INDONESIA Law and Practice Contributed by: Agus Ahadi Deradjat, Gustaaf Reerink and Adri Dharma, ABNR Counsellors at Law
In practice, foreign investors would most likely opt for direct acquisition, as it is a much simpler process. The structures in this section are also common in public companies. 3.2 Regulation of Domestic M&A Transactions An M&A transaction for a private company must com - ply with the requirements and procedures of the Indo - nesian Company Law. • In a merger or direct acquisition, the BOD of the company would be required to produce a merger/ acquisition plan for approval by the board of commissioners (BOC) and a general meeting of shareholders (GMS) of the company. This require - ment does not apply if the acquisition only involves direct acquisition of the existing shares of the company. • The merger/acquisition plan must be announced to the creditors in a newspaper with nationwide circulation, and to employees. This announcement provides an opportunity for creditors of the compa - ny to file objections to the merger/acquisition plan. The company must settle all claims before the transaction can proceed. Meanwhile, employees of the company would also have the option to either continue or terminate their employment following the transaction. • The result of the merger/acquisition transaction must be further announced in a newspaper with nationwide circulation. Depending on the industry, an M&A transaction may require prior approval from the relevant government authority. Should the M&A transaction meet a certain assets/sales value threshold, additional reporting requirements shall apply (for further details, see 6. Antitrust/Competitio n). For public companies, a GMS is not required for an acquisition that results in a change of control. Howev - er, the new controller is required to make a mandatory tender offer (MTO). In an MTO, the new controller must offer to purchase all shares from the shareholders, other than those owned by: • a shareholder that has taken part in the takeover transaction with the new controller;
• a person who has already received an offer with the same terms and conditions from the new con - troller; • another person who, at the same time, is mak - ing either an MTO or voluntary tender offer for the same company’s shares; • a shareholder who owns at least 20% of the com - pany’s shares; or • another controller of the public company. For a merger, the merger plan must be approved by the BOC and the GMS. However, if the merger might cause a conflict of interest that could potentially result in economic loss to a public company, prior approval for the merger must be obtained from the independent shareholders. 4. Corporate Governance and Disclosure/Reporting 4.1 Corporate Governance Framework An FDI company in Indonesia must be a limited liability company, which is a legal entity established by at least two shareholders by way of capital pooling in which the shareholder’s liability is limited to the amount paid for the shares subscribed to. The establishment of the company must be carried out with due observance of the provisions under the Company Law and the Investment Law. Limited liability is also the requisite legal format for public companies. The general requirements for establishment of an FDI company are as follows: • the company must have at least two shareholders; • the minimum issued and paid-up capital is IDR2.5 billion (approximately USD150,000); • the investment value must be greater IDR10 billion (approximately USD625,000), excluding the land and building value, per line of business and project location – different minimum investment criteria apply to businesses engaged in certain activities, such as F&B, real estate, accommodation, agricul - ture, plantation, livestock and aquaculture busi - nesses; and • the company must have a two-tier management system comprising (i) a BOD, which manages the
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