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Mechanism of Investment through Purchase of Shares

Mechanism of Investment through Purchase of Shares

A. Purchase of Company Shares

Purchase of shares of a non-PMA or PT. Ordinary by a foreign party or a PMA company may result in the status of the target company whose shares may be acquired (acquisition) or non-acquisition (not a Acquisition).

The difference between acquisition and non-acquisition is done by identifying whether the share purchase causes a change of control (corporate control) to the target company or not. Article 1 number (11) of Limited Liability Company Law identifies “acquisition” as a legal act taken by a legal entity or an individual who results in the transfer of control over the company. Thus, the acquisition of shares does not mean that the acquisition of the shares must be partial or total, but is sufficiently proven by the change of control or the target company concerned.

The process of entry of foreign capital through the purchase of shares of a company in general must pay attention to the provisions of Article 58 and 59 of the Company Law which regulates the right of first offer (ROFO) and on the approval of the organ of a limited liability company in the event of transfer of rights to shares in which in this case is usually a RUPS of the target company. Article 58 of Company Law regulates the right of first offer (ROFO) such as follows:

(1)  In the event that the articles of association require the seller’s shareholders to offer their shares firstly to certain classification holders or other shareholders, and within 30 (thirty) days from the date of the offering it turns out that the shareholder does not buy, the seller’s shareholders may offer and sell shares to a third party.

(2)  Each shareholder of the seller who is required to offer its shares as referred to in paragraph (1) shall be entitled to withdraw the offer, after the expiry of 30 (thirty) days as referred to in paragraph (1).

(3) The obligation to offer certain shareholders or shareholders as referred to in paragraph (1) shall only be valid for 1 (one) time.

Under the provisions of Article 58 of Limited Liability Company Law above, in connection with the purchase of shares of a company by foreign parties or PMA (perusahaan), the following things which must be considered:

  1. Right of First Offer (ROFO) based on Limited Liability Company Law is not mandatory, because it depends on the arrangement in the company’s articles of association. Another thing that should also be considered is ROFO unknown to listed companies listed on the stock exchange.
  2. ROFO may be owned by a particular classification shareholder based on the arrangements in the articles of association of the company concerned.
  3. If the ROFO is regulated in a company’s articles of association, the ROFO is valid for 30 days from the date of its offer, whereas if the shareholder receiving the ROFO does not exercise such ROFO, then the shareholder is offering it to another third party.
  4. The ROFO submitted to such other shareholders is essentially irrevocable, unless the term of 30 days from the date of the offer has expired.
  5. The ROFO shall not apply more than once and is valid only once, where a company’s articles of association may not specify ROFO more than once before offering to a third party.

Article 59 of the Company Law further regulates the approval of the organ of a limited liability company, in this case usually the RUPS organ, as follows:

(1) The approval of the transfer of rights to shares requiring the approval of the Company or its rejection must be in writing within a period of 90 (ninety) days from the date the organs of the company receive the request for approval of the transfer.

(2) In the event that the period referred to in paragraph (1) has passed and the company’s organs do not provide a written statement, the company’s organs are deemed to approve the transfer of the rights to such shares.

(3)  In the event that the transfer of rights to shares is approved by the company’s organs, the transfer of rights shall be conducted in accordance with the provisions referred to in Article 56 and shall be made within a period of not more than 90 (ninety) days from the date of approval.

From the description of Article 59 of Company Law, the following things need to be considered, namely:

  1. Approval or rejection of the organ of a limited liability company, such as RUPS, on a stock transfer plan of a company is essentially absolutely necessary. For public companies listed on the stock exchange, of course the transfer of shares of the company does not require approval from the RUPS.
  2. Approval or rejection of a company’s share transfer plan shall be provided in writing.
  3. Approval and rejection of a share transfer plan by a limited number of individual organs such as a General Meeting of Shareholders shall be submitted no later than 90 days from the date on which the organ receives an approval request from the shareholder who will transfer the shares.
  4. The realization of such share transfer shall be done no later than 90 days from the date of approval of such share transfer. It should also be noted that based on the explanation of article 29 paragraph (3) letter (c) of the Company Law, the transfer of shares, although not categorized as amendment to the articles of association, should be notified to the Minister of Law and Information regarding the change of data in the list of companies.

If among shareholders of a company is a joint venture agreement or shareholders ‘agreement, the ROFO arrangement and approval of the RUPS in a joint venture agreement or shareholders’ agreement shall take into account also the provisions of Articles 58 and 59 of the Company Law.

Occassionaly joint venture agreement or shareholders’ agreement also sets out other arrangements such as the provision of tag-along-right or drag along right, where although these things are basically not prohibited in Limited Liability Company Law but must be considered in order not to violate the provisions of Limited Liability Company Law, specifically in connection with the duration of its implementation.

B. Acquisition of closed company

As described above, acquisition of shares is acquired/acquisition and non-acquisition. This section will discuss further the acquisition of a closed company. Before discussing it, it should be pointed out that the use of “closed company” terminology in this discussion is intended to distinguish it from “open companies”. This, given the scope and mechanism of the acquisition of open companies is very different from the Acquisition of a closed company.

As previously mentioned, Limited Liability Company Law defines a Acquisition as a legal act by a legal entity or an individual to take over an individual stock resulting in the transfer of control over the company. Article 125 paragraph (1) of the Company Law stipulates that the Acquisition is done by acquisition of shares issued and/or to be issued by the company through the directors of the company or directly from the shareholders. Thus some things that need to be recorded in connection with the Acquisition based on the concept of LIMITED LIABILITY COMPANY LAW among others:

  1. Corporate Control Transaction

Acquisitions resulted in the transfer of control (Corporate control) of the foreclosed company. Thus, there may be acquired shares. Thus, it may happen that shares acquired or purchased by an investor are not substantial or material amounting to less than 50% of the total paid-in capital of the target company, but since the shares are taken over is golden share then the purchase of shares is categorized as acquisition/acquisition .

For example: PT A, PT B, PT C, and Mr. D are respective shareholders of 25% of Target Company ‘s paid-in capital. But Mr. D’s share is a golden share that grants Mr. D the right to shareholders: (a) to nominate members of the board of directors as president director and finance director as well as 2 members of the board of commissioners; and (b) in the event of a change in the articles of association of Target Company, the RUPS approving the amendment of the articles of association shall involve the approval of Mr. D. If E Limited, a company incorporated under the jurisdiction of Singapore, purchases all of Mr. D’s shares, D purchased by E Limited is only 50% then the actual purchase of shares is a Acquisition/acquisition in the context of Limited Liability Company Law. This is because in the purchase of shares there is a transfer of control (corporate control) of Target Company from Mr. D to E Limited.

  1. Shares Issued and To Be Issued as Object of Acquisition Transaction

Acquisitions may be made on shares that have been issued by an existing company or on shares to be issued by a target company. Thus the investor in carrying out a Acquisition of a target company can buy stocks rather than existing shareholders or buy shares to be issued by the target company or even a combination of both.

The consequence of the purchase of shares to be issued by the target company is the increase in the deposit capital of the target company concerned, in which case the pre-emptive right provisions of the shareholders as stipulated in the articles of association and Article 43 of Company Law should be considered. If approved by shareholders, such pre-emptive rights may not be used by shareholders or be waived, however such shall be expressly stated.

  1. Acquisition from Board of Directors and Acquisition from Shareholders

Acquisitions can be made through the Board of Directors of the target company or directly from the target company’s shareholders. In the event of a Acquisition through the directors of the target company, in addition to the provisions contained in Government Regulation no. 27 of 1998 on Merger, Consolidation, and Acquisition of Limited Liability Company (PP 27/1998) must also be considered. Judging from Limited Liability Company Law and PP 27/1998 in general the process of taking over a company through directors can be described as follows:

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a) Delivery of of Acquisition Intention and Proposal of Acquisition Plan

In the Acquisition process involving the directors of the target company, the party that will take over will first convey the purpose of the Acquisition to the target company’s directors.

The target company and the respective party will take over each of the proposed Acquisition plans that are required to obtain approval from the board of commissioners of the target company and the party who takes over the target company. The proposed Acquisition plan is the material for drafting a take-over draft compiled jointly by the directors of the target company and the party taking over.

b) Preparation of Acquisition Draft

The directors of the target company and the companies that will perform the take over with the approval of the respective Board of Commissioners shall draw up a draft of a Acquisition which containing:

  1. The name and place of domicile of the company that will take over and
  2. to be taken over.
  3. The reasons and explanations of the Board of Directors of the company that will take over and to be taken over.
  4. The financial statements as referred to in Article 66 paragraph (2) letters
  5. LIMITED LIABILITY COMPANY LAW for the last fiscal year of the company to take over and to be acquired.
  6. Procedures for the valuation and conversion of shares of the company to be acquired against the shares of redemption when the Acquisition is paid by a share swap.
  7. Number of shares to be acquired.
  8. Readiness of funding.
  9. Proforma consolidated balance sheets of the targeted company after acquisition prepared in accordance with generally accepted accounting principles in Indonesia, as well as estimates of matters relating to profit and loss and the future of the enterprise based on the results of independent expert judgments.
  10. How to settle the rights of shareholders who disagree with the Acquisition.
  11. How to settle the status, rights and obligations of members of the board of directors, board of commissioners and employees of the target company.
  12. Expected period of Acquisition, including the period of authorization of transfer of shares from shareholders to company directors.
  13. The draft amendment of the company’s articles of association of expropriation if any.

c) Announcement of Acquisition Draft

The board of directors of the company that will takeover announces a summary of the takeover draft at least in one newspaper and announces it in writing to employees of the company which will takeover within 30 days prior to the call of the RUPS.

The above announcement is intended to enable the parties concerned to acknowledge the existence of the plan and submit an objection if they feel their interests are harmed and make also notice that interested parties may obtain a takeover plan of the office of the company from the date of the announcement of the RUPS until the date of the General Meeting of Shareholders convened.

In the context of the interests of employees or workers, it is necessary to consider the provisions of Article 61 paragraph (3) of Law no. 13 of 2003 on employment (Law 13/2003) which regulates as follows:

“In the event of a transfer of enterprise, the rights of the worker/laborer shall be the responsibility of the new entrepreneur, unless otherwise provided in the transfer agreement which does not diminish the rights of the workers/laborers.”

To understand what is meant by the workers/laborers’ rights as mentioned in Article 61 Paragraph (3) of Law 13/2003 above it is necessary to review the provisions of Article 163 paragraph (1) and (2) of Law 13/2003 which regulate as follows:

  1. Employers may terminate the employment of workers in the event of a change of status, merger, consolidation or change of ownership of the enterprise and workers/laborers are entitled to severance pay amounting to 1 (one) time in accordance with the provisions of article 156 paragraph (3) and compensation pay in accordance with the provisions of article 156 paragraph (3) with compensation pay in accordance with the provisions of Article 156 paragraph (4).
  2. Employers may terminate the employment of a worker/laborer due to a change of status, merger or consolidation of an enterprise, and the employer is unwilling to accept workers in his company, the worker shall be entitled to severance pay twice 2 (two) times of Article 156 paragraph 3), and compensation pay according to the provisions of Article 156 paragraph (4).

The provisions of Article 163 paragraph (1) and (2) of Law 13/2003 in practice are often the questions of foreign investors intending to invest through the purchase of shares of a company in Indonesia. Special paragraph (1) of that article is often a question of why employers who terminate their employment if the employer is not willing to continue the employment relationship is the worker in relation to the change of ownership in the company?

If the worker is not willing to continue the employment relationship then the employee should voluntarily resign as regulated in Article 162 of Law 13/2003, so that the employer does not have to pay the severance and gratuity fee to the resigned worker.

The provisions of Article 163 paragraph (1) and (2) of Law 13/2003 in practice are often the questions of foreign investors intending to invest through the purchase of shares of a company in Indonesia. Khsusus verse (1) of that article is often the question of why the employer who terminates the employment if the employer is not willing to continue the work is the worker in connection with the change of ownership in the company? If unemployed workers continue the employment relationship then the employee should voluntarily resign as regulated in Article 162 of Law 13/2003, so that the employer does not have to pay the severance and gratuity fee to the resigned worker.

The things that are often being questioned is the definition of employers who must make termination of employment and pay severance debts for the award of employment, and money compensation. In theory of employment relations, the termination of employment and payment of those rights should be made between the parties who have a working relationship and the payment of those rights should be made between the parties who have a working relationship, ie the employer and the worker concerned.

In the context of a takeover if a foreign investor wants to buy shares of a target company from the shareholders of the company, where there are some jobs from the target company who are unwilling to continue work with the target company in case of a change of ownership in the target company, pay the rights of the worker is the target company concerned as the employer.

However, in terms of Article 61 Paragraph (3) of Law 13/2003, in the event of a transfer of enterprises, workers’ rights shall be the responsibility of the new entrepreneur, unless otherwise provided in the transfer agreement which does not diminish the rights of the workers/laborers.

The notion of “new entrepreneur” is in fact interpreted as the party who takes over the target company. Therefore, in an agreement governing the acquisition of a target company, it should be clearly regulated who will be responsible for severance pay, gratuity and other compensation benefits entitled workers in the event of a dismissal in connection with the acquisition transaction in the context of Law No. 13/2003.

4) Proposition of Director’s Objection

Within a period of not later than 14 days after the aforementioned announcement, the creditor may file an objection to the company, where in the event that there is no objection laid aside by the creditor then the creditor may be deemed to approve the acquisition. Article 33 paragraph (2) of PP 27/1998 stipulates that the creditor may file an objection in connection with the exercise of the takeover not later than seven days prior to the convention of the RUPS.

However, of course, this provision does not reduce the rights (contractual right) of the creditor under a loan agreement, underlying his/her right of claim to the company. For example if in a debt agreement it is mentioned that the change of ownership of shares or acquisition of the company concerned must be approved in advance of the creditor, then at its base the acquisition can only be made if the creditor’s agreement has been obtained. Should such matter be breached, the execution of such takeover shall result in the company’s breach of contract on the debt agreement.

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If such time period is up to the date of the RUPS of the objection of the Creditor can not be resolved by the Board of Directors, the objection must be submitted to the General Meeting of Shareholders in order to obtain a settlement, which if the settlement has not been reached. It will be different if there is an objection from minority shareholders, where article 126 Limited Liability Company Law stipulates that minority sham holders who do not agree with the takeover exercise may exercise their rights as regulated in Article 62 of Limited Liability Company Law and the takeover exercise may exercise its right as regulated in Article 62 of Company Law and the exercise of the right it can not block the implementation of merging or consolidation.

Article 62 of Company Law provides that each shareholder is entitled to request the company to have its shares purchased at a fair price if the party does not approve the company’s actions that harm the shareholders, in the form of: (a) the amendment of the articles of association; (b) the transfer or underwriting of a company’s assets transfer or guarantee of corporate wealth of more than 50% or (c) merger, consolidation, acquisition or segregation.

In the event that the shares requested to be purchased exceed the limit of the terms of the share repurchase in the company as referred to in Article 37 paragraph (1) letter (b), the company must make sure that the remaining shares are bought by a third party.

Based on Article 37 Paragraph (1) of Company Law, the company must make sure that the remaining net worth of the company becomes less than the amount of the issued capital plus the mandatory reserves that have been in disposal, and (b) the total nominal value of all shares repurchased by the company and the pledge of shares and fiduciary security of shares held by the company itself/or any other company whose shares are directly not directly owned by the company, does not exceed 10% of the total paid-up capital deposited in the company, unless otherwise provided for in another legislation in the field of planting capital.

5) Notice of RUPS

Notice of RUPS in connection with the acquisition is made 14 days before the General Meeting of Shareholders is held by not counting the date of the summons and the date of the RUPS by means of a registered letter and/or newspaper advertisement containing the date, time, place and agenda of the RUPS with notice that the RUPS material is available at the company office concerned since the date of the invitation of the RUPS up to the date of the RUPS.

The resolutions of the RUPS remain valid even though the invitation of the RUPS is not in accordance with the above provisions if all shareholders with voting rights are present or represented in the RUPS and the resolution is approved unanimously.

6) GMS (General (eeting of Shareholders)

Article 89 Limited Liability Company Law provides for matters relating to the GMS in respect of acquisition, in which the quorum to the RUPS is at least 3/4 of the total number of shares with voting rights, which, if not achieved, the second RUPS may be held by a quorum agreement of 2/3 part of the total number of shares with voting rights.

The number of inner quorums is determined to be greater in the company’s articles of association. Furthermore, if the quorum in the RUPS can be thirdly unachievable pursuant to Article 85 Paragraph (5), (6) and (7) Limited Liability Company Law the Company may apply to the head of the district court in its jurisdiction including the place of domicile of the company to set a quorum for the third RUPS where such determination is final and has a permanent legal force.

Paragraph (6) of Article 86 of the Company Law stipulates that the call of the 3rd GMS must state that the second RUPS has been held and does not reach the quorum and the third RUPS will be issued and the quorum set by the head of the district court. The GMS decision in connection with the acquisition of a company, either in the first GMS or in the second GMS, is valid if it is approved by 3/4 of the votes cast in the RUPS, unless the articles of association determine a much larger number of votes.

Pursuant to Article 86 Paragraph (8) and (9) of Company Law, the second and third General Shareholders’ General Assembly shall be held within seven days before the second or third RUPS is held and the second and third GMS are held within 10 days and no later than 21 days after the preceding RUPS was held.

Beyond what has been stipulated in the Company Law and the articles of association of the company concerned, what is stipulated in the joint venture agreement aha shareholders’ agreement (if any) should also be considered. The provisions stipulated in the joint venture agreement or shareholders’ agreement shall apply to the shareholders and companies concerned as long as what is regulated is not contrary to the Company Law and other Laws.

The draft of the acquisition which has been approved by the General Meeting of Shareholders is set forth in the deed of takeover made before the Notary in the Indonesian language. A copy of the deed of such expropriation shall be attached to the delivery of notification to the Minister of Justice and Human Rights concerning the amendment of the articles of association.

7) Person taking car of Registration or Licensing in PTSP BKPM or PDPPM/PDKPM

Article 23 of Regulation of BKPM 12/2009 stipulates that domestic investment companies that will make changes in capital participation Due to the entry of foreign capital resulting in all or part of the capital of the company into foreign capital which resulted in part or all or part of the capital of the company into foreign investment conducts the followings:

  1. Investment registration as a result of changes occurring in PTSP BKPM, if the company concerned does not have a principle license and does not have a business license or does not have a license of principle. BKPM will publish the registration of apabia in the field of business and the percentage of foreign ownership in compliance with the provisions of the law or the rejection of registration (as set forth in annex VIIB of BKPM Regulation 12/2009).
  2. Application for a principal license or business license for investment of capital as a result of the port of PTSP BKPM if the company has a license of principle or business license. However, if the business field of the company is the authority of the provincial government and/or the district/city government, prior to applying for a business license or a principal license to PTSP BKPM is required to attach a letter of introduction from PTSP PDPPM or PTSP PDKPM concerning the planned capital inflows as set forth in annex VIIA of BKPM Regulation 12/2009. In the case of a letter of introduction of PTSP PDPPM or PTSP PDKPM not yet published within 10 working days, the company may attach the receipt of the application.

Another thing to be considered is that based on Article 37 of BKPM 12/2009 regulations, PMA and PMDN companies are obliged to apply for a change principle permit submitted to PTSP BKPM, PTSP BKPM, PTSP PDPPM or PTSP PDKPM, (under the authority), if the relevant company make a change in:

  1. Terms of business field, including type and production capacity.
  2. Equity participation in the company.
  3. Project completion period.

Those listed in the principle permit or the expansion principle permit. Based on Article 42 Paragraph (3) of Regulation of BKPM 12/2009 Permission of Principle of Change of Capital Investment shall be issued not later than five working days from receipt of complete and correct application.

Amendments to the provisions contained in the registration or the principle permit other than those mentioned above shall be reported by the company concerned to the PTSP issuing the registration or the principle permit by using the form as set forth in annex VIIA of Regulation BKPM 12/2009.

The application for change principle permit as regulated in Article 37 of BKPM Regulation 12/2009 is filed by using the form as contained in Attachment IX of Regulation BKPM12/2009 with the following requirements:

a). Records of license of investment principle applied for the amendment.

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b). Records of deed of establishment and amendment, completed with the approval of the Minister Law and Human Rights.

c). For changes in business (type/production capacity) is furnished with:

  1. Description of the activity plan, a description of the production process that includes the type of raw materials and is equipped with flow chart (flow chart).
  2. Recommendations from relevant government agencies, when required.

d). For a change of revelation in the company’s capital (percent) of foreign ownership) is completed by:

  1. Shareholders’ agreement on percentage change of shares between foreign and Indonesia in the company as set forth in the form of recording of minutes of RUPS or circular decisions signed by all shareholders and has been recorded (warmerking) by a notary or a recording of a decision statement of meeting or minutes of the meeting in the form of deed Notary, which meets Article 21 and CHAPTER VI OF LIMITED LIABILITY COMPANY LAW, and supplemented with proof of new shareholder.
  2. Chronological participation in the company’s capital from establishment until the last application.
  3. Especially for an open company, the application is furnished with the requirements in accordance with the provisions of the capital market regulations.

e). For the change of project completion period comes with the reason for the change.

f). Investment activity report (LKPM) for the last period.

g). A request for a principle permit for changes in capital investments whose applications are submitted by the directors of the company or if they are represented is based on a power of attorney set forth in article 63 of BKPM Regulation 12/2009.

8) Notice to the Minister of Law and Human Rights

Certain acquisitions change the ownership of the target company’s shares, in which the relevant company’s articles of association may change or remain unchanged. If in the takeover only change the composition of shareholders, then the company’s articles of association. In this case the change in the shareholder structure is sufficiently notified to the Minister of Law and Human Rights in connection with changes in corporate data.

However, a change of the company’s articles of association may occur in a takeover, be it a change of articles of association requiring the approval of the Minister of Law and Human Rights Article 131 of the Company Law stipulates that a copy of the deed of acquisition shall be attached to the notification to the Minister of Law and Human Rights.

9) Announcement of Result of Acquisition

In accordance with Article Limited Liability Company Law the directors of the target company shall collect the proceeds in one or more newspapers within 30 days from the date of entry into force of the takeover. The 30 day calculation shall commence from the date of notification in connection with such transfer of shares or changes to the said company’s articles of association (if any amendment of the articles of association as a result of expropriation) is accepted by the Minister of Law and Human Rights.

This arrangement is slightly different when compared to Article 34 of Government Regulation 27/1998 which requires that the announcement be made in two daily newspapers and only applies to companies that undertake acquisitions with certain value of wealth determined under the Decree of the Minister of Law and Human Rights.

Conflict or Contradiction of this arrangement when viewed from the concept of lex superior derogate legi inferiori, then in this case that apply is the provisions of Article 133 LIMITED LIABILITY COMPANY LAW, such Decree of Minister of Law and Human Rights mentioned in Article 34 paragraph (3) PP 27/1998 does not exist.

As has been explained earlier that the takeover of the company can be done directly from the shareholders without involving the directors of the target company. In fact, when observed a direct takeover from shareholders is widely used in practice, because the implementation mechanism is simpler. If the acquisition is made directly from the shareholders, then the party to take over does not need to submit its intentions as the target company’s director and prepare the takeover plan as described in description (1) and (2) above. However, in the process of the acquisition of shares directly from the shareholders, the matters as described in the above description (3) to (9) above mutatis mutandis remain in force and must be considered.

In relation to the deed of acquisition, it is practically impossible for the party to take over, the shareholder whose shares will be acquired and the target company in question has previously entered into a share sale and purchasase agreement or the acquisition agreement, prior to the drafting of the takeover design is conditional (conditional sale and purchase agreement or conditional acquisition agreement) or an agreement on the terms of respite as provided for in Article 1253 up to Article 1264 Civil Code, whereby all procedures that must be pursued under the legislation is one of the conditions (conditional precendent) that must be met first shall apply effectively.

In the concept of takeover of target company by Foreign Party, of course agreement made usually use English or bilingual. However, it should be noted that under the applicable laws and regulations, the deed of acquisition must be made in the Indonesian language and in the form of a notarial deed. Regarding the use of English in the document of takeover transactions, it should be noted that under Article 31 of Law no. 24/2009 on Flags, Languages and State Symbols and National Anthems (Law 24/2009) stipulating that the Indonesian language shall be used in a memorandum of understanding or agreement involving state institutions, government agencies of the Republic of Indonesia, private Indonesian institutions or individual Indonesian citizens , whereby if it involves a foreign party, the documents are also written in the national language of the foreign party and/or English. The provisions of Article 31 of Law 24/2009 do not clearly set the prevailing language and what languages are the status of being engaged.

The question also arises whether if a document is made of more than one language, does the translation have to be official, and translated by a sworn translator? Article 40 of Law 24/2009 stipulates that further provisions on the use of Indonesian language shall be governed by a presidential regulation, where in Article 73 of Law 24/2009 it is stipulated that the implementing regulations necessary to implement this Law shall be resolved no later than two years from the year following the enactment of this Law. However, as of this writing is made, the presidential regulations as mentioned above still do not exist.

In practice, a deed of acquisition is often made and signed after all conditions precedent in relation to such acquisition are fulfilled, whereby by the signing of the deed of acquisition the takeover or closing of the takeover transaction will be made. In sequence there are still things that need to be done after the signing of the deed of acquisition so that the transaction is completely valid, that is the process of notification to the Minister of Justice and Human Rights and the process of announcement about the acquisition result.

Another thing to be considered is that based on Article 125 paragraph (4) of Company Law, in the case of a takeover by a legal entity in the form of a limited liability company, the board of directors prior to committing a legal act of expropriation shall be based on the resolutions of the General Meeting of Shareholders meeting the quorum of attendance and provisions concerning the decision-making requirements of the RUPS as intended in Article 89 of Limited Liability Company Law.

C. Acquisition of Public Company

If the target company to be bought by a foreign party is a public company, then the legislation in the field of capital market, especially issued by BAPEPAM-LK should also be considered. Basically, if the purchase of the target company’s shares by the foreign party is done in order to portfolio investment (portfolio investment) conducted through the capital market, then in the transfer of shares:

  1. Approval of the GMS of the target company is not required.
  2. The transfer of such shares shall not be offered to other shareholders first (first refusal right).
  3. The transfer of shares does not require a licensing process in BKPM or PTSP in the region as regulated in Article 23 of Regulation BKPM 12/2009, so if the target company is originally a non-PMA company, then the target company does not need to change the status of a PMA company.
  4. The transfer of such shares shall not be notified to the Ministry of Law and Human Rights as regulated in Article 29 paragraph (3) letter (c) Limited Liability Company Law.

The elaboration of the acquisition of a closed company and the acquisition of an open company that the use of the term “closed company” in this discussion is intended to distinguish it from an “open company”. Taking stock is different. This, given the scope and mechanism of the acquisition of public companies is very different from the takeover of a closed company.

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