The Financial Services Authority (Otoritas Jasa Keuangan - "OJK") recently issued a new rule on annual reports for listed companies and public companies. To implement this new rule, on 3 August 2016, OJK issued OJK Circular Letter No. 30/SEOJK.04/2016. Implication for Listed Companies and Public Companies As an annual report serves as the BOD and BOC accountability report and as a source of information for investors, OJK intends to increase the quality and accessibility of annual reports. To achieve this, OJK provides several additional provisions for the preparation and submission of annual reports. Under the new rule, OJK also sets administrative sanctions if listed companies and public companies fail to submit an annual report or breach the rule. What the rule says The new rule does not provide significant changes from Rule X.K.6. However, the new rule sets out administrative sanctions for listed companies and public companies that fail to submit reports or comply with the new rule. We set out below the key changes of the new rule and circular letter. BOC Report. BOC reports of listed companies and public companies are required to include the following additional items: a. A report on the supervision of the implementation of the company's strategy. b. The commissioners' perspective on the implementation of the company's corporate governance. c. The frequency and manner of advisement to members of the company's BOD. Company Profile. There are several additional requirements to provide more detail in company profiles in an annual report, including the following: a. If the company has changed its name during the financial year, that must be noted. The reason for the change of name and the date on which the name change came into effect should also be noted. b. The BOD's and BOC's profiles must now include, in addition to the requirements set out in the previous regulations, any concurrent Capital Market 2 OJK Issues New Rule on Annual Reports of Listed and Public Companies September 2016 positions of the members of the BOD and the BOC, whether as a member of a BOD, BOC, or committee, or other positions. c. The commissioners' profiles, including profiles of independent commissioner(s). d. Information on the shareholding structure and classifications: i. Shareholding by local institutions ii. Shareholding by foreign institutions iii. Shareholding by local individuals iv. Shareholding by foreign individuals Management Analysis and Discussion. The circular letter requires several additional requirements in the Management Analysis and Discussion section of an annual report: a. The company must disclose the reasons behind its capital structure policy. b. The company must now disclose its investments in capital goods realized in the last financial year. The following information must be included: i. The type of capital goods investment ii. The objective of capital goods investment iii. The value of capital goods investment Corporate Governance. Under the circular letter, the following corporate governance requirements must also be included in the annual report: a. Corporate governance information for the BOD must also include, in addition to the requirements in the previous regulations: i. a statement from the BOD that it has a guideline or charter for its governance; and ii. the procedure, basis for determination, structure, and the amount of remuneration for each director, and information on the correlation between their remuneration and the performance of the company. b. Additional information that must be included in corporate governance information for the BOC includes: i. duties and responsibilities of the BOC; ii. a statement from the BOC that it has a guideline or charter for its governance; iii. the procedure, basis for determination, structure, and the amount of remuneration for each commissioner; iv. the company's policy for assessment of each director's and commissioner's performance, and its implementation; v. assessment of the performance of other committees established to implement the duties of the BOC. c. The listed company and public companies must include information on their committees, such as on dual positions of the committee members. Capital Market 3 OJK Issues New Rule on Annual Reports of Listed and Public Companies September 2016 d. If a Nomination and Remuneration Committee has not been appointed, the following must be included in the BOC's summary: i. reasons why the committee has not been established; and ii. the procedure for nomination and remuneration in the relevant financial year. Use of Language. The new rule obliges listed companies and public companies to use at least Indonesian and English language for the annual reports. If there is any inconsistency in the annual report, the Indonesian language version will prevail. Submission Period. Under the new rule, annual report of a listed and public company whose securities are offered within and outside Indonesia must be submitted within 4 months after the end of the company's financial year. Previously, Rule X.K.6 regulated that the submission deadline for the annual report would be subject to the submission requirements set by the foreign capital market authority. Electronic Reporting. Listed companies and public companies must submit 2 hard copies and a soft copy of their annual reports to the OJK. The new rule introduces the use of the OJK's electronic system to submit the soft copy version (through https://spe.ojk.go.id/ereporting/login). If there is a time difference in the submission of the hard copy and the soft copy, the OJK will record the earliest receiving time as the submission time. Sanctions. The new rule details the administrative sanctions which OJK can impose on parties that violate the rule, which are (in no particular order): a. Written warning b. Fines c. Limitation of business activities d. Suspension of business activities e. Revocation of business license f. Cancellation of approvals g. Cancellation of registrations OJK may also impose "additional administrative sanctions" and/or carry out "certain actions". Certain actions could include delaying the issue of an effective statement or statement of no additional response for rights issue transactions. Transitional Provision. The provisions under the new rule will be applicable for 2017 annual reports (i.e. annual reports published within 2017), though several provisions will already apply for 2016 annual reports. The following are some of the provisions that will apply for 2016 annual reports: a. The annual report submission obligation for newly listed companies whose effective statement is obtained between the end of its financial year and the annual report submission deadline under the new rule. b. The recording time, if there is a time difference in submitting the hard copy and soft copy of the annual report. c. The calculation of days with regard to late submission of annual reports to the OJK. Capital Market 4 OJK Issues New Rule on Annual Reports of Listed and Public Companies September 2016 www.hhp.co.id For further information please contact Iqbal Darmawan Partner +62 21 2960 8567 email@example.com Ken Prasadtyo Senior Associate +62 21 2960 8543 firstname.lastname@example.org Vera Ruth A. Sihombing Associate +62 21 2960 8552 email@example.com Hadiputranto, Hadinoto & Partners The Indonesia Stock Exchange Building, Tower II, 21st Floor Sudirman Central Business District Jl. Jenderal Sudirman Kav. 52-53 Jakarta 12190 Indonesia Tel: +62 21 2960 8888 Fax: +62 21 2960 8999 Conclusion There is no significant changes to the new rule for the annual report. However, there are several requirements that must be considered and included in 2017 annual report, among others, the remuneration of BOD and BOC. *** ©2016 Hadiputranto, Hadinoto & Partners. All rights reserved. Hadiputranto, Hadinoto & Partners is a member of Baker & McKenzie International, a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a “partner” means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an “office” means an office of any such law firm. This may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Prior results do not guarantee a similar outcome.