INDONESIA Law and Practice Contributed by: Jufrian Murzal and Enos Martryn Budiman, Murzal and Partners
6.5 Minimum Acceptance Conditions Under Indonesian capital markets regulations, a mandatory tender offer may not include a minimum acceptance threshold. The purpose of the offer is to provide the new controlling shareholder with an opportunity to acquire the remaining shares held by minority shareholders following a change of control. In practice, attention is often given instead to the maxi - mum number of shares that may be acquired, particu - larly where foreign ownership limits or sector-specific restrictions apply. By contrast, voluntary tender offers allow greater flex - ibility. The bidder may include conditions in the offer, including a minimum acceptance threshold, subject to review by the OJK. 6.6 Requirement to Obtain Financing In private M&A transactions in Indonesia, a business combination may be made conditional on the bidder obtaining financing, subject to the parties’ contractual agreement. In public company transactions, however, tender offer regulations require the bidder to demonstrate the availability of funds before launching the offer. As a result, tender offers are generally not structured as conditional on financing in practice. Acquisition financing remains common, although transactions in certain regulated sectors may be subject to additional prudential or regulatory require - ments. 6.7 Types of Deal Security Measures In Indonesia, bidders may seek contractual deal pro - tection measures such as exclusivity, non-solicita - tion undertakings and, in some cases, match rights. Break-up fees are not prohibited but remain relatively uncommon in domestic transactions and are more frequently seen in cross-border deals. Mechanisms such as force-the-vote provisions are rarely used, as key corporate actions must ultimately be approved by shareholders through the GMS under the Com - pany Law. In public company transactions, such arrangements must also comply with OJK regulations designed to protect minority shareholders.
There have been no significant regulatory changes directly affecting interim periods in recent years. However, transaction timelines may be influenced by regulatory approvals or notifications to authorities such as the KPPU, the OJK and relevant administra - tive systems. 6.8 Additional Governance Rights Where a bidder does not acquire full ownership, additional governance rights are typically agreed in a shareholders’ agreement. These commonly include the right to appoint directors or commissioners, veto rights over certain strategic matters, enhanced infor - mation rights, and transfer restrictions such as rights of first refusal, tag-along and drag-along rights. Parties may also agree on pre-emptive rights for new share issuances and approval rights over key corpo - rate actions, such as amendments to the AoA or mate - rial transactions. Such rights are contractual in nature and must remain consistent with the Company Law and the authority of the company’s corporate bodies. 6.9 Voting by Proxy Under the Company Law, a shareholder is permitted to grant a written power of attorney to another person to attend and vote on their behalf at a GMS, subject to any limitations set out in the company’s AoA and applicable regulations, particularly for public compa - nies. 6.10 Squeeze-Out Mechanisms Indonesian law does not provide a statutory squeeze- out or short-form merger mechanism allowing a bid - der to compel minority shareholders to sell their shares after a tender offer. Where a bidder seeks to acquire the remaining shares, full ownership is typi - cally achieved through negotiated share purchases or subsequent corporate actions, such as a merger or, in the case of public companies, a going-private or delisting transaction. These processes require compliance with the Company Law and applicable OJK regulations, including shareholder approval and the protection of minority shareholder rights, such as appraisal rights in certain circumstances.
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