficial owners of shares in public companies. This is a significant departure from ownership disclosure practice to date, under which direct share ownership disclosure has only been required to a limited extent. This is a major departure that will affect Indonesian public companies deal structuring.

The position of investment managers will have to be carefully considered where the managers hold shares on account of other investors (who in theory now would have to disclose their indirect share ownership above 5% if there is any change of 0.5% or more).

The new reporting obligation is also in line with the Indonesian tax amnesty program to monitor the obligation of the Indonesian taxpayers who hold assets through a special purpose vehicle company ("SPV") to transfer such assets to Indonesia or to assume the ownership of the SPV from its nominee(s) (click here for our e-bulletin on the Indonesia Tax Amnesty Update).

It is not yet clear how the new reporting obligation (especially related to indirect share ownership) will be monitored in practice or what beneficial ownership look-through procedures OJK will consider sufficient.