Corporate M&A in Indonesia – Activism

Shareholder activism is not a defined term, nor is it recognized under any laws in Indonesia. The Indonesian Company Law, however, does provide minority shareholders with certain rights. These rights give them the ability to initiate certain actions that are essentially intended to protect them against potential losses that might be caused by a company's corporate actions.

In an M&A context, for example, each shareholder has the right to request that the company repurchase his or her shares at a reasonable price if a merger, consolidation or acquisition of the company causes the shareholder to suffer losses. Each shareholder is also entitled to file a lawsuit against the company if the shareholder suffers losses caused by any of the company's actions that are considered unfair or unreasonable.

In the realm of public companies, any conflict of interest transactions that may cause a loss to the company are subject to prior approval from minority or disinterested shareholders, which is given through a general meeting of independent shareholders.

Aims of Activists

The way rights are given to minority shareholders under the Company Law is generally not intended to give them the ability to encourage certain corporate actions of the company. The company must convene a shareholder meeting at the request of one or more shareholders who jointly represent one tenth of the total number of shares having valid voting rights, but there is no guarantee that the meeting will yield the outcome that the minority shareholders are seeking without securing the votes of the majority shareholders in the company.

Interference with Completion

The Company Law does not provide any rights to minority shareholders to interfere with transactions, particularly when they are still in the announcement stage, which typically means the shareholders or the board (as applicable) have not approved the transaction. The rights of minority shareholders are triggered only when a corporate action, including those involving M&A transactions, has obtained the requisite corporate approval either at shareholder or board level.

This first appeared in the Chambers Corporate M&A 2020 global guide, published by Chambers and Partners. 

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