Indonesia

As the World Health Organization announced the Corona Virus Disease 2019 (“Covid-19”) spreads as a global pandemic, it does not take long for countries to bear the repercussions of this pandemic. The government, along with the stakeholders in every sector, are racing against time to be able to mitigate the risks of future potential losses.

The Covid-19 infection cases have been growing exponentially in Indonesia since the first confirmed case on 2 March 2020. In an effort to handle the spreading of the Covid-19, on 31 March 2020, the government implements the large-scale social restriction by issuing the Regulation of the Government of the Republic of Indonesia No. 21 of 2020 on The Large-Scale Social Restrictions for the Acceleration of Mitigation to Corona Virus Disease 2019 (Covid-19) (“GR 21/2020”).

A large-scale social restriction means the restriction of certain activities of the population in an area suspected to be infected by Covid-19 in such a way as to prevent the possibility of the spreading of the Covid-19[1] (“LargeScale Restrictions”). In Article 4 Paragraph (1) GR 21/2020, stipulate that the Large-Scale Social Restrictions at least encompass:

  1. temporary closure of schools and workplaces;
  2. religion activities restriction; and/or
  3. public facility or public place activities restriction.

Pursuant to the GR 21/2020, each of Regional Government may perform the Large-Scale Social Restrictions, with the approval from the minister in charge of government affairs in the health sector after considering the epidemiological, the magnitude of the threat, effectiveness, resource supports, operational technicalities, political, economic, social, cultural, and defense and safety[2].

In order to save the national economy and the stability of the financial system amidst the pandemic, the government issued the Regulation of the Government of the Republic of Indonesia in Lieu of Law No. 1 of 2020 on State Financial Policies and the Stability of the Financial System in Relation to the Handling to the National Economy and/or Stability of the Financial System (“Regulation 1/2020”) dated 31 March 2020.

The Regulation 1/2020 governs, among others, the financial system stability policies that comprise the policies to the handling of the financial institution problems that endanger the national economy and/or financial system stability[3] which are implemented by Bank Indonesia (“BI”), Indonesia Deposit Insurance Corporation/Lembaga Penjamin Simpanan (“LPS”),  Indonesia Financial Services Authority/ Otoritas Jasa Keuangan (“OJK”), and the establishment of the Financial System Stability Committee/Komite Stabilitas Sistem Keuangan (“KSSK”). Pursuant to the Regulation 1/2020, in order

to support the tasks of KSSK, BI, OJK, and LPS have been granted several authorities for the purpose of controlling the financial system stability, as follows:

  1. BI has been authorized to (i) provide short-term liquidity financing based on sharia principles to systemic banks or non systemic banks, (ii) provide special liquidity loan to systemic banks that experience liquidity difficulty and fail to fulfill the requirements for the granting of short-term liquidity loan, (iii)buy the Government bond and/or long-term Government sukuk in the primary market for the control of financial system problems that harm the national economy, (iv) buy/repo Government securities that are owned by LPS for the fees in controlling solvability problems of systemic banks and non systemic banks, (v) regulate obligation to receive and use foreign exchange for resident including provisions on foreign exchange transfer, repatriation, and conversion for the purpose of maintaining macroeconomic and financial system stability, and (vi) provide funding access to corporations/private sectors by repo of Government bond or Government sukuk that are owned by corporations/private sectors through banking[4].
  2. LPS has been authorized to (i) conduct preparation for the control and increase the preparation intensity with the OJK to control banks’ solvability problems, (ii) in the event that LPS is expected to experience liquidity difficulties in controlling failed banks, conduct sale/repo the Government bond that is owned by BI, issuance of bonds, loan to other parties, and/or loan to the government, (iii) conduct decision making to rescue or not to rescue the non-systemic banks, and (iv) formulate and implement deposit insurance policies for a group of customers[5].
  3. OJK has been authorized to (i) give the mandate to financial service institutions to implement various types of corporate actions, i.e., merger, consolidation, acquisition, integration, and/or conversion, (ii) implement the exemption for certain parties from the mandatory implementation of the transparency principle within the capital market sector in order to the prevent and handle the financial system crisis, and (iii) establish the provisions on the utilization of information technology with respect to the organization of the General Meeting of Shareholders or other relevant meetings under prevailing laws[6].

Since the beginning of March 2020, OJK and the Indonesia Stock Exchange (“IDX”) have been issuing various regulations and policies in the capital market sector, among others:

No. Policies Outline
1. The IDX Announcement No. Peng-00058/BEI.POP/03-2020 dated 2 March 2020 on the Revocation of List of Securities that Can be Transacted by Short Selling

 

The revocation of the List of Securities that can be transacted by Short Selling effective as of 2 March 2020, until the period which will be determined later.
2. Circular of the OJK No. 3/SEOJK.04/2020 dated 9 March 2020 on the Other Conditions Which Constitute Significantly Fluctuating Market Conditions for the Implementation of Shares Buyback Issued by Issuers or Public Companies (“Circular of the OJK No. 3/2020”) –                After the occurrence of the other condition which is set by OJK, Issuers or Public Companies may implement the Shares Buyback under the provisions and the mechanism set forth in the OJK Regulation No. 2/POJK.04/2013 on the Shares Buyback Issued by Issuers or Public Companies in the Significantly Fluctuating Market Conditions (“OJK Regulation No. 2/2013”).

–                The Threshold of the Shares buyback by the Issuers or Public Companies shall be:

a.             The total of the buyback is maximum 20% from the paid-up capital; and

b.             At least the listed shares are a minimum of 7.5%.

3. The OJK Letter No. S-274/PM.21/2020 dated 10 March 2020 on the Order to Carry Out the Trading Halt in IDX under the Pressure of Capital Market Conditions –                The order to carry out the trading halt for 30 minutes in terms of the IDX Composite Index/Indeks Harga Saham Gabungan (”IHSG”) has decreased, reaching 5%. Effective as of 11 March 2020, until the period which will be determined later by OJK.

–                If the decrease of IHSG value reaches 10% – 15%, then the provisions of the Decree of IDX Board of Directors (“BOD”) No. Kep-00366/BEI/05-2012 will prevail.

4. The Decree of IDX BOD No. KEP-00024/BEI/03-2020 of 2020 dated 10 March 2020 along with its Attachment on the Change of the Guidance of the Handling of the Continuity of the IDX Trading within Emergency Conditions –                The change of the Decree of IDX BOD No. Kep-00366/BEI/05-2012, in which the difference is in the Part III.3.8, in terms of the occurrence of the market panic in carrying out the sell and/or buy transactions which result in the very sharp decline in the IHSG value within 1 exchange day, with the following conditions:

a.             IHSG value drop to more than 5% a trading halt for 30 minutes;

b.             IHSG value drop to more than 10% a trading halt for 30 minutes;

c.              IHSG value drop to more than 15% a trading suspends: until the end of the trading session or more than 1 trading session, after obtaining the approval or the command from OJK.

5. Circular of the OJK No. S-89/D.04/2020 of 2020 dated 16 March 2020 on the Elucidation of the Implementation of Share Buybacks Issued by Issuers or Public Companies –                The elucidation of the Article 6 paragraph (2) of the OJK Regulation No. 2/2013, as follows:

The Disclosure of Information conducted within the period:

a.             Of maximum 7 exchange days after based on the Issuers’ or Public Companies’ calculation, it is known that the IHSG value in 3 consecutive exchange days cumulatively drops to 15% or more; or

b.             At any time since the enactment of Circular of the OJK No. 3/2020 up to 7 exchange days after the revocation of such Circular.

–                The provision of the transfer of treasury shares/treasury shares refloat.

6. The OJK Letter No. S-92/D.04/2020 of 2020 dated 18 March 2020 on the Relaxation of the Submission of Reports and the Implementation of the General Meeting of Shareholders Obligations (“OJK Letter S-92/2020”) –                The deadline extension for the submission of the annual financial report and annual report for Issuers and Public Companies, Audit Committee evaluation report and annual financial report for the IDX, the Indonesia Clearing and Guarantee Corporation, the Indonesia Central Securities Depository, Securities Companies, the Indonesia Securities Investor Protection Fund, Securities Appraisal Institutions, the Indonesia Securities Funding Institutions, Securities Administration Bureau, Mutual Fund, the Collective Investment Contract of the Real Estate Investment Trust, the Collective Investment Contract of the Backed Asset Securities, Backed Asset Securities in the form of the Letter of Participation, the Collective Investment Contract of the Infrastructure Investment Trust, dan Securities Rating Companies, into two months from the deadline for the submission of the reports as referred to in the prevailing laws and regulations in the Capital Market Sector.

–                The Implementation of the Annual General Meeting of Shareholders (“GMS”) by Issuers and Public Companies may be done in the e-GMS mechanism provided by the Indonesia Central Securities Depository, which later determined by Indonesia Central Securities Depository.

 

7. The Decree of IDX BOD No. KEP-00027/BEI/03-2020 dated 20 March 2020 the Relaxation of the Submission of Reports and the Implementation of the General Meeting of Shareholders Obligations –                Mutatis mutandis with the OJK Letter S-92/2020.

 

8. Circular of the OJK No. S-101/D.04/2020 of 2020 dated 24 March 2020 on the Extended Period of the Validity of the Financial Report and the Capital Market Valuation Report, Extended Period of the Initial Public Offering and the Postponement /Cancellation of the Public Offering –                The period between the date of the latest financial reports which examined by the Accountant and the valuation date (cut off date) of the appraisal report up to the effective Registration Statement be extended from the period as referred to in the prevailing laws and regulations in the Capital Market Sector, as follows:

a.             for the financial reports and appraisal date up to 30 November 2019, extended to 3 months from the period as referred to in the prevailing laws and regulations in the Capital Market Sector;

b.             for the financial reports and appraisal date after 30 November 2019, extended to 2 months from the period as referred to in the prevailing laws and regulations in the Capital Market Sector;

–                The period between the date of the latest financial reports which examined by the Accountant and the valuation date (cut off date) of the appraisal report which used in order to the material transaction, affiliated transaction and the transaction that contain a conflict of interest extended from the period as referred to in the prevailing laws and regulations in the Capital Market Sector, as follows:

a.             for the financial reports and appraisal date up to 30 November 2019, extended to 3 months from the period as referred to in the prevailing laws and regulations in the Capital Market Sector;

 

 

b.             for the financial reports and appraisal date after 30 November 2019, extended to 2 months from the period as referred to in the prevailing laws and regulations in the Capital Market Sector.

–                The period of the confirmation whether there is any change of the information or the submission of the information regarding the amount and Securities offering value, Securities underwriter, and/or bond interest rate or yields of sukuk extended to 2 months after the announcement of the Prospectus Summary and/or after OJK’s states that the Issuer (Emiten) can carry out the book-building and/or spread the information which related to the Public Offering.

–                The mechanism of the postponement /cancellation of the Public Offering due to the other conditions which constitute significantly fluctuating market conditions.

 

Governmental bodies are expected to issue more policies to overcome the impact of the pandemic on the national economy. Those new policies may not be unprecedented to the business entities, such as the e-GMS. More detailed guidance or socialization may need to be issued to ensure that the policies are workable.

 

 

Contacts

For further information, please contact:

Genio Atyanto

Partner

 

P/ +62 21 5140 0311

F/ +62 21 5140 0313

atyanto@nacounsels.com

        Aldi Prapanca

Associate

 

P/ +62 21 5140 0311

F/ +62 21 5140 0313

aldi.prapanca@nacounsels.com

This Client Alert is owned by Nasoetion & Atyanto and subject to copyright protection under the Laws of the Republic of Indonesia and through international treaties, other countries. No part of this Client Alert may be reproduced, licensed, sold, published, transmitted, modified, adapted, publicly displayed, broadcast without the prior written permission of Nasoetion & Atyanto.

 

The information herein is solely intended to provide a general guide to the subject matter and should not be treated as a substitute for specific professional advice for any particular course of action as such information may not suit your specific business and operational requirements. Nasoetion & Atyanto do not accept, and fully disclaim, responsibility for any loss or damage which may result from accessing or relying on this Client Alert. Please seek legal advice for your specific situation. In this regard, you may call the lawyer you usually deal with in Nasoetion & Atyanto.

 

>[1]   Article 1 of the GR 21/2020;

>[2]   Article 2 of the GR 21/2020;

>[3]   Article 1 paragraph (5) of the Regulation 1/2020;

>[4]   Article 16 of the Regulation 1/2020;

>[5]   Article 20 of the Regulation 1/2020; and

>[6]   Article 23 paragraph (1) of the Regulation 1/2020.

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