ENACTMENT OF FINANCIAL SERVICES AUTHORITY (OJK) REGULATION ON THE STOCK SPLIT AND REVERSE STOCK SPLIT BY PUBLIC COMPANIES

On 18 August 2022, the Financial Services Authority (“OJK”) issued the OJK Regulation No. 15/POJK.04/2022 of 2022 on the Stock Split and Reverse Stock Split by Public Companies (“POJK 15/2022”). Prior to the issuance of POJK 15/2022, there was no specific regulation covering the stock split and reverse stock split transactions by companies that are the issuer of equity securities through the public offering or the public companies (“Public Companies”).


The new regulation requires any Public Companies (both listed or not listed) that intend to conduct a stock split or reverse stock split to obtain prior approval from the General Meeting of Shareholders (“GMS”). If the shares of the Public Company are listed on the stock exchange, the public company is required to obtain a principal approval on the plan of stock split or reverse stock split (“Transaction”) from the stock exchange.


Any public companies that will carry out a Transaction are required to announce information disclosure about the proposal on the same day as the announcement of RUPS for approving the Transaction. The information disclosure shall contain at least the following:
a. title of the information disclosure on the Transaction (stock split or reverse stock split);
b. information on the share classification;
c. information regarding the change in the nominal value of the share as a result of the Transaction (except for stock of public companies without par value);
d. number of shares before and after the Transaction;
e. ratio of stock split or reverse stock split;
f. the date of the principal approval from the stock exchange on the plan for the Transaction;
g. reason and objective for the Transaction;
h. impact of the Transaction on the number and exercise price of equity securities other than shares that have not been converted into shares if the Public Company issues equity securities other than shares;
i. summary of the share valuation report, if any;
j. forecast of the implementation of the Transaction;
k. information on the implementation of GMS;
l. information on the corporate action plan that affects the number of shares and/or capital of the Public Company, which will be carried out within six months after the date of the implementation of the Transaction; and
m. statement of responsibility of the board of directors for the correctness of information in the information disclosure.

The share valuation mentioned in the point i above applies if the shares of the public company are not listed on the stock exchange, or (i) if a listed Public Company at the time of submission of the principal approval to the stock exchange, its shares have been suspended for a period of at least three months, and/or (ii) if the share price of the listed Public Company is at the lowest limit of the share price determined by the stock exchange for at least 30 trading days within a three month period prior to the submission of the principal approval.

Aside from the above information, the information disclosure for the reverse stock split shall contain additional information on the following:
a. settlement of shares that the amount does not meet one trading unit at the stock exchange, which information must at least provide the method or manner of purchase and the purchase price;
b. shareholders who are entitled to sell their share to a party appointed to purchase the shares that the amount that does not meet one trading unit at the stock exchange;
c. party appointed to purchase the shares that the amount does not meet one trading unit at the stock exchange;
d. estimated schedule related to the purchase of the shares that the amount that does not meet one trading unit at the sock exchange;
e. issuance of new shares (to fulfill one share trading unit); and
f. mechanism for settlement of fractional shares for the Public Companies that are not listed on the stock exchange.


The information disclosure, along with the supporting document, must be submitted to OJK on the same day as the announcement of disclosure information.
The Public Company is prohibited from conducting the Transaction within:
a. 24 months from the date of listing in the framework of the initial public offering; or
b. 12 months from:
(i) the effective date of the registration settlement in the context of increasing the capital of the public company by granting the pre-emptive right;
(ii) the date of implementation of the capital increase of the public company without granting pre-emptive rights (except for the capital increase in the framework of the stock ownership program);
(iii) the date of prior stock split or reverse stock split;
(iv) effective date of the statement of a business merger or consolidation, whichever comes later.

Within the 12-month period after the implementation of the Transaction, the Public Companies are prohibited from carrying out capital increases without granting pre-emptive rights other than for the purpose of improving financial condition. The prohibition may be exempted if:
a. the Public Companies intend to conduct capital increases without granting pre-emptive rights other than the purpose of the correction of financial position, which is carried out in the framework of a share ownership program; or
b. the Public Companies are a financial service institution under certain conditions;
c. the Public Companies carry out restructuring in order to improve its financial position;
d. the Public Companies are issuers that conduct public offering of equity securities in the form of shares by implementing shares with multiple voting rights that perform capital increase without granting any pre-emptive rights in order to maintain the ownership of voting rights of more than 50% of all voting rights.


The implementation of the Transaction shall be carried out within 30 days after the GMS approval. This provision does not apply to the reverse stock split carried out in relation to the need for a capital increase of the Public Company.
The POJK 15/2022 comes into force after six months from the date of its promulgation.

By : Dony Syarifuddin

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