Navigating Indonesia’s New Ownership Reporting Regulation: What You Need to Know

In an effort to align with international standards and enhance transparency within the market, the Financial Services Authority of Indonesia (Otoritas Jasa Keuangan, or OJK) has introduced a significant update to the ownership reporting requirements for public companies. On 28th February, 2024, the OJK issued Regulation Number 4 of 2024 (POJK.4/2024), replacing the previous Regulation Number 11/POJK.04/2017.

This new regulation, which comes into force on 28th August, 2024, marks a substantial shift in how share ownership and voting rights are reported in Indonesia.

The new regulation introduces several important changes, including:

• Focus on Voting Rights: The reporting emphasis has shifted from the total number of shares held to the total number of voting rights held by shareholders. This change aligns with international best practices and emphasises the importance of voting power rather than mere ownership of shares.
• Mandatory Reporting of Share Pledges: In line with global standards, shareholders must now report any share pledging activities. This requirement ensures greater transparency in situations where share encumbrances could lead to changes in control within a company.
• Shortened Reporting Period: The reporting period has been shortened, and the regulation now requires percentage unit reporting instead of the previous 0.5% share movement threshold. This change is designed to make the reporting process more precise and reflective of meaningful changes in ownership.

These updates represent a significant shift in regulatory focus and underscore the OJK’s commitment to aligning Indonesia’s financial regulations with those of other major markets.

Under the new regulation, members of the board of directors or commissioners, as well as any party holding a threshold position, are required to report their ownership of voting rights and any changes to the OJK. The specific thresholds include:

• Ownership of Voting Rights at 5% or More: Any party holding voting rights amounting to at least 5% of the public company’s outstanding shares must report this to the OJK.
• Reduction Below 5%: If a party’s ownership of voting rights falls below the 5% threshold, this must also be reported.
• Percentage Unit Changes: Any change in the percentage of voting rights – measured by whole numbers – compared to the previous ownership level must be reported. This is similar to the disclosure requirements under Hong Kong’s Securities and Futures Ordinance Part XV.

For example:

• A change from 5.1% to 6.2% (from 5% to 6%) requires reporting.
• A change from 6.1% to 6.99% does not trigger a reporting obligation since the percentage remains rounded down to 6%.
• A change from 5.9% to 6.0% (a 0.1% change) is reportable under the new rules.

The regulation requires careful calculation of ownership percentages, taking into account multiple voting rights owned by an investor while excluding treasury shares from the total. This ensures that the reported figures accurately reflect the investor’s influence over the company.

Certain changes in voting rights ownership do not trigger a reporting obligation, including:

• Corporate Actions: If a change in ownership is solely due to corporate actions like additional capital with or without pre-emptive rights, or actions carried out by the public company without any transactions by shareholders, reporting is not required.

The required report must include:

• Details of the reporting person.
• The name of the public company.
• The number of shares and percentage of voting rights before and after the transaction.
• The event that triggered the reporting obligation.
• Transaction details, including the date, type, and price.
• Information on any organisational group involved.

The report must be submitted in accordance with the format specified in Appendix I of the regulation, and it will be made publicly available.

Reports must be submitted within five working days after the reporting threshold is crossed. If the deadline falls on a holiday, the report is due the next working day. Currently, the OJK has not established an electronic reporting system, so reports must be submitted via printed or electronic documents. However, once an electronic system is operational, the reporting deadline will be shortened to three business days.

The regulation also introduces new reporting requirements for encumbered shares (pledged as collateral). Shareholders must report within five business days after signing security documents if:

• The encumbrance affects at least 5% of shares with voting rights.
• There is any change in the percentage of encumbered shares.

The report for encumbered shares must be prepared in accordance with the format listed in Attachment II of the regulation.

Regulation POJK.4/2024 will take effect on 28th August, 2024, at which point it will revoke the previous regulation (POJK 11/2017). Non-compliance can result in administrative sanctions from the OJK, including written warnings, fines, and more severe penalties such as suspension or revocation of licenses.

The shift from shares to voting rights in reporting, coupled with the exclusion of treasury shares and the need to account for fractional percentage movements, adds layers of complexity to compliance. Additionally, the inclusion of repurchase agreements under the regulation means that parties involved must be diligent in their disclosures.

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Navigating the complexities of Indonesia’s new ownership reporting regulation requires precision and expertise. Funds-Axis is here to help. Contact us today to learn how our automated solutions can streamline your compliance efforts and keep you ahead of regulatory changes.