New Mandatory Reporting for Shareholders of Public Companies (Indonesia)

New calculation formula based on voting rights

One of the most substantive changes introduced by POJK 4/2024 is the revision of the calculation method for determining the shares that are subject to reporting. Historically, reporting obligations were triggered based on the number of shares owned. However, under POJK 4/2024, the focus shifts to the percentage of shares with voting rights held by a shareholder. Consequently, shares without voting rights are not considered, even if they represent more than 5%.

Under POJK 4/2024, the following parties are subject to the ownership reporting requirement:

1. Any directors or commissioners holding shares with voting rights, either directly or indirectly;
2. Any party, either directly or indirectly, who:
   1. Holds at least 5% shares with voting rights, or
   2. Controls the public company
      • Under POJK 4/2024, for reporting purposes, “controller” of a public company is defined as a controller with ownership of either more or less than 5%.
      • This is a different take on defining controller of a public company. For comparison, under OJK Regulation No. 9/POJK.04/2018 on Takeover of Public Companies, “controller” is defined as a party(ies) that meets any of the following criteria:
        • owns, directly or indirectly, more than 50% of the total issued and paid-up share capital; or
        • has the ability to, directly or indirectly, determine, in whatever manner, the management and/or the policies of the public company.

For shareholders, this means a more nuanced approach to compliance, where the actual influence on company decisions, rather than just the number of shares, determines reporting obligations. Shareholders of a public company, particularly those holding shares with varying voting rights, must now consider their total voting power rather than merely their share quantity. For instance, in a scenario where a public company’s shares are divided into classes with differing voting rights, a shareholder may control a significant portion of voting power without holding a commensurate number of shares. This regulatory shift aims to ensure that the reporting regime more accurately reflects the shareholder’s true influence on corporate governance.

In line with the new calculation formula, the information required for reporting has also been adjusted. While the list of required information remains largely the same, there are some new items that must also be disclosed, including:

1. The number of shares and the corresponding voting rights percentage, both before and after the transaction
2. The type of transaction
3. The number of shares purchased, sold, or transferred
4. Details on the share classification
5. If the report is made by the controller of the public company, the controller must state whether it will retain control or not

New reporting requirement for share encumbrance

In addition to altering the calculation method for reporting obligations, POJK 4/2024 introduces a new requirement for reporting of share encumbrances in a public company. Under this provision, any form of share encumbrances must be reported to the OJK. This addition to the reporting requirement appears to increase transparency around the obligations and risks associated with shares in public companies.

The reporting for share encumbrance must follow the form that is provided in POJK 4/2024, which include the disclosure of:

1. The identity of the shareholders (name, residence, and nationality)
2. The name of the public company whose shares are encumbered
3. The number of shares and the percentage of share ownership that are encumbered
4. The value of the loan secured by the encumbered shares
5. The type of transaction or event that resulted in a change in the number of encumbered shares, if there is a change
6. The date and term of the agreement
7. The nature of the affiliate relationship between the parties involved in the encumbrance, if any

As reporting on share encumbrances is a new requirement, shareholders are advised to closely monitor any encumbrances and ensure that all necessary reports are submitted to the OJK within the required timeframe. From a lenders’ perspective, lenders may now consider including encumbrance reporting to the OJK as conditions for the financing they provide.

Deadlines and reporting portal

While POJK 11/2017 allowed shareholders 10 calendar days to report changes, POJK 4/2024 reduces this timeframe to 5 business days only. This new timeline applies to both changes in ownership and share encumbrance reporting.

POJK 4/2024 also mandates the OJK to create an electronic portal where shareholders can submit their reports online. Although, as of the date of this alert, the OJK has not yet launched the online portal, and no technical guidelines have been provided. This will be a development that remains to be seen in the upcoming months.

Once the online portal is operational, the 5 business days deadline will be further shortened to 3 business days.

Exceptions

Under POJK 4/2024, changes in ownership of voting rights as a result of the following events are exempted from the reporting requirements:

1. Corporate actions by the public company in the form of capital increases with or without granting pre-emptive rights (rights issue or private placement)
2. Corporate actions by the public company that do not involve shareholder transactions

Sanctions

Similar to POJK 11/2017, POJK 4/2024 prescribes a range of administrative sanctions for non-compliance, including:

1. Written warning
2. Administrative fines
3. Limitation of business activities
4. Suspension of business activities
5. Revocation of business licenses
6. Revocation of approvals
7. Revocation of registrations

Following another similar approach from POJK 11/2017, the OJK reserves the right to impose any other sanctions it deems necessary and to publicize and announce these sanctions to the public.

Conclusion

The issuance of POJK 4/2024 stems from the broader mandate established by Law No. 4 of 2023 on the Development and Strengthening of the Financial Sector, which seeks to modernize Indonesia’s financial regulatory framework. POJK 4/2024 underscores the importance of transparency, accountability, and robust supervision within the financial markets. By implementing more stringent reporting requirements and focusing on voting rights, the OJK is ensuring that the market operates with greater clarity and fairness, fulfilling its legislative intent to enhance market integrity.

Moreover, the issuance of POJK 4/2024 reflects the OJK’s strategic initiative to enhance the quality of information disclosure by specific shareholders and to strengthen the oversight of share ownership reports. These targeted measures are designed to ensure that Indonesia's regulatory framework not only meets global benchmarks but also provides comprehensive coverage of all relevant shareholder activities within public companies.