INDONESIA Law and Practice Contributed by: Chandrawati Dewi, Gustaaf Reerink and Bilal Anwari, ABNR Counsellors at Law
2.3 Types of Transactions Several types of transactions are caught by Indonesian merger control rules – ie, mergers, consolidations, and acquisitions (both for share and asset transactions). However, only transac - tions that fulfil the following criteria are caught by Indonesian merger control rules: • results in a change of control; • meets the jurisdictional thresholds; • meets the dual nexus requirements; • is carried out between non-affiliated compa - nies; and • is not carried out to implement prevailing laws and regulations. In line with the criterion that the transaction must be carried out between non-affiliated companies, internal restructuring or reorganisa - tion are in principle not caught by Indonesian merger control rules, if they concern transac - tions between affiliated parties. The KPPU has considered transactions involving sales and purchase of units in a trust as notifiable transactions, although they do not fall under the category of share or of asset transactions from an Indonesian law perspective. Shareholders’ agreements and changes to articles of associa - tion could be caught by the Indonesian merger control rules if such agreements and changes to articles of association would ultimately result in a change of control. 2.4 Definition of “Control” Under Indonesian competition law, a change of control occurs when the acquiring party obtains more than 50% of the shares and voting rights or obtains less than 50% of the shares and voting rights but holds factual control (allowing them to influence or direct the company’s policies and management). Normally, the KPPU would look
into reserved matters, veto rights and the power to nominate the majority of the directors as indi - cations of change of control, when the acquired share capital is less than 50%. Although the law is unclear on this matter, a change from sole to joint control could also constitute a change of control. Further, a transfer of assets – with or without shares – can be deemed the equivalent of an acquisition of shares and should be reported to the KPPU. This is the case if the following condi - tions are met: • results in a transfer of management control and/or physical control over the assets; and/ or • increases the acquiring party’s ability to con - trol a relevant market. An asset is defined as any movable or immov - able object owned by an undertaking – both tangible and intangible – that has economic value (eg, bonds or stocks). Additionally, in the authors’ experience, a participating interest in a joint operation in Indonesia may also be consid - ered an Indonesian asset. In foreign-to-foreign transactions, the question of change of control is in principle determined by the applicable law in the jurisdiction where the share or asset transaction occurs. However, it has been observed that in acquisitions of 50% or less of the shares, the KPPU will now also make its own assessment of decision-making mecha - nisms, the appointment of board members, and the day-to-day operation management system, to determine whether the transaction has result - ed in a change of control.
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