On 21 December 2021, the Indonesia Stock Exchange (IDX) issued a new regulation – IDX Board of Directors Decree No. Kep-00101/BEI/12-2021 on the Amendment to Regulation No. I-A regarding the Listing of Shares and Equity-Type Securities Issued by Listed Companies (the New IDX Regulation), which replaces the previous IDX listing regulation issued in 2018.

Introduction of Free Float Shares

One of the notable changes under the New IDX Regulation is the introduction of the term “Free Float Shares”, which are defined as shares that are (a) owned by shareholders holding less than 5 percent of the total listed shares of the company, (b) not owned by the controlling shareholders or any affiliates of the company, or members of the board of directors or commissioners, and (c) not treasury shares.

Affected free float requirements

The use of Free Float Shares will affect how ‘free float’ requirements are assessed, both during IPOs and on an ongoing basis.

Free float requirements upon IPO

Under the New IDX Regulation, on the listing date:

  • a prospective listed company must have at least 300 million Free Float Shares in case of a listing on the IDX main board or 150 million Free Float Shares in case of a listing on the IDX development board, whichever applies; and

  • the Free Float Shares must represent at least:

a) 20 percent of total listed shares if the company has total equity below IDR500 billion before the IPO;

b) 15 percent of total listed shares if the company has total equity between IDR500 billion and IDR2 trillion before the IPO; or

c)10 percent of total listed shares if the company has total equity exceeding IDR2 trillion before the IPO.

Free float requirements on an ongoing basis

The New IDX Regulation requires a listed company to, among other things, always maintain at least 50 million Free Float Shares representing at least 7.5 percent of its listed shares post-listing. It must also have at least 300 shareholders with separate investor identification numbers.

The New IDX Regulation allows listed companies to apply to the IDX to request an exemption for shareholders that do not meet the requirements for holding Free Float Shares but can still be categorised as holders of Free Float Shares, provided that their shares form part of a portfolio investment with public investor beneficiaries.

Listed company requirements to stay listed on IDX main board

In addition to the Free Float requirements set out above, the New IDX Regulation also introduces some new requirements for companies listed on the IDX main board:

  • The company must meet one of the following criteria (effective from 2 May 2025):

a) has not booked a net loss for two consecutive years; or

b) has booked compound annual growth in operating income of at least 20 percent for the last three years.

  • The company must not have booked negative equity in its latest financial statements (effective from 2 May 2022).

  • The company must have more than 750 shareholders with separate investor identification numbers (effective from 21 December 2023).

  • The Free Float Shares must meet one of the following criteria (effective from 21 December 2023):

a) if the Free Float Shares comprise 10 percent or more of total listed shares, their capitalisation value must exceed IDR200 billion; or

b) if the Free Float Shares comprise less than 10 percent of total listed shares, their capitalisation value must exceed IDR1 trillion.

  • The company must meet one of the following criteria (effective from 2 May 2022):

a) the price-to-earnings ratio of the company must not exceed three times the price-to-earnings ratio in the market;

b) the price-to-book value ratio of the company must not exceed three times the price-to-book value in the market; or

c) the capitalisation value of the company’s shares must be at least IDR12 trillion.

  • The company must not have received a third written notice of sanctions from the IDX during the past year (effective from 2 May 2022).

  • The company must have obtained an auditor’s unmodified opinion on its annual audited financial statements in each of the past two financial years (effective from 21 December 2023).

The New IDX Regulation states that a company listed on the IDX main board that fails to fulfil any of these requirements may be transferred to the IDX development board (commencing on 2 May 2022).

Conclusion

In order to comply with the New IDX Regulation, investors and shareholders of listed companies which currently rely on the 20 percent public shareholding threshold to comply with the ongoing previous free float requirements, and companies listed on the IDX main board, may need to revisit their investment structure and relevant agreements.