INDONESIA Law and Practice Contributed by: Melissa Butarbutar, Ken Prasadtyo, Kevin Yehezkiel and Cindy Caroline, TnP Law Firm
voting rights in public companies or investors that hold a controlling stake in public companies must report a decrease of share ownership to the OJK if such decrease results in their voting share becoming less than 5%. The report must be submitted to the OJK no later than five busi - ness days upon the change of share ownership. 4.3 Hurdles to Stakebuilding Under the Company Law, articles of association may specify that changes in shareholding com - position of private companies must be approved by the existing shareholders through the general meetings of shareholders. The Company Law determines the minimum quorum for convening a general meeting of shareholders and for pass - ing a shareholder resolution. However, the Com - pany Law provides flexibility for limited liability companies to set out higher quorums in their articles of association for convening the general meetings of shareholders. Therefore, if there is any discrepancy between the quorum require - ments set out in the Company Law and articles of association, the articles of association will take precedence over the quorum requirements under the Company Law. The quorum requirements can significantly impact any change of shareholding composition, let alone any stakebuilding process. Companies with higher quorum requirements to convene a general meeting of shareholders or to pass a shareholder resolution might face challenges in securing approval from the shareholders for changes to the shareholding composition, par - ticularly those with a large number of share - holders. Furthermore, companies in specific industries may encounter hurdles in changing their shareholding composition due to specific requirements set out by the relevant authorities.
As an aside, in terms of public companies, one of the exemptions from triggering a mandatory tender offer (see below) is when a new controller acquires control by acquiring not more than 10% shares every 12 months. 4.4 Dealings in Derivatives Although the involvement of derivatives in merg - er and acquisition transactions is neither specifi - cally governed nor prohibited by the Indonesian laws, this practice has been used in several transactions, as some companies prefer to use derivatives for tax efficiency purposes. Generally, those transactions might involve, among other things, convertible or exchangeable bonds. 4.5 Filing/Reporting Obligations There are no specific filing or reporting require - ments for transactions that are carried out using derivatives. However, reporting obligations may be triggered depending on the derivatives used in such transactions. For example, for the con - version of debt into shares, the company may need to file a report with the KPPU if the conver - sion exceeds the merger filing thresholds. On the other hand, public companies intending to carry out a debt-to-equity conversion are required to announce their intention to the shareholders through a disclosure of information and submit the disclosure of information to the OJK. Additionally, the OJK requires companies that intend to issue debt securities and/or sukuk without public offerings in Indonesia or to an Indonesian party to, among other things, submit documents for the issuance of such derivatives to the OJK, without prejudice to the companies’ obligation to obtain prior approval from other relevant authorities. Upon the issuance of debt securities and/or sukuk without public offerings, the companies (or issuers) must then submit a
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