The Indonesia Financial Services Authority (Otoritas Jasa Keuangan – “OJK”) enacted OJK Regulation No. 14/POJK.04/2019 (“POJK 14/2019”) concerning Amendment to OJK Regulation No. 32/POJK.04/2015 concerning Capital Increase of Public Companies with Pre-Emptive Rights. Interestingly, POJK 14/2019 regulates the provisions regarding public company’s increase of capital without rights issue (“Non-Rights Issue”) that previously governed under OJK Regulation No. 38/POJK.04/2014 concerning Capital Increase of Public Companies without Pre-Emptive Rights and also revokes such regulation. As a result, rules on increase of capital, whether with rights issue or Non-Rights Issue, are now regulated under POJK 14/2019.

The main consideration of OJK to enact POJK 14/2019 is to protect the interest of minority shareholders, particularly in the Non-Rights Issue for purposes other than to improve financial position of public company. Therefore, OJK inserts the following new provisions into POJK 14/2019:

1. General Meeting of Shareholders (“GMS”)

The GMS with regards to Non-Rights Issue other than to improve financial position may be held if the GMS is attended by more than ½ of all shares owned by inde-pendent shareholders and shareholders which are not affiliated with the relevant public company, members of directors or board of commissioners, principal shareholders or controller. POJK 14/2019 does not define who independent shareholders are, but based on the Rule IX.E.1 on Affiliated Party Transaction and Conflict of Interest Transaction (“Rule IX.E.1”), they are shareholders who do not have conflict of interest with the proposed Non-Rights Issue. The abovementioned GMS may validly adopt resolution if the agenda is approved by more than ½ of the said independent and non-affiliated shareholders. Quorum for the second GMS (if the quorum of first GMS is not reached) remains the same, but second GMS may validly adopt resolution if more than ½ of the independent and non-affiliated shareholders who attended the GMS cast their vote. Quorum for the third GMS (if the quorum of second GMS is not reached) will be set by OJK and it may validly adopt resolution if more than 50% of the independent and non-affiliated shareholders who attended the GMS cast their vote.

On the other hand, GMS for Non-Rights Issue to improve financial position shall be held in line with the rules under the OJK’s regulation regarding GMS of public company, namely the quorum is ½ of all shareholders with valid voting rights and affirmative

2. Maximum Percentage

The maximum percentage for Non-Rights Issue other than to improve financial position is still 10% of the issued capital. But POJK 14/2019 now regu-lates that dilution to minority shareholders shall be as minimum as possible. It means OJK might limit the amount a public company expects to raise in Non-Rights Issue for purposes other than to improve financial position to the actual needs of the public company.

In addition to the above, POJK 14/2019 also reaffirms that Non-Rights Issue which constitutes conflict of interest transaction, shall comply with the provisions under Rule IX.E.1, inter alia to announce the descrip-tion of conflict of interest transaction (including the nature of conflict of interest between the parties in the Non-Rights Issue) and summary of fairness opinion report simultaneously with the announcement of GMS to public. If the independent shareholders do not approve the Non-Rights Issue, the public company shall not resubmit the agenda to the GMS within 12 months as of the date of disapproval of the GMS.