Public Mergers and Acquisitions in Indonesia: Regulation and Regulatory Bodies

SSEK Legal Consultants partner Fahrul S. Yusuf and Michael S. Carl, a senior foreign legal advisor at the firm, have contributed the Indonesia chapter of the new Practical Law global guide to Public Mergers and Acquisitions. SSEK Legal Consultants is one of the top M&A law firms in Indonesia, as ranked by leading independent legal directories including Chambers & Partners, IFLR1000, Legal 500 and Asia Law & Practice.

The following is an excerpt from Public Mergers and Acquisitions in Indonesia.

How are public takeovers and mergers regulated, and by whom?

Takeovers of public companies are principally regulated by:

• Law No. 8 of 1995 regarding the Capital Markets.
• Regulations issued by the Indonesian Financial Services Authority (Otoritas Jasa Keuangan) (OJK), namely:
  • OJK Regulation No. IX.H.1 regarding Acquisitions of Public Companies and
  • OJK Regulation No. IX.F.1 regarding Voluntary Tender Offers.

In addition, several other statutes can affect the acquisition of public companies, including:

• The Indonesian Company Law, which sets out procedural requirements for a merger.
• The Indonesian Employment Law, which gives employees the right to resign and receive a severance package where there is a change of control.
• The Indonesian Anti-Monopoly Law, which requires notification to the Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha) (KPPU) for post-acquisition review if certain thresholds are met in combined assets and/or turnover.

Rules from the Indonesia Stock Exchange (IDX) regarding securities trading may also be applicable if the shares are listed on the IDX (as almost all public companies are). Most (although not all) shares in public companies are held in scripless form (that is, in non-physical form, without share certificates) which must be deposited in the Indonesian Central Securities Depository (Kustodian Sentral Efek Indonesia) (KSEI). Most transactions by public companies must therefore be settled through the KSEI.

Most scrip shares are held by controlling shareholders with longstanding holdings, and these shares would typically be converted to scripless form in the process of consummating any transaction in these shares. The OJK is responsible for overseeing public companies and capital market activities generally. Other government agencies may have regulatory oversight of a particular transaction depending on the business activities in which the public company engages, for example:

• The OJK oversees the banking industry.
• The Ministry of Transportation supervises the aviation, shipping and land transportation sectors.
• The Ministry of Informatics oversees the telecommunications industry.

Regulations issued by these and other industry-specific government agencies will also impact mergers and acquisitions.

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