The Indonesia Stock Exchange (“IDX”) has issued a new regulation under IDX Board of Directors Directive No. Kep-00183/BEI/12-2018, dated 26 December 2018 (the “New Regulation”), which revokes and supersedes IDX Board of Directors Directive No. Kep-00001/BEI/01-2014 (Securities Listing Regulation No. I-A - General Provisions for the Listing of Equity Securities on the IDX / “Previous Regulation”).
The New Regulation, which was issued so as to bring IDX regulations into compliance with those issued by the Financial Services Authority (”OJK”), clarifies a number of issues that were not clearly regulated under the Previous Regulation.
B. Key Changes
The following are the key changes introduced by the New Regulation:
1. Corporate Governance
Unlike the Previous Regulation, the New Regulation no longer contains specific provisions related to the organs and committees of public committees. This is so as to avoid unnecessary duplication / overlapping with the relevant OJK regulations that govern the same issues.
One source of controversy, at least at the outset, was the omission from the New Regulation of provisions requiring the appointment of independent directors. By contrast, the role of independent director was expressly recognized by the Previous Regulation. As there are currently no OJK regulations that specifically require an independent director to be appointed, this means that, theoretically at least, listed companies are no longer required to appoint independent directors.
2. Face Value
Unlike the Previous Regulation, which prescribes the minimum face (or par) value of shares (nilai nominal saham) that must be maintained at all times post-listing, the New Regulation only stipulates that the face value of shares at the time of listing must be not less than IDR 100 (.0071 U.S. cents) per share.
3. Listing Requirements
In general, there are no significant changes to the requirements for listing on the Main Board, other than an additional requirement that the prospective issuer must have a recorded operating income for the preceding three years.
However, there are quite significant changes to the requirements for listing on the Development Board, including the following:
a. the requirement for 12 consecutive months of commercial operation in the same core business may now be fulfilled by a subsidiary of the prospective issuer.
b. as for assets or value requirements, a prospective issuer may qualify for listing if it satisfies one of the following conditions:
1) it has net tangible assets of at least IDR 5 billion (approx. USD 355 thousand)
2) it satisfies both of the following:
i. operating profit (laba usaha) in the most recent financial year of at least IDR 1 billion (USD 71 thousand); and
ii. share capital prior to the listing date of at least IDR 100 billion (USD 7.10 million)
3) it satisfies both of the following:
i. operating revenue (pendapatan usaha) for the most recent financial year of at least IDR 40 billion (USD 2.8 million); and
ii. pre-listing capitalization of at least IDR 200 billion (USD 14.2 million).
4. Document-Submission Requirements
As opposed to the Previous Regulation, which required a long list of documents to be submitted that contained essentially the same information as was presented in the prospectus, the New Regulation only requires the softcopies of, among other things, the prospectus, taxpayer registration number, and financial projections for at least the next three years.
5. Lock-up on Stock Splits and Reverse Stock Splits
The New Regulation prohibits a listed company from performing a stock split or reverse stock split for at least 12 months counting from (i) the date of listing of its shares, or (ii) the most recent stock split or reverse stock split, as the case may be.
6. Registration of Shares at Central Securities Custodian
The New Regulation requires a listed company to register its shares at the Indonesian Central Securities Custodian (PT Kustodian Sentral Efek Indonesia). This means that all listed shares must be in scripless form. We understand that this new provision is designed to further encourage “dematerialization”, i.e., the shift from physical to scripless shares.
7. Free-float Requirement
The New Regulation provides guidelines for the handling of non-compliance with the 7.5% free-float requirement as a result of corporate actions. In such circumstances, the listed company must submit an action plan to comply with the free-float requirement within not more than two trading days after the company becomes aware of such non-compliance. However, the IDX has discretion as to whether it will approve or reject the action plan.
If the non-compliance results from a mandatory tender offer (“MTO”), the company must fulfill the free-float requirement within not more than 2 years subsequent to completion of the MTO.
8. Listing of Additional Shares
In connection with the listing of additional shares, the IDX has amended a number of provisions, including those on pricing and lock-ups.
For the listing of additional shares as a result of a capital increase without pre-emptive rights (“Non Rights Issue”), the price for the additional shares must be at least 90 percent of the average closing price over a period of 25 consecutive trading days on the regular market prior to application for listing of the additional shares. However, this pricing requirement does not apply if the listing of additional shares is intended to improve the company’s financial position, in which case the price will be determined on an arm’s length basis, as agreed by the company and its creditors in the case of a debt to equity conversion.
For a listing of additional shares as a result of a rights issue, the share price must be at least the same as the lowest trading price of the shares on the regular market and the cash market, i.e., IDR 50 (.0035 U.S. cents).
The lock-up provision for new shares resulting from a Non Rights Issue that was contained in the Previous Regulation has been omitted from the New Regulation.