Amount of Shares to be Divested through Sale-and-Buy-Back

As discussed in our previous column, newly established companies are not subject anymore to the divestment requirement. Foreign companies (PMA) which were established before the enactment of BKPM regulation number 5/2013 on Guidelines and Procedures on Licensing and Non-licensing of Capital Investment as amended by BPKM regulation number 12/2013 (BKPM Regulation) must divest in case they hold a divestment requirement in their Principle License (Izin Prinsip) and/or in the Business License (Izin Usaha). The amount or percentage of divestment is usually stated in the aforementioned licenses. However if no amount is stated, the foreign company is required to divest a minimum of 10 million rupiah. This is the minimum amount of one shareholder, based on article 22(3)(c) BKPM Regulation.

Sale-and-Buy-Back of Shares: Procedure Set by Minister of Law and Human Rights

Based on the Regulation of the Minister of Law and Human Rights (Minister), number 4 of 2014 regarding the Application Procedures for Approval of Ratification of a Legal Entity and Amendment of Articles of Association and Submission of Notice of Amendment of Articles of Association and Change of Limited Liability Company Data (Minister Regulation), changes in shareholding structure due to the transfer of shares and/or changes in the amount of ownership of shares owned, requires:

1. a deed about the change of shareholding structure, which includes the name and number of shares held by the respective shareholders; and
2
. a deed of transfer of shares in accordance with article 56 of Indonesian Law number 40 of 2007 regarding Limited Liability Companies (Company Law).

The abovementioned documents must be reported to the Minister in accordance with the procedure set out in the Minister Regulation.

Besides the requirements stated in the Minister Regulation and the Company Law, the articles of association of a foreign company may require additional documents and/or set additional procedures for the transfer of shares.

Sale-and-Buy-Back of Shares: Procedure Set by BKPM

The BKPM Regulation requires foreign companies (PMA) to apply for a change of their Principle Permit (Izin Prinsip Perubahan) in the event of the following company changes:

1. the amount of capital and percentage of share ownership;
2
. the names of shareholders and/or
3
. shareholders' country of origin.

Since a sale of shares to an Indonesian party and buy-back by the foreign company (PMA) will result in abovementioned changes, the foreign companies (PMA) are required to apply for a change of their Principle License (Izin Prinsip Perubahan) in accordance with the procedure set out in the BKPM Regulation.

Sale and Purchase Agreement and Deed of Transfer

It should be noted that Share Purchase Agreement (SPA) does not lead in itself to a transfer of rights over the shares in accordance with the Company Law. Therefore, parties can choose either:

1. to include a provision in the SPA that the right of the shares were transferred to the buyer; or
2
. draft and sign the deed of transfer in a separate agreement of the SPA to transfer the rights over the shares.

This column is provided by PNB Law Firm

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