Client Alert: What is a Share Buyback Without General Meeting of Shareholders’ Approval and How It Works

In response to the recent sharp decline in the Indonesia Composite Stock Price Index (Indeks Harga Saham Gabungan or IHSG), the Financial Services Authority (Otoritas Jasa Keuangan or “OJK”) issued a press release based on Letter No. SP 53/GKPB/OJK/III/2025 dated 19 March 2025 (“Press Release Letter”), confirming that the current market situation constitutes a “significantly fluctuating market condition” under OJK Regulation No. 13 of 2023 on the Policies for Maintaining Capital Market Performance and Stability Under Significantly Fluctuating Market Conditions (“POJK 13/2023”). Accordingly, OJK officially permits publicly listed companies to conduct share buybacks without prior approval from the General Meeting of Shareholders (“GMS”). This policy has been communicated by OJK to the board of directors of the publicly listed company through an official letter dated 18 March 2025, and shall remain valid for a period of six months from the date of such letter.

Under normal circumstances, a share buyback by a publicly listed company must first obtain approval from the GMS as required under OJK Regulation No. 29 of 2023 on the Buyback of Shares Issued by Publicly-Traded Companies. However, under POJK 13/2023 which became effective since 20 July 2023, it provides an exception for such approval in the event of significantly fluctuating market conditions. This exception allows a publicly listed company to conduct share buyback without prior GMS approval, provided it does not violate market manipulation and insider trading rules under the Indonesian capital market regulations.

Article 2 of POJK 13/2023 sets out several conditions under which market fluctuations are deemed significant, including:

1. a decrease in most or all of the prices of securities listed on the stock exchange or market organizers outside the stock exchange in which such a large amount of material occurs suddenly (market crash);
2. the capital market is under significant pressure;
3. regional and global economic conditions that are experiencing pressure and deceleration so as to have a significant impact or potential to have a significant impact on the stability of the capital market;
4. occurrence of natural or non-natural disasters that have an impact on the pressure on the stability of the capital market;
5. such a large redemption of shares or investment product participation units and material in nature which occurs suddenly (crash), the cessation of securities trading for most of the securities portfolios of investment products at the stock exchange, or the closing of the stock exchanges in which most of the securities portfolios of investment products are traded;
6. trading system failures or transaction settlements which cause the market to fluctuate significantly; and/or
7. other conditions as established by the OJK.

In this context, the Press Release Letter expressly confirms that the ongoing situation falls within the scope of Article 2(g) as “other conditions as determined by OJK.”

Under Article 8 of POJK 13/2023, the maximum number of shares that may be bought back under these circumstances is 20% of the publicly listed company’s paid-up capital.

To initiate the buyback without GMS approval, a publicly listed company must first submit an information disclosure to both the OJK and the stock exchange and announce the plan to the public through:

1. the website of the stock exchange and the website of publicly listed companies, for a publicly listed company whose securities are listed on the stock exchange; or
2. a nationally circulated daily newspaper in the Indonesian language or a website designated by OJK, along with the company’s own website, for a publicly listed company whose securities are not listed on the stock exchange.

Disclosure may be made once OJK declares that significantly fluctuating market conditions exist and must be submitted no later than seven trading days after OJK determines that such conditions have ended.

Based on Article 9 paragraph (5) of POJK 13/2023, the disclosure of information must contain the following information:

1. the estimated schedule, the estimated cost of the buyback, and the estimated nominal value of all shares to be bought back;
2. the estimated decrease in revenue of the publicly listed company as a result of the implementation of the buyback of shares and the impact on the financing cost of the publicly listed company;
3. pro forma earnings per share of the publicly listed company after the plan to buyback the shares, by taking into account the decline in revenue;
4. limitation of share price for the buyback of shares;
5. limitation on the period of buyback of shares;
6. the method to be used in order to buyback the shares; and
7. management discussion and analysis on the effect of the buyback of shares on the business activities and growth of the publicly listed company in the future.

In addition, Article 11 of POJK 13/2023 prohibits the following parties from conducting transactions involving the shares of a publicly listed company during the share buyback period or on the same day as the sale of shares resulting from the buyback conducted by the publicly listed company through the stock exchange:

1. a commissioner, director, employee, and principal shareholder of the publicly listed company;
2. an individual who due to his/her position or profession or due to his/her business relationship with a publicly listed company allows the person to obtain insider information; or
3. a party who within the last six months is no longer a party as referred to in letter a and letter b.

A report on the buyback results must be submitted to OJK on the same day the transaction is executed, following the trading close. This reporting must continue throughout the buyback period until its conclusion.