INDONESIA Law and Practice Contributed by: Melissa Butarbutar, Ken Prasadtyo, Kevin Yehezkiel and Cindy Caroline, TnP Law Firm
by the OJK. While the specifics depend on the agreement between the seller and the purchaser, some transactions may require the purchaser to provide proof of fund sufficiency to the seller to secure the closing of the transaction. 6.7 Types of Deal Security Measures Deal security measures are commonly imple - mented in Indonesia. Some deals may include deal security measures in the form of break fees or non-solicitation provisions. The amount of break fees depends on the agreement between the seller and purchaser, but it is common prac - tice for the break fees to amount to half of the expenses incurred by the sellers. 6.8 Additional Governance Rights To become a controller of a company, a party is not necessarily required to hold 100% of the ownership of a target company. Instead, the Company Law prohibits a party from holding all the stakes in a company, which would result in there being a single shareholder in that company. The number of shares (with voting rights) owned by shareholders determines their rights in the general meeting of shareholders. The higher the shareholding percentage, the more influence a shareholder has in approving resolutions at the general meeting of shareholders. Most reso - lutions require approval by more than 50% of shares with voting rights present at the meet - ing. However, certain corporate actions require a higher quorum, such as changes to the articles of association, which require more than two-thirds of the company’s voting shares present at the meeting. Other corporate actions, such as merg - ers, consolidations, acquisitions or dissolution of companies, require more than three-quarters of the voting shares present at the meeting. That being said, a 75% stake in a company should be
sufficient for a controller to secure the majority vote at a general meeting of shareholders. In current practice, shareholders may govern the additional governance rights through a separate agreement (eg, a shareholder agreement). Under this agreement, shareholders may set higher thresholds for certain reserved matters, such as requiring unanimous approval for specific reserved matters. 6.9 Voting by Proxy The Company Law allows shareholders with vot - ing rights who are entitled to attend the general meeting of shareholders to appoint a proxy to attend the general meeting of shareholders and cast a vote on their behalf. The proxy is typically granted through a written power of attorney. 6.10 Squeeze-Out Mechanisms The concept of squeeze-out mechanism is not applicable in Indonesia given that the practice is not governed under any prevailing laws and regulations. 6.11 Irrevocable Commitments As this is decided on a case-by-case basis, some transactions may require a pre-closing condition in the form of an irrevocable commit - ment from the principal shareholder of the target company to approve the transaction at the gen - eral meeting of shareholders. In some cases, this is crucial to secure the deal. If the transaction is subsequently postponed or cancelled after approval is obtained, the principal shareholder may withdraw their commitment.
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