A new regulation on rights issues – Regulation 32/POJK.04/2015 on Increase of Capital with Pre-emptive Rights – was passed in December 2015 by the Financial Services Authority (OJK). It replaces and revokes Bapepam-LK Rule IX.D.1, which was promulgated by Bapepam Chairman Decision-LK Kep-26/PM/2003 on Pre-emptive Rights.

The new regulation introduces the following key changes:

  • Unlike the previous regulation, the new regulation requires that an intended rights issue be approved by a company's general meeting of shareholders before the registration statement is submitted to the OJK.
  • The effective statement required for the rights issue must be obtained from the OJK within 12 months of its approval by the general meeting of shareholders.
  • Non-cash capital injections are now acknowledged, provided that:
    • the non-cash injection is directly related to the utilisation plan for the rights issue proceeds;
    • the fair price of the non-cash injection is determined by an appraiser; and
    • the period between the appraisal date and the implementation date of the non-capital injection does not exceed six months.
  • The previous regulation's requirement to announce the rights issue in a newspaper is no longer in effect. Under the new regulation, the company can choose to announce it either in a newspaper or on the Indonesian Stock Exchange website, in addition to the required announcement on the company's website.
  • A time limit of 10 working days is imposed on the company to fulfil the OJK's further requirements regarding company registration statement documents. Failure to comply with the time limit will result in invalidation of the registration statement and a requirement to resubmit it.
  • Unlike the previous regulation, the new regulation requires the principal shareholder to provide a statement of whether it will exercise its rights.

Evidently, the new regulation is intended to provide investors with more flexibility and ease when conducting rights issues.

For further information on this topic please contact Elsie Hakim or Novario Asca Hutagalung at Ali Budiardjo, Nugroho, Reksodiputro by telephone (+62 21 250 5125) or email ([email protected] or [email protected]). The Ali Budiardjo, Nugroho, Reksodiputro website can be accessed at www.abnrlaw.com.