New regulations issued by the Indonesian Financial Services Authority (Otoritas Jasa Keuangan "OJK") aim to increase the number of public offerings in Indonesia by (1) shortening the regulatory review period by adopting a parallel submission process for OJK and IDX and (2) simplifying certain OJK submission requirements. In addition, new disclosure requirements are expected to further improve the regulatory landscape for offerings by enhancing the quality of disclosure to better protect investors. The new disclosure requirements generally bring the disclosure closer in line with disclosure standards in offering documents used for international tranches offered under Regulation S and/or Rule 144A of the U.S. Securities Act of 1933 ("Reg S/Rule 144A offering documents").
On 14 March 2017, OJK issued OJK Regulation No. 7/POJK.04/2017 on Registration Statement Documents in Public Offerings of Equity Securities, Debt Securities or Sukuk ("POJK 7/2017") and OJK Regulation No. 8/POJK.04/2017 on The Form and Substances of Prospectus and Abridged Prospectus in Public Offering of Equity Securities ("POJK 8/2017"). POJK 8/2017 became effective on 14 March 2017 whilst POJK 7/2017 is expected to come into effect in September 2017.
Measures Adopted to Expedite the Offering Process
The new regulations introduce several amendments which aim to expedite the time it takes to bring an offering to market
Shortening the overall review period with a parallel review process
POJK 7/2017 enables the submission of the registration statement to OJK to be made simultaneously with the submission to the Indonesian Stock Exchange ("IDX"). The previous regulation required separate and sequential submissions, first to IDX and then to OJK. POJK 7/2017 enables parallel review by removing the requirement to include in the OJK submission the preliminary listing agreement, which is issued by the IDX upon its preliminary approval. This could shorten the review process for initial public offerings ("IPOs") by up to three to four weeks.
Simplified financial disclosure
POJK 8/2017 reduces the requirement for financial-related disclosure requirements from five years to three years for key financial highlights, production capacity and sales data. This change brings the disclosure more in line with the disclosure standards typical of Reg S/Rule 144A offering documents.
Simplified legal due diligence
POJK 7/2017 also simplifies the legal due diligence in respect of the corporate capital history for the Indonesian counsel legal opinions, which are required to be submitted to the regulator as part of the review process. The regulation now only requires the legal opinions, and accordingly, the corresponding prospectus disclosure, to cover the review of (i) the deed of establishment and the latest articles of association; and (ii) any changes to the capital structure and share ownership for the latest three years for equity offerings and two years for debt offerings. Previously, the legal opinions and related offering disclosure covered the period since establishment of the issuer. However, we note that the standard for due diligence for an IPO, as issued by the Association of Capital Markets Lawyers in Indonesia (the "Association") still requires the full review of corporate documents since the establishment of the issuer. The Association has yet to revise the standard to bring it in line with POJK 7/2017, although this would be expected in due course.
Enhancing Quality of Disclosure
POJK 8/2017 introduces additional disclosure requirements to enhance the quality of disclosure and formalizes in the rule certain disclosure requirements, which were formerly included in offering documents as result of OJK practice.
The new requirements provided by POJK 8/2017 will bring the disclosure in Indonesian prospectuses more in line with the disclosure included in Reg S/Rule 144A offering documents. The new requirements should also increase overall consistency between the Indonesian prospectuses and Reg S/Rule 144A offering documents.
The following table describes some of the key changes.
The changes in POJK 7/2017 and POJK 8/2017 aim to shorten the timeline to take an Indonesian offering to market and to simplify certain OJK submission requirements. The changes also enhance disclosure standards to further protect investors and bring the disclosure standards closer in line with those of Reg S/Rule 144A offering documents. With the implementation of these changes, OJK aims to further develop the legal landscape for Indonesian capital markets and, as a consequence, expects the number of companies conducting public offerings in Indonesia will increase over time.