Effective Recently: New Regulation POJK 4/2024 Expands Share Ownership Reporting Requirements to Include Encumbrances

The Indonesia Financial Services Authority (“OJK”) issued OJK Regulation (“POJK”) No. 4 of 2024 on Reports on Ownership of or Any Changes in Shares Ownership in Public Companies and Reports on Pledge over Public Companies Shares (“POJK 4/2024”) on 28 February 2024. This regulation has been in effect since 28 August 2024 and it revokes the previous regulation POJK No. 11/POJK.04/2017 on Ownership Reports or Any Changes in Share Ownership of Public Companies (“POJK 11/2017”). As a result, shareholders of public companies in Indonesia must now comply with the new reporting requirements under POJK 4/2024. 

The issuance of POJK 4/2024 was driven by the need to harmonize provisions as mandated in Law Number 8 of 1995 on Capital Markets as amended with Law Number 4 of 2023 on Development and Strengthening the Financial Sector and the need to improve the quality of information disclosure by shareholders and supervision carried out on share ownership reports. It aims to adapt provisions to international standards and best practices applied in other countries, as well as expanding the scope of regulations to cover other types of transactions carried out by public company shareholders, such as encumbering public company shares.

The key changes and requirements regulated in POJK 4/2024 are as follows:

1. Requirement to Report Ownership or Any Changes in Ownership of Public Company Shares

a. Reporting Based on Voting Rights:

POJK 4/2024 clarifies the reporting requirements by stipulating that parties with share ownership that includes voting rights, whether directly or indirectly, in the company must submit a report on ownership of voting rights over shares and any changes in ownership of voting rights over shares of a public company to the OJK. This represents a shift from the previous regulation, which only required reporting of the total number of shares owned.

b. Reporting Obligations:

The following parties must submit reports to the OJK within five business days of any change in ownership of voting rights, whether directly or indirectly, in the company:

i. directors or commissioners holding voting rights;

ii. controlling party of the public company.

iii. parties with at least 5% of voting rights; and

Additionally, parties who experience a decrease in their share ownership with voting rights to below 5% are also required to report the change to the OJK. 

Regarding the contents of the report, they are largely similar to the provisions in POJK 11/2017. However, POJK 4/2024 introduces additional requirements, including: 

i, transaction type; 

ii. information on the classification of shares;

ii. information on shareholder of public companies for the interests of the beneficial owners (if relevant); 

iv. name of the shareholder providing the power of attorney (if relevant); 

v.vdetailed information of an organized group (if relevant); and

vi. statement on whether the controlling shareholder intends to retain control or not (if relevant).

c. Inheritance and Exemptions

Unlike the previous regulation, POJK 4/2024 for the first time requires that shares with voting rights acquired through inheritance must be reported. However, changes in ownership resulting from corporate actions, such as capital increases or share buybacks, are exempt from reporting.

2. Requirement to Report Activities on Public Company Shares Encumbrances

In addition, OJK has introduced new provisions regarding reports on activities involving encumbrances over public company shares. Shareholders must report any shares encumbrance if it involves at least 5% of shares with voting rights. The 5% threshold is calculated from either a single instance or the accumulation of multiple encumbering activities over public company shares. 

The report must be submitted within five business days after the security documents are signed and include details that contains at least: 

1. name, address, and nationality;
2. name of the public company shares being encumbered;
3. number and percentage of shares being encumbered;
4. loan value secured by the encumbered shares;
5. type of transaction/event causing the change in the number of encumbered shares, if there is a change;
6. date and duration of the agreement; and
7. nature of the affiliation between parties involved in the encumbering activity (if relevant).

3. General Rule on Reporting Changes in Share Percentages

Previously, reporting was required for changes in ownership of public company shares of at least 0.5% of the issued shares. POJK 4/2024 broadens this requirement to include any change in the percentage of voting rights or encumbered shares that alters the whole number before the decimal point. For example, a change from 5.1% to 6.2% is reported as a change from 5% to 6%, and a change from 7.8% to 6.2% is reported as a change from 7% to 6%. If the percentage change results in a fraction, it is rounded down to determine if a change has occurred. For instance, a change from 6.1% to 6.99% is not considered a reportable change, as 6.99% is rounded down to 6%.

4. Electronic Reporting to OJK

While POJK 4/2024 indicates an intent to establish an electronic reporting system, the details and timeline for its implementation are not yet provided. Once the electronic reporting system fully operates, the reporting period will be reduced to three business days.

Any party violating the provisions above will be subject to administrative sanctions such as written warning, fine, restriction of business activities, suspension of business activities, revocation of business license, cancellation of approval and cancellation of registration.

By: Nabilla Syahdinda Putri