Financial Services Authority Regulation Number 17/POJK.04/2020 Concerning Material Transactions and Changes in Business Activities

COPY
FINANCIAL SERVICES AUTHORITY REGULATION
OF THE REPUBLIC OF INDONESIA
NUMBER 17/POJK.04/2020
CONCERNING
MATERIAL TRANSACTIONS AND CHANGES IN BUSINESS ACTIVITIES BY THE GRACE OF GOD THE ALMIGHTY THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY,

Considering:
a. that with the shift of functions, duties, and authorities for the regulation and supervision of financial services activities in the capital market sector from the Capital Market Supervisory Agency and Financial Institutions to the Financial Services Authority, and in providing protection for shareholders and increasing the quality of information disclosure for public companies that will conduct material transactions and changes in business activities; b. that existing regulations related to material transactions and changes in main business activities are no longer suitable for the needs of a dynamic market and international best practices, and therefore need to be replaced;
c. that based on the considerations mentioned in letters a and b, it is necessary to establish a Financial Services Authority Regulation concerning Material Transactions and Changes in Business Activities;

THE FINANCIAL SERVICES AUTHORITY
OF THE REPUBLIC OF INDONESIA

Recalling:

1. Law Number 8 of 1995 concerning the Capital Market (State Gazette of the Republic of Indonesia Year 1995 Number 64, Supplement to the State Gazette of the Republic of Indonesia Number 3608);
2. Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253);

DECIDES:
To establish: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING MATERIAL TRANSACTIONS AND CHANGES IN BUSINESS ACTIVITIES.

CHAPTER I
GENERAL PROVISIONS

Article 1
In this Financial Services Authority Regulation, the following terms are defined as:

1. Material Transaction is any transaction conducted by a public company or controlled company that meets the value limits as regulated in this Financial Services Authority Regulation.
2. Public Company is an issuer that has conducted a public offering of equity securities or a Public Company.
3. Controlled Company is a company that is controlled directly or indirectly by a Public Company.
4. General Meeting of Shareholders, hereinafter abbreviated as GMS, is the organ of the Public Company that has authority not delegated to the Board of Directors or Board of Commissioners as referred to in the Law concerning Limited Liability Companies and/or the Articles of Association of the Public Company.
5. Business Activity is the business activity recorded in the Articles of Association of the Public Company and has been carried out.
6. Appraiser is an individual who, with their expertise, conducts valuation activities in the capital market.
7. Website is a collection of web pages containing information or data that can be accessed through an internet network system.

CHAPTER II
MATERIAL TRANSACTIONS

First Section
Scope of Transactions

Article 2
A Public Company conducting a Material Transaction in:
a. 1 (one) single transaction; or b. a series of transactions for a specific purpose or activity, must fulfill the provisions as regulated in this Financial Services Authority Regulation.

Second Section
Value Limits

Article 3
(1) A transaction is categorized as a Material Transaction if the transaction value is equal to or greater than 20% (twenty percent) of the Public Company's equity.
(2) Transactions involving the acquisition and divestment of a company or operating segment are categorized as Material Transactions in the event:
a. the transaction value is equal to or greater than 20% (twenty percent) of the Public Company's equity; b. the total assets of the transaction object divided by the total assets of the Public Company equals or exceeds 20% (twenty percent);
c. the net profit of the transaction object divided by the net profit of the Public Company equals or exceeds 20% (twenty percent); or
d. the business revenue of the transaction object divided by the business revenue of the Public Company equals or exceeds 20% (twenty percent).
(3) In the event that the transaction referred to in paragraph (1) and paragraph (2) is conducted by a Public Company with negative equity, the transaction is categorized as a Material Transaction if the transaction value is equal to or greater than 10% (ten percent) of the total assets of the Public Company.

Article 4
(1) The value of a Material Transaction as referred to in Article 3 is calculated based on the latest financial reports from:
a. audited annual financial reports; b. quarterly financial reports accompanied by an accountant's review or audit report; or
c. interim financial reports other than those in letter b that are audited.
(2) In the event that the financial report referred to in paragraph (1) used to determine the value of a Material Transaction has not been submitted to the Financial Services Authority, the Public Company must submit such financial report.

Article 5
The time period between the date of the financial report as referred to in Article 4 and the date of calculating the value of a Material Transaction must be at most 12 (twelve) months before:
a. the date the transaction is executed, for Material Transactions that do not require GMS approval; or b. the date of the GMS execution, for Material Transactions that require GMS approval.

Third Section
Procedures

Article 6
(1) A Public Company intending to conduct a Material Transaction must:
a. use an Appraiser to determine the fair value of the Material Transaction object and/or the fairness of the transaction; b. announce information disclosure regarding every Material Transaction to the public;
c. submit the information disclosure as referred to in letter b and supporting documents to the Financial Services Authority;
d. first obtain GMS approval in the event:

1. the Material Transaction as referred to in Article 3 paragraph (1) and paragraph (2) exceeds 50% (fifty percent);
2. the Material Transaction as referred to in Article 3 paragraph (3) exceeds 25% (twenty-five percent); or
3. the Appraiser's report states that the Material Transaction to be conducted is unfair; and
   e. report the results of the Material Transaction execution in the annual report.
   (2) The time period between the date of valuation as referred to in paragraph (1) letter a and:
   a. the date of the Material Transaction; or b. the date of GMS execution in the event the Material Transaction requires GMS approval, must be at most 6 (six) months.
   (3) The announcement as referred to in paragraph (1) letter b and the submission of information disclosure and documents as referred to in paragraph (1) letter c must be done:
   a. at the latest 2 (two) working days after the date of the Material Transaction; or b. simultaneously with the GMS announcement, in the event the Material Transaction conducted by the Public Company is required to obtain GMS approval. (4) In the event of changes or additions to information as referred to in paragraph (1) letter b, such changes or additions to information must be announced at the latest 2 (two) working days before the GMS execution. (5) The documents as referred to in paragraph (1) letter c must include:
   a. the Appraiser's report; and b. other supporting documents.

Article 7
In the event that a Material Transaction approved in the GMS has not been executed within a period of 12 (twelve) months from the date of GMS approval, the Public Company must:
a. disclose it in the annual report; and b. provide a special explanation regarding the non-execution of the Material Transaction in the nearest GMS.

Article 8
(1) In the event that the Material Transaction as referred to in Article 7 will be executed, the Public Company must obtain GMS approval again for such Material Transaction.
(2) The execution of the Material Transaction as referred to in paragraph (1) must follow the procedures for Material Transactions as regulated in this Financial Services Authority Regulation.

Article 9
In the event that a Material Transaction does not obtain GMS approval, the new Material Transaction plan can only request GMS approval again at least 12 (twelve) months after the GMS execution that did not approve the Material Transaction.

Article 10
(1) In the event that a Material Transaction is an affiliated transaction as referred to in the Financial Services Authority Regulation concerning affiliated transactions and conflict of interest transactions, in addition to fulfilling the provisions as referred to in Article 6 paragraph (1), the Public Company must have adequate procedures to ensure that the affiliated transaction is conducted in accordance with prevailing business practices. (2) The Public Company must retain documents related to the execution of the procedures as referred to in paragraph (1) for the document retention period in accordance with statutory regulations.

Article 11
A Public Company is not required to use an Appraiser as referred to in Article 6 paragraph (1) letter a and obtain GMS approval as referred to in Article 6 paragraph (1) letter d if it conducts Material Transactions as follows:
a. transactions with a Controlled Company whose shares are owned at least 99% (ninety-nine percent) of the paid-up capital of the Controlled Company, or transactions conducted between Controlled Companies whose shares are owned at least 99% (ninety-nine percent) by the Public Company in question; b. loan transactions received directly from banks, venture capital companies, financing companies, or infrastructure financing companies, both domestic and foreign;
c. guarantee transactions provided to banks, venture capital companies, financing companies, or infrastructure financing companies, both domestic and foreign, for loans received directly by the Public Company or Controlled Company;
d. transactions involving the addition or reduction of capital participation to maintain its ownership percentage after the participation is conducted for at least 1 (one) year; e. transactions resulting from court rulings or decisions; f. transactions conducted through an auction process in the event the Public Company is a participant in the auction; g. transactions conducted by a Public Company other than banks that have negative working capital and negative equity; h. transactions conducted by a Public Company that is a financial services institution with a Controlled Company that is a Sharia financial services institution for the development of the aforementioned Sharia financial services institution;
i. transactions conducted by a Public Company in order to fulfill obligations in accordance with statutory regulations; and/or
j. transactions involving restructuring conducted by a Public Company controlled directly or indirectly by the government.

Article 12
(1) In the event that a Public Company is a financial services institution in certain conditions, Material Transactions conducted by the Public Company are not required to fulfill the provisions as referred to in Article 6 paragraph (1) letters a through d. (2) Financial services institutions in certain conditions as referred to in paragraph (1) are determined by the Financial Services Authority. (3) The Public Company must report the Material Transaction as referred to in paragraph (1) to the Financial Services Authority at the latest on the 2nd (second) working day after the date of the Material Transaction.

Article 13
(1) A Public Company is not required to fulfill the provisions as referred to in Article 6 paragraph (1) if it conducts Material Transactions that are Business Activities conducted to generate business revenue and are conducted routinely, repeatedly, and/or continuously. (2) Material Transactions as referred to in paragraph (1) must be disclosed in the annual report or the annual financial report of the Public Company. (3) Disclosure as referred to in paragraph (2) must include information:
a. the transaction object; b. the transacting party; and
c. the transaction value.
(4) In the event that the information disclosure as referred to in paragraph (3) is contained in the annual financial report of the Public Company, the Public Company must provide a reference to the disclosure in the annual financial report in the annual report.

Article 14
In the event of the following conditions:
a. the Material Transaction as referred to in Article 6 paragraph (1) letter d contains an affiliated transaction; b. the Material Transaction contains a conflict of interest; and/or
c. the Material Transaction has the potential to disrupt the continuity of the Public Company's business,
the Public Company must fulfill the provisions as referred to in Article 6 paragraph (1) letters a, b, and c and obtain approval from independent shareholders in the GMS as referred to in the Financial Services Authority Regulation concerning the planning and execution of GMS of Public Companies.

Article 15
(1) The execution of the GMS for Material Transactions as referred to in Article 6 paragraph (1) letter d must fulfill the following provisions:
a. conducted in accordance with the Financial Services Authority Regulation concerning the planning and execution of the General Meeting of Shareholders of Public Companies; b. contains a special agenda item regarding the Material Transaction to be conducted, along with an explanation that includes all information as contained in the information disclosure of the Material Transaction;
c. provides meeting agenda materials regarding the Material Transaction for shareholders, which include:

1. information disclosure as referred to in Article 6 paragraph (1) letter b;
2. the Appraiser's report; and
3. other supporting documents.
   (2) The meeting agenda materials as referred to in paragraph (1) letter c must be available to shareholders since the GMS announcement and submitted to the Financial Services Authority simultaneously with the GMS announcement for the purpose of approving the Material Transaction.

Article 16
(1) In the event that the object of the Material Transaction is shares listed and traded on a stock exchange, but for 90 (ninety) days or more before the Material Transaction were not traded on the stock exchange or their trading was temporarily suspended by the stock exchange, the share price must be determined with the following provisions:
a. for sales, at least at the fair market price or higher than the fair market price determined by the Appraiser, or at least at the average price of daily closing prices on the stock exchange in the last 12 (twelve) months calculated backwards from the last trading day or the day trading was temporarily suspended, using the higher price; or b. for purchases, at most at the fair market price or lower than the fair market price determined by the Appraiser, or at most at the average price of daily closing prices on the stock exchange in the last 12 (twelve) months calculated backwards from the last trading day or the day trading was temporarily suspended, using the lower price. (2) In the event that the object of the Material Transaction is shares of another Public Company listed and traded on a stock exchange and does not cause the Public Company to lose or gain control over the other Public Company, the share price must be determined with the following provisions:
a. for sales, at least at the average price of the highest daily trading prices on the stock exchange during the last 90 (ninety) days before:

1. the date the Material Transaction is executed by the Public Company, if the transaction value meets the criteria as referred to in Article 3; or
2. the date of the GMS announcement, if the value of the Material Transaction meets the criteria as referred to in Article 6 paragraph (1) letter d; or
   b. for purchases, at most at the average price of the highest daily trading prices on the Stock Exchange during the last 90 (ninety) days before:
3. the date the Material Transaction is executed by the Public Company, if the transaction value meets the criteria as referred to in Article 3; or
4. the date of the GMS announcement, if the value of the Material Transaction meets the criteria as referred to in Article 6 paragraph (1) letter d.
   (3) In the event that the object of the Material Transaction is shares of another Public Company listed and traded on a stock exchange and causes the Public Company to lose or gain control over the other Public Company, the share price may refer to the fair market value determined by the Appraiser. (4) The Public Company is not required to appoint an Appraiser as referred to in Article 6 paragraph (1) if the Public Company conducts Material Transactions involving the sale or purchase of shares as referred to in paragraph (2).

Fourth Section
Information Disclosure

Article 17
Information disclosure as referred to in Article 6 paragraph (1) letter b must contain at least:
a. a description of the Material Transaction, at least:

1. the transaction object;
2. the transaction value; and
3. the party conducting the transaction;
   b. an explanation, considerations, and reasons for conducting the Material Transaction and the impact of the transaction on the financial condition of the Public Company;
   c. in the event the Public Company uses an Appraiser to conduct a valuation of the transaction object, a summary of the Appraiser's report at least:
4. party identity;
5. valuation object;
6. purpose of valuation;
7. assumptions and limiting conditions;
8. valuation approaches and methods; and
9. value conclusion;
   d. a summary of the Appraiser's report regarding the fairness of the transaction, at least:
10. party identity;
11. valuation object;
12. purpose of valuation;
13. assumptions and limiting conditions;
14. valuation approaches and methods; and
15. opinion on the fairness of the transaction;
    e. an explanation of the location or address, telephone number, and email address that shareholders can contact to obtain information regarding the Material Transaction; f. a statement by the Board of Directors that the Material Transaction is or is not an affiliated transaction as referred to in the Financial Services Authority Regulation concerning affiliated transactions and conflict of interest transactions; and g. a statement by the Board of Commissioners and Board of Directors that:
16. the Material Transaction does not contain a conflict of interest as referred to in the Financial Services Authority Regulation concerning affiliated transactions and conflict of interest transactions; and
17. all material information has been disclosed and such information is not misleading.

Article 18
(1) In the event that the object of the Material Transaction is:
a. shares of a private company, the information that must be announced at least concerns the financial data of the company, with the provisions:

1. for a company to be established, in the form of a feasibility study made by an Appraiser;
2. for a company that has been established but has not yet conducted Business Activities, in the form of an audited opening balance sheet;
3. for a company that has been established for at least 2 (two) years and has conducted Business Activities, in the form of audited financial reports for the last 2 (two) years; and
4. for a company that has been established but for less than 2 (two) years and has conducted Business Activities, in the form of audited financial reports adjusted to the period of establishment;
   b. assets other than shares, the information that must be announced at least concerns detailed data and types of assets including legal aspects;
   c. operating segments, the information that must be announced at least concerns data related to the operating segment as well as assets and liabilities attached to the operating segment including legal aspects;
   d. funds borrowed or lent, the information that must be announced concerns the parties conducting the Material Transaction, the amount of funds borrowed or lent, and the terms and conditions of borrowing including funds borrowed, interest, duration, guarantees, and prohibited actions by the debtor; e. mortgaged assets, the information that must be announced at least concerns the assets mortgaged by the parties conducting the Material Transaction, the object of the guarantee, guarantee terms, guarantee value, and risks that may occur if the guarantee must be executed by the Public Company; f. corporate guarantees, the information that must be announced at least concerns the parties conducting the Material Transaction, the object guaranteed, guarantee terms, guarantee value, and risks that may occur if the guarantee must be executed by the Public Company; g. purchase or sale of shares that causes the Public Company to gain or lose control over a company, the information that must be announced is the impact of the transaction on the financial condition of the Public Company presented in proforma financial information reviewed by an Accountant; and h. Material Transactions that have the potential to disrupt the continuity of the Public Company's business, the information that must be announced is the proforma impact of the transaction on the financial condition of the Public Company prepared at least based on financial reports with limited review, with the provision that the date of the financial report is the same as the date of the valuation report. (2) The time period between the date of the last audited financial report from the company that is the object of the transaction and the date of the Material Transaction must be at most 6 (six) months.

Article 19
In the event that a Material Transaction is an affiliated transaction as referred to in the Financial Services Authority Regulation concerning affiliated transactions and conflict of interest transactions, in addition to the information disclosure requirements as referred to in Article 17, the Public Company must add the following information:
a. the relationship and nature of the affiliated relationship of the parties conducting the Material Transaction with the Public Company; and b. an explanation, considerations, and reasons for conducting the transaction, compared to if a similar transaction were conducted with a non-affiliated party.

Article 20
(1) In the event that a Public Company conducts a Material Transaction as referred to in Article 6 paragraph (1) letter d involving the issuance of debt securities and/or sukuk where the buyer of the debt securities and/or sukuk is not yet known, information regarding:
a. the party purchasing the debt securities and/or sukuk and the summary of the Appraiser's report as referred to in Article 17 letters a number 3, c, and d, is not required to be disclosed; and b. the amount of funds to be borrowed, the interest rate or yield, and the guarantee value (if any) as referred to in Article 18 paragraph (1) letters d, e, and f, is presented as the maximum value. (2) The information as referred to in paragraph (1) must be announced at the latest 2 (two) working days after the date of issuance of the debt securities and/or sukuk.

Article 21
In the event that a Public Company is the party conducting an auction, the identity of the party transacting with the Public Company as referred to in Article 17 letter a number 3 is not required to be disclosed.

CHAPTER III
CHANGES IN BUSINESS ACTIVITIES

Article 22
(1) A Public Company conducting a change in Business Activity must fulfill the following provisions:
a. first obtain GMS approval; b. use an Appraiser to conduct a feasibility study on the change in Business Activity;

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c. announce information disclosure regarding the plan to change Business Activities to shareholders simultaneously with the announcement of the General Meeting of Shareholders;
d. provide data regarding the change in Business Activities to shareholders from the moment of the General Meeting of Shareholders announcement; and e. submit the information disclosure as referred to in letter c and its supporting documents to the Financial Services Authority no later than at the time of the General Meeting of Shareholders announcement. (2) The convening of the General Meeting of Shareholders as referred to in paragraph (1) letter a must be conducted in accordance with the Financial Services Authority Regulation regarding the plan and convening of the General Meeting of Shareholders of Public Companies. (3) The General Meeting of Shareholders as referred to in paragraph (1) letter a must have a specific agenda item regarding the discussion of the feasibility study on the change in Business Activities of the Public Company.

Article 23
Information disclosure as referred to in Article 22 paragraph (1) letter c must include at least:
a. a summary of the feasibility study on the change in Business Activities, including at least:

1. intent and purpose;
2. assumptions and limiting conditions; and
3. opinion on the feasibility of the change in Business Activities;
   b. the availability of experts related to the change in Business Activities;
   c. explanation, considerations, and reasons for the change in Business Activities;
   d. explanation regarding the impact of the change in Business Activities on the financial condition of the Public Company; and e. other material matters related to the new Business Activities.

Article 24
(1) The provision of data regarding the change in Business Activities as referred to in Article 22 paragraph (1) letter d must include at least:
a. information as required in Article 22 paragraph (1) letter c; and b. the Appraiser's report regarding the feasibility study on the change in Business Activities.
(2) The time period between the date of the feasibility study valuation as referred to in Article 23 letter a and the date of the General Meeting of Shareholders as referred to in Article 22 paragraph (1) letter a must be no longer than 6 (six) months.

Article 25
(1) A Public Company that changes its Business Activities by reducing Business Activities is not required to obtain approval from the General Meeting of Shareholders as referred to in Article 22 paragraph (1) letter a, provided it meets the following provisions:
a. the Business Activities to be reduced have incurred business losses for 3 (three) consecutive years based on the annual financial statements of the Public Company; and b. the reduction of Business Activities will not affect the continuity of the Public Company's business. (2) The Public Company must announce information disclosure regarding the change in Business Activities as referred to in paragraph (1) to the public and submit its supporting documents to the Financial Services Authority no later than the end of the 2nd (second) working day since the decision on the change in Business Activities.

(3) The information disclosure as referred to in paragraph (2) must contain at least:
a. explanation, considerations, and reasons for the change in Business Activities; b. segment operating financial information;
c. management analysis of segment operating losses;
d. management statement that the reduction does not disrupt the continuity of the Public Company's business; and e. the date of the decision on the change in Business Activities.

Article 26
In the event that the change in Business Activities does not receive approval from the General Meeting of Shareholders, a new plan for the change in Business Activities may be requested for General Meeting of Shareholders approval no sooner than 12 (twelve) months after the execution of the General Meeting of Shareholders that did not approve the change in Business Activities.

CHAPTER IV
ANNOUNCEMENT MEDIA

Article 27
(1) Announcements of Material Transactions and changes in Business Activities as regulated in this Financial Services Authority Regulation for Public Companies whose shares are listed on a stock exchange must be conducted through at least:
a. the Public Company's Website; and b. the Stock Exchange's Website.
(2) Announcements of Material Transactions and changes in Business Activities as regulated in this Financial Services Authority Regulation for Public Companies whose shares are not listed on a stock exchange must be conducted through at least:
a. the Public Company's Website; and b. 1 (one) daily newspaper in the Indonesian language with national circulation or a Website provided by the Financial Services Authority.
(3) In the event the announcement is conducted through a daily newspaper as referred to in paragraph (2) letter b, proof of such announcement must be submitted to the Financial Services Authority no later than 2 (two) working days after the date of such announcement.

Article 28
The implementation of announcement provisions through the Website provided by the Financial Services Authority for announcements of Material Transactions and changes in Business Activities as referred to in Article 27 paragraph (2) letter b is determined by the Financial Services Authority.

CHAPTER V
OTHER PROVISIONS

Article 29
(1) In the event a Public Company experiences dilution due to capital increases conducted by a Controlled Company, resulting in the Controlled Company's financial statements no longer being consolidated by the Public Company, the Public Company must follow the provisions as regulated in this Financial Services Authority Regulation, if the result of the calculation:
a. total assets of the Controlled Company in question divided by the consolidated total assets of the Public Company; b. net profit of the Controlled Company in question divided by the consolidated net profit of the Public Company; or
c. business revenue of the Controlled Company in question divided by the consolidated business revenue of the Public Company,
has a value equal to or greater than 20% (twenty percent).
(2) The calculation as referred to in paragraph (1) must be based on audited financial statements with a time period no longer than 12 (twelve) months before:
a. the date the Public Company experiences dilution, if the calculation result as referred to in paragraph (1) is not more than 50% (fifty percent); or b. the date of the General Meeting of Shareholders execution, if the calculation result as referred to in paragraph (1) is more than 50% (fifty percent).

Article 30
In the event a Material Transaction is conducted by:
a. a Controlled Company that is not a Public Company and whose financial statements are consolidated with the Public Company, the Public Company must conduct procedures as regulated in this Financial Services Authority Regulation; or b. a Controlled Company that is a Public Company and whose financial statements are consolidated with the Public Company, only the Controlled Company in question is required to conduct procedures as regulated in this Financial Services Authority Regulation.

Article 31
In the event a change in Business Activities is conducted by a Controlled Company that is a Public Company and whose financial statements are consolidated with the Public Company, only the Controlled Company in question is required to meet the provisions as regulated in this Financial Services Authority Regulation.

Article 32
In the event a change in Business Activities is conducted by a Controlled Company that is not a Public Company and whose financial statements are consolidated with the Public Company, the Public Company is required to meet the provisions as regulated in this Financial Services Authority Regulation to the extent that the contribution of the Controlled Company's revenue is 20% (twenty percent) or more of the Public Company's revenue based on:
a. the Public Company's annual consolidated financial statements, if the Controlled Company's financial statements have been consolidated; or b. the Public Company's reviewed consolidated proforma financial information if the Controlled Company's financial statements have not been consolidated in the Public Company's annual financial statements.

Article 33
In the event of a Material Transaction:
a. which is an affiliated transaction as referred to in the Financial Services Authority Regulation regarding affiliated transactions and conflict of interest transactions, the Public Company is only required to meet the provisions as regulated in this Financial Services Authority Regulation; b. which is a conflict of interest transaction as referred to in the Financial Services Authority Regulation regarding affiliated transactions and conflict of interest transactions, the Public Company is required to meet the provisions as regulated in this Financial Services Authority Regulation and the provisions of the Financial Services Authority Regulation regarding affiliated transactions and conflict of interest transactions;
c. which is a capital increase as referred to in the Financial Services Authority Regulation regarding capital increases of Public Companies, the Public Company is only required to meet the provisions of the Financial Services Authority Regulation regarding capital increases of public companies by providing preemptive rights; and
d. which is a takeover of a Public Company as referred to in the Financial Services Authority Regulation regarding the takeover of Public Companies, is required to meet the provisions as regulated in this Financial Services Authority Regulation and the provisions as regulated in the Financial Services Authority Regulation regarding the takeover of Public Companies.

CHAPTER VI
ADMINISTRATIVE SANCTIONS

Article 34
(1) Any party that violates the provisions as referred to in Article 2, Article 4 paragraph (2), Article 5, Article 6 paragraph (1), paragraph (2), paragraph (3), and paragraph (4), Article 7, Article 8, Article 10, Article 12 paragraph (3), Article 13 paragraph (2), paragraph (3), and paragraph (4), Article 14, Article 15, Article 16 paragraph (1) and paragraph (2), Article 17, Article 18, Article 19, Article 20 paragraph (2), Article 22, Article 23, Article 24, Article 25 paragraph (2) and paragraph (3), Article 27, Article 29, Article 30, Article 31, Article 32, and Article 33 shall be subject to administrative sanctions. (2) Sanctions as referred to in paragraph (1) shall also be imposed on parties who cause the violation as referred to in paragraph (1) to occur. (3) Sanctions as referred to in paragraph (1) and paragraph (2) are imposed by the Financial Services Authority. (4) Administrative sanctions as referred to in paragraph (1) consist of:
a. written warning; b. fine, namely the obligation to pay a certain amount of money;
c. restriction of business activities;
d. suspension of business activities; e. revocation of business license; f. cancellation of approval; and g. cancellation of registration.
(5) The procedure for imposing sanctions as referred to in paragraph (3) is conducted in accordance with the provisions of applicable legislation.
(6) Administrative sanctions as referred to in paragraph (4) letter b, letter c, letter d, letter e, letter f, or letter g may be imposed with or without being preceded by the imposition of an administrative sanction in the form of a written warning as referred to in paragraph (4) letter a. (7) Administrative sanctions in the form of a fine as referred to in paragraph (4) letter b may be imposed separately or together with the imposition of administrative sanctions as referred to in paragraph (4) letter c, letter d, letter e, letter f, or letter g.

Article 35
In addition to administrative sanctions as referred to in Article 34 paragraph (4), the Financial Services Authority may take certain actions against any party that violates the provisions of this Financial Services Authority Regulation.

Article 36
The Financial Services Authority may announce the imposition of administrative sanctions as referred to in Article 34 paragraph (4) and certain actions as referred to in Article 35 to the public.

CHAPTER VII
CLOSING PROVISIONS

Article 37
After 6 (six) months have elapsed since this Financial Services Authority Regulation takes effect, the Decision of the Chairman of the Capital Market and Financial Institution Supervisory Board Number: Kep-614/BL/2011 dated 28 November 2011 regarding Material Transactions and Changes in Main Business Activities, along with Regulation Number IX.E.2 which is its attachment, are repealed and declared invalid.

Article 38
The provisions as referred to in Article 1, Article 2, Article 3, Article 4, Article 5, Article 6, Article 7, Article 8, Article 9, Article 10, Article 11, Article 13, Article 14, Article 15, Article 16, Article 17, Article 18, Article 19, Article 20, Article 21, Article 22, Article 23, Article 24, Article 25, Article 26, Article 27, Article 28, Article 29, Article 30, Article 31, Article 32, and Article 33 shall take effect after 6 (six) months have elapsed since the date of promulgation.

Article 39
This Financial Services Authority Regulation shall take effect on the date of promulgation.

This copy is in accordance with the original
Deputy Director of Legal Consultation and
Harmonization of Banking Regulations 1
Legal Directorate 1
Department of Law signed
Wiwit Puspasari

In order that everyone may know it, order the promulgation of this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.
Determined in Jakarta on 20 April 2020
CHAIRMAN OF THE COMMISSIONERS BOARD
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
WIMBOH SANTOSO

Promulgated in Jakarta on 21 April 2020
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2020 NUMBER 105

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 17 /POJK.04/2020
REGARDING
MATERIAL TRANSACTIONS AND CHANGES IN BUSINESS ACTIVITIES

I. GENERAL
The Financial Services Authority, as an institution having the function as a regulator of the financial services sector, specifically in the field of the capital market, plays a role in regulating and supervising the orderly, fair, transparent, accountable, sustainable, and stable operation of the capital market, as well as protecting the interests of investors, specifically public shareholders. To provide ease for Public Companies that will conduct Material Transactions and Changes in Business Activities under certain conditions and requirements, to improve the quality of information disclosure, market mechanism regularity and fairness, and to provide legal certainty in the context of protecting the interests of investors, specifically public shareholders, the Financial Services Authority needs to improve the provisions regulating Material Transactions and changes in Main Business Activities that are currently in effect. Provisions regulating material transactions and changes in business activities by Public Companies have been regulated in Regulation Number IX.E.2, Attachment of the Decision of the Chairman of the Capital Market Supervisory Board Number: Kep-614/BL/2011 dated 28 November 2011 regarding Material Transactions and Changes in Main Business Activities. Over the past 9 (nine) years, in various other jurisdictions and regulations outside the capital market field, regulations regarding material transactions and changes in business activities have developed dynamically, so it is necessary to improve those regulations by considering the currently applicable provisions with dynamic market needs and best practices in other countries (international best practices). Over the past 9 (nine) years, both the capital market in Indonesia and in other countries have undergone changes and developments, so it is necessary to improve those regulations by considering the currently applicable provisions with running practices and best practices in the capital market, market needs, and international standards.

II. ARTICLE BY ARTICLE
Article 1
Clearly sufficient.

Article 2
The term "Material Transaction" includes among others:

1. participation in business entities, projects, and/or specific business activities;
2. purchase, sale, transfer, use, or exchange of assets or operating segments;
3. acquisition, divestment, and/or use of services;
4. leasing of assets;
5. lending and borrowing of funds including their transfer;
6. pledging Public Company and/or Controlled Company assets for loans from third parties; and
7. providing corporate guarantees.

Letter a
Clearly sufficient.

Letter b
Examples of conditions indicating a series of transactions for a specific purpose or activity include among others:

1. there is dependency and/or continuity between planned transactions;
2. gradual acquisition of other companies' shares for the purpose of control or investment;
3. gradual divestment of company shares for the purpose of divestment resulting in loss of control; and
4. acquisition or divestment of a unit of assets conducted separately (for example, selling a factory by separating its components and selling them to different parties).

Examples of transactions that constitute 1 (one) series:

1. A Public Company buys shares of PT A from Parties X, Y, and Z. This transaction is considered interrelated because the share objects purchased are the same, namely shares of PT A, and it indicates the Public Company's intent to take over PT A.
2. A Public Company buys shares of PT X, PT Y, PT Z from PT A. The purchase cannot be conducted separately because PT A intends to sell PT X, PT Y, PT Z as a package and the business activities of PT X, PT Y, PT Z are interrelated. PT A sets one price for the package.

Examples of transactions that do not constitute a series of transactions:

1. A Public Company buys shares of PT A, PT B, and PT C from Party X (the same party), where the purchase of each share of PT A, PT B, and PT C is conducted separately.
2. A Public Company buys shares of PT A from X, shares of PT B from Y, and shares of PT C from Z at the same time.

Both transactions do not constitute a series of transactions because the transaction objects are different shares.

Article 3
Paragraph (1)
Clearly sufficient.

Paragraph (2)
Letter a
Clearly sufficient.

Letter b
Clearly sufficient.

Letter c
The term "net profit" refers to the current year's net profit.

Letter d
The term "business revenue" refers to revenue derived from the overall results of the main product or service business activities conducted by the company in a period.

Paragraph (3)
Clearly sufficient.

Article 4
Clearly sufficient.

Article 5
Clearly sufficient.

Article 6
Paragraph (1)
Clearly sufficient.

Paragraph (2)
Clearly sufficient.

Paragraph (3)
Letter a
The term "date of Material Transaction" refers to the date of signing the agreement, provided the agreement meets the following conditions:

1. it is final and binding; and
2. it creates rights and obligations for the transacting parties.

Examples of the date of Material Transaction:

1. PT A Tbk sells land to PT B. The agreement contains a suspensive condition that the sale and purchase transaction becomes effective upon PT B obtaining prior approval from the General Meeting of Shareholders regarding the transaction. Thus, the date of the Material Transaction is the date of the execution of PT B's General Meeting of Shareholders approving the transaction.
2. PT A Tbk buys shares of PT X. The agreement contains a suspensive condition that the sale of PT X shares becomes effective upon PT X divesting all its shareholdings (divestment) in PT Z. Thus, the date of the Material Transaction is the date of the divestment of all PT Z shares by PT X.

Letter b
This provision aims for public shareholders to obtain complete information regarding the plan to execute the transaction, so that the announcement of information disclosure and the announcement of the General Meeting of Shareholders must be conducted simultaneously.

The term "submission of documents conducted simultaneously with the General Meeting of Shareholders announcement" means that the submission of documents to the Financial Services Authority is conducted on the same day as the General Meeting of Shareholders announcement.

Paragraph (4)
Clearly sufficient.

Paragraph (5)
Letter a
Clearly sufficient.

Letter b
The term "other supporting documents" includes among others the land sale and purchase agreement document.

Article 7
Clearly sufficient.

Article 8
Clearly sufficient.

Article 9
Clearly sufficient.

Article 10
Paragraph (1)
The term "adequate procedures" includes among others procedures that compare the terms and requirements of the transaction with equivalent transactions conducted between parties that do not have an Affiliation relationship.

Paragraph (2)
Clearly sufficient.

Article 11
Letter a
Clearly sufficient.

Letter b
Clearly sufficient.

Letter c
Clearly sufficient.

Letter d
Clearly sufficient.

Letter e
Clearly sufficient.

Letter f
Clearly sufficient.

Letter g
Clearly sufficient.

Letter h
The development plan for Islamic financial service institutions is formulated in the business plan of the financial service institution that has received approval from the Financial Services Authority.

Letter i
Clearly sufficient.

Letter j
The term "restructuring" refers to restructuring transactions aimed at improving or maintaining business continuity and have received approval from the Ministry overseeing the company in government control.

Article 12
Clearly sufficient.

Article 13
Paragraph (1)
The term "Material Transaction that is a Business Activity" refers to transactions that will be conducted routinely, repeatedly, and/or continuously in the context of conducting new Business Activities that will generate business revenue and have received approval from the General Meeting of Shareholders regarding the change in Business Activities.

Examples of transactions included in Business Activities include among others:
Purchase of raw materials including in operational costs (Operational Expenditure/OPEX).

Examples of transactions not included in Business Activities include among others:
Acquisition of funding to finance Business Activities, purchase of production machinery, purchase of land for investment property, sale of receivables, sale of unproductive assets, leasing assets used for production activities, buying or building assets used for production activities and included in capital expenditure (Capital Expenditure/CAPEX).

Paragraph (2)
Clearly sufficient.

Paragraph (3)
Clearly sufficient.

Paragraph (4)
Clearly sufficient.

Article 14
Letter a
Clearly sufficient.

Letter b
Clearly sufficient.

Letter c
Examples of Material Transactions that have the potential to disrupt the continuity of the Public Company's business include among others:

1. transactions that can cause a proforma decrease in business revenue of 80% (eighty percent) or more; or
2. transactions that can cause the Public Company to incur a proforma net loss.

Article 15
Clearly sufficient.

Article 16
Paragraph (1)
Letter a
Stock exchange includes stock exchanges inside and outside the country.
If the determination of the fair value of the transaction object's share price does not use an Appraiser, the Public Company does not need the Appraiser's opinion on the fairness of the Material Transaction.

Letter b
Clearly sufficient.

Paragraph (2)
Clearly sufficient.

Paragraph (3)
Clearly sufficient.

Paragraph (4)
Clearly sufficient.

Article 17
Letter a
Description of the party conducting the transaction must include at least:

1. name;
2. address, telephone number, facsimile, and email address;
3. current business activities;
4. management;
5. supervision; and
6. shareholder structure.

Letter b
Clearly sufficient.

Letter c
Information regarding the identity of the Party must include at least:

1. name;

2. address, telephone number, facsimile, and email address;

3. current business activities;

4. management;

5. supervision; and

6. shareholder structure.

Letter d
Clearly sufficient.

Letter e
Clearly sufficient.

Letter f
Clearly sufficient.

Letter g
Clearly sufficient.

Article 18
Clearly sufficient.

Article 19
Clearly sufficient.

Article 20
Clearly sufficient.

Article 21
Clearly sufficient.

Article 22
The definition of change in Business Activities includes:

1. addition of Business Activities not yet contained in the Articles of Association and to be conducted;
2. the Public Company intends to conduct Business Activities already stated in the Articles of Association but not yet conducted;
3. reduction of Business Activities already conducted by the Public Company; and
4. replacing all Business Activities already conducted with new Business Activities.

Article 23
Clearly stated.

Article 24
Clearly stated.

Article 25
Paragraph (1)
What is meant by "reduction of Business Activities" is the permanent reduction of some or all of the business activities of an Open Company currently being carried out, by means such as sale, transfer, or cessation of such business activities.

Paragraph (2)
Clearly stated.

Paragraph (3)
Letter a
Clearly stated.

Letter b
Clearly stated.

Letter c
Clearly stated.

Letter d
Clearly stated.

Letter e
What is meant by "date of the decision on change of Business Activities" may include, among others, the date of a Board of Directors meeting that decided to stop business activities.

Article 26
Clearly stated.

Article 27
Clearly stated.

Article 28
Clearly stated.

Article 29
Clearly stated.

Article 30
Clearly stated.

Article 31
Clearly stated.

Article 32
Clearly stated.

Article 33
Clearly stated.

Article 34
Clearly stated.

Article 35
What is meant by "specific actions" includes, among others, the postponement of the implementation of an Extraordinary General Meeting of Shareholders (EGMS).

Article 36
Clearly stated.

Article 37
Clearly stated.

Article 38
Clearly stated.

Article 39
Clearly stated.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6492