GUIDELINES

FOR THE SEPARATION

OF SHARIA BUSINESS UNITS

Directorate of Sharia Banking Regulation and Licensing

GUIDELINES

FOR THE SEPARATION OF SHARIA BUSINESS UNITS

Directorate of Sharia Banking Regulation and Licensing

Guidelines for the Separation of Sharia Business Units

i

Directorate of Sharia Banking Regulation and Licensing

FOREWORD

Peace be upon you.

We praise Allah SWT for all the blessings and guidance bestowed upon us with the publication of the Sharia Business Unit (SBU) Separation Guide. This guide serves as a publication medium presenting systematic information regarding the procedures for SBU separation in accordance with Financial Services Authority Regulation (POJK) Number 59/POJK.03/2020 concerning Requirements and Procedures for the Separation of Sharia Business Units and other related regulatory provisions. With the publication of this SBU Separation Guide, it is hoped that it will facilitate readers, particularly Conventional Commercial Banks (CCBs), that intend to separate their SBUs.

The material presented covers information on what CCBs must prepare and undergo at each stage to obtain approval or consent for SBU separation. Furthermore, to carry out SBU separation, it is recommended that readers first understand the relevant provisions regarding separation, specifically the obligations that must be met and the sanctions that will result if they are not met.

Given the limitations of this SBU Separation Guide, we hope that the material presented can provide optimal benefits to readers.

Peace be upon you.

Jakarta, December 2020

Deden Firman Hendarsyah

Director of Sharia Banking Regulation and Licensing

Guidelines for the Separation of Sharia Business Units

ii

Directorate of Sharia Banking Regulation and Licensing

FOREWORD ..................................................................................................i

TABLE OF CONTENTS ....................................................................................ii

LIST OF ABBREVIATIONS................................................................................iii

I. INTRODUCTION .........................................................................................1

A. Background................................................................................1

B. List of Regulations ...........................................................................2

II. SEPARATION OF SBU THROUGH ESTABLISHMENT OF A SHARIA COMMERCIAL BANK .......4

A. Principle Approval........................................................................4

B. Business License................................................................................8

III. SEPARATION OF SBU THROUGH TRANSFER OF RIGHTS AND OBLIGATIONS

TO A SHARIA COMMERCIAL BANK ...................................................................11

A. Separation Plan.....................................................................11

B. Separation Approval................................................................16

IV. SEPARATION OF SBU THROUGH TRANSFER OF RIGHTS AND OBLIGATIONS

TO A CCB UNDERGOING A CHANGE IN BUSINESS ACTIVITY

TO BECOME A SHARIA COMMERCIAL BANK..................................................................19

A. Application for License to Change Business Activity...............................19

B. OJK Approval ..........................................................................19

V. BANKING SYNERGY..............................................................................20

A. Separation of SBU through Establishment of a Sharia Commercial Bank.......20

B. Separation of SBU through Transfer of Rights and Obligations

to a Sharia Commercial Bank .........................................................................21

VI. RELATED PROVISIONS..............................................................................22

A. Ownership of Commercial Bank Shares.................................................22

B. Capital Participation by Local Government-Owned Banks .......................22

C. Banks that are Public Companies..........................................................22

VII. CLOSING .................................................................................................23

Guidelines for the Separation of Sharia Business Units

iii

Directorate of Sharia Banking Regulation and Licensing

LIST OF ABBREVIATIONS

CCB Conventional Commercial Bank

BUK Bank based on Business Activities

SCB Sharia Commercial Bank

BUKG Banking Business Group

OJK Financial Services Authority

BI Regulation Bank Indonesia Regulation

POJK Financial Services Authority Regulation

GMS General Meeting of Shareholders

BI Circular Bank Indonesia Circular

OJK Circular Financial Services Authority Circular

Law Act

SBU Sharia Business Unit

Guidelines for the Separation of Sharia Business Units

Directorate of Sharia Banking Regulation and Licensing

I. INTRODUCTION

A. Background

Sharia banking in Indonesia has continued to develop following the issuance of Act Number 21 of 2008 concerning Sharia Banking (Sharia Banking Act), which provides a stronger legal basis for Sharia banks in Indonesia. The Sharia Banking Act details the legal basis and types of business that can be operated and implemented by Sharia banks in Indonesia. This Act also directs that CCBs can operate based on Sharia principles by establishing an SBU. An SBU is a unit owned by a CCB for the purpose of conducting business activities based on Sharia principles.

In accordance with the mandate of the Sharia Banking Act, further provisions regarding separation are regulated in Bank Indonesia Regulation (PBI) Number 11/10/PBI/2009 concerning Sharia Business Units (PBI SBU) as last amended by PBI Number 15/14/PBI/2013.

In its development, OJK, which has been the supervisory authority for the financial services industry (banking, capital markets, and non-bank financial industries) since 2011, has issued strategic policies aimed at creating a stable and competitive national banking system capable of responding to challenges posed by the increasingly dynamic and complex development of the financial services industry. One of the strategic policies issued by OJK is to encourage the banking industry to undertake consolidation efforts to create a strong banking structure, increase business scale, and enhance competitiveness through innovation capabilities, while contributing significantly to the national economy.

In this regard, the formulation of POJK concerning Requirements and Procedures for the Separation of Sharia Business Units (POJK SBU Separation) was carried out to refine the requirements and procedures for SBU separation so that they align with OJK's strategic policies. The refinement of these provisions is intended as an effort to strengthen the SCB resulting from the separation so that it does not experience a decline in performance and is expected to continue to grow sustainably.

To facilitate CCBs intending to separate their SBU in identifying the separation stages, the issuance of POJK SBU Separation is also accompanied by a guidebook systematically compiled regarding the procedures for SBU separation. It should be noted that this guidebook is a compilation of various regulations related to separation and is not a legal product.

B. List of Regulations

This guidebook refers to regulatory provisions related to carrying out corporate actions in the form of SBU separation. In the event of changes, the content of this guidebook will adjust to changes in those regulatory provisions. The regulatory provisions include:

No. Regulation Number Subject

1. Act Number 40 of 2007 Limited Liability Companies (Limited Liability Company Act)

2. PBI Number 11/3/PBI/2009 Sharia Commercial Banks (PBI SCB)

3. BI Circular 11/9/DPbS Sharia Commercial Banks (BI Circular SCB)

4. PBI Number 11/10/PBI/2009 Sharia Business Units (PBI SBU)

5. BI Circular Number 11/28/DPbS Sharia Business Units (BI Circular SBU)

6. POJK Number

64/POJK.03/2016

Change of Business Activity of Conventional Banks to Sharia Banks

(POJK Change of Business Activity)

7. OJK Circular Number 2

/SEOJK.03/2017

Change of Business Activity of Conventional Commercial Banks to Sharia Commercial Banks (OJK Circular Change of Business Activity)

8. PBI Number 19/13/PBI/2017 Integrated Licensing Related to Operational Relations between Commercial Banks and Bank Indonesia (PBI Integrated Licensing)

9. POJK Number

28/POJK.03/2019

Banking Synergy in One Ownership for the Development of Sharia Banking (POJK Banking Synergy)

Guidelines for the Separation of Sharia Business Units

Directorate of Sharia Banking Regulation and Licensing

Sharia Banking (POJK Banking Synergy)

10. POJK Number

37/POJK.03/2019

Transparency and Publication of Bank Reports (POJK Transparency and Publication of Bank Reports)

11. OJK Circular Number

10/SEOJK.03/2020

Transparency and Publication of Reports of Sharia Commercial Banks and Sharia Business Units (OJK Circular Transparency and Publication of SCB and SBU Reports)

12. POJK Number

41/POJK.03/2019

Merger, Consolidation, Takeover, Integration, and Conversion of Commercial Banks (POJK MCI)

13. POJK Number

12/POJK.03/2020

Consolidation of Commercial Banks (POJK Consolidation of Commercial Banks)

14. PBI Number 22/8/PBI/2020 Bank Indonesia Integrated Licensing Through Licensing Front Office (PBI Licensing Front Office)

15. POJK Number

59/POJK.03/2020

Requirements and Procedures for the Separation of Sharia Business Units (POJK SBU Separation)

Directorate of Sharia Banking Regulation and Licensing

II. SEPARATION OF SBU THROUGH ESTABLISHMENT OF A SHARIA COMMERCIAL BANK

Separation of an SBU through the establishment of an SCB is done with permission from OJK. The establishment of an SCB is carried out by a CCB that owns an SBU. The granting of permission for the establishment of an SCB resulting from separation by OJK is done in 2 (two) stages, namely principle approval and business license.

In order to establish an SCB to separate the SBU, in principle, it refers to PBI SCB; however, in the event there are specific provisions regulated in POJK SBU Separation, the establishment of the SCB refers to POJK SBU Separation.

A. Principle Approval

1. Drafting the Separation Plan

a. The Board of Directors of the CCB owning the SBU drafts the Separation Plan.

b. In drafting the Separation Plan, the Board of Directors of the CCB owning the SBU needs to pay attention to the scope of information as stipulated in Article 10 of POJK SBU Separation.

c. In drafting the Separation Plan, the Board of Directors of the CCB owning the SBU coordinates with the OJK supervisor regarding the development of the Separation Plan draft to ensure that the Separation Plan complies with POJK SBU Separation and other related regulatory provisions.

d. Before being submitted to OJK as an attachment to the application for principle approval, the Board of Commissioners of the CCB owning the SBU provides approval for the Separation Plan drafted by the Board of Directors as regulated in Article 8 paragraph (1) of POJK SBU Separation.

2. Submission of Application for Principle Approval for the SCB Resulting from Separation

The Separation Plan draft in item 1 above is one of the required documents in the application for principle approval for the establishment of an SCB in the context of Separation. In addition to the Separation Plan, other documents must also be submitted in the application for principle approval. In submitting the application, the CCB owning the SBU submits the documents as referred to in Article 8 of POJK SBU Separation completely. In addition, the documents submitted also include the application documents for principle approval for the establishment of an SCB regulated in Section II Letter A of BI Circular SCB.

The establishment of an SCB in the context of Separation may result in the original CCB and the SCB resulting from Separation forming a BUKG. In the event that the separation of the SBU by establishing a new SCB results in the formation of a BUKG, the CCB owning the SBU as the parent company or the parent company executor submits documents to OJK as referred to in Article 6 paragraph (1) of POJK Consolidation of Commercial Banks.

3. Announcement of the Summary of the Separation Plan

a. In the process of establishing an SCB in the context of Separation, there is an obligation for the CCB owning the SBU to make announcements regarding material information or facts and the corporate action of Separation.

1) Based on POJK Transparency and Publication of Bank Reports, Separation is material information or facts that must be announced. Therefore, the Board of Directors of the CCB owning the SBU intending to carry out Separation announces the summary of the Separation Plan to the public through the website of the CCB owning the SBU no later than 2 (two) working days after the occurrence of material information or facts as regulated in Article 27 paragraph (2) of POJK Transparency and Publication of Bank Reports. In this case, the occurrence of material information or facts is marked by the obtaining of principle approval.

2) Based on the Limited Liability Company Act, the summary of the Separation Plan is announced in at least 1 (one) newspaper and in writing to the employees of the CCB owning the SBU within a period of at least 30 (thirty) days before the convening of the GMS as regulated in Article 127 paragraph (2) of the Limited Liability Company Act.

b. The announcement of the summary of the Separation Plan also contains a notification that interested parties can obtain the Separation Plan at the office of the CCB owning the SBU from the date of announcement until the date the GMS is held as regulated in Article 127 paragraph (3) of the Limited Liability Company Act.

c. The CCB owning the SBU submits the Separation Plan as material information or facts to the OJK supervisor no later than 2 (two) working days after the principle approval is received by the CCB owning the SBU, using a format referring to Section III of the Appendix of OJK Circular Transparency and Publication of SCB and SBU Reports.

4. Objections by Creditors

Announcements to the public are not only intended for transparency but also to provide an opportunity for parties related to the CCB owning the SBU regarding the Separation Plan to be implemented. One interest that needs to be protected in the Separation is the interest of creditors. In the Separation process, creditors have certain rights regulated in regulatory provisions as follows.

a. Creditors can submit objections to the CCB owning the SBU within a period of at most 14 (fourteen) days after the announcement of the summary of the Separation Plan to the public as regulated in Article 127 paragraph (4) of the Limited Liability Company Act.

b. If within the period of at most 14 (fourteen) days creditors do not submit objections, creditors are deemed to have approved the Separation as regulated in Article 127 paragraph (5) of the Limited Liability Company Act.

c. In the event that creditor objections cannot be resolved by the Board of Directors of the CCB owning the SBU by the date the GMS is held, the objections must be submitted in the GMS for resolution as regulated in Article 127 paragraph (6) of the Limited Liability Company Act.

d. Resolution by the Board of Directors or GMS can be in the form of resolving objections or establishing a resolution scheme agreed upon with creditors, which is contained in a deed made by a notary in the Indonesian language.

e. Until such resolution is reached, Separation cannot be implemented as regulated in Article 127 paragraph (7) of the Limited Liability Company Act.

5. Implementation of GMS

The GMS is one of the important processes in decision-making to carry out Separation. In accordance with Article 127 paragraph (1) of the Limited Liability Company Act, the GMS in the context of Separation is carried out according to the GMS procedures regulated in Article 87 paragraph (1) and Article 89 of the Limited Liability Company Act. The CCB owning the SBU carries out the GMS in the context of Separation as follows.

a. The convening of the GMS is done within a period of at least 14 (fourteen) days before the date the GMS is held, without counting the convening and the date of the GMS as regulated in Article 82 paragraph (1) of the Limited Liability Company Act. The convening of the GMS is done by registered letter and/or advertisement in a newspaper. The GMS invitation must state the date, time, place, and agenda of the meeting, accompanied by a notification that the material for the corporate action of Separation is available at the office of the CCB owning the SBU from the date of convening the GMS until the date the GMS is held as regulated in Article 82 paragraph (3) of the Limited Liability Company Act. In addition, in accordance with Article 83 paragraph (4) of the Limited Liability Company Act, the CCB owning the SBU provides copies of the corporate action material for Separation to shareholders free of charge if requested.

b. The GMS to approve Separation can be held if at least 3/4 (three-quarters) of the total shares with voting rights are present or represented at the GMS, and the decision is valid if approved by at least 3/4 (three-quarters) of the votes cast, unless the articles of association determine a larger quorum for attendance and/or provisions regarding GMS decision-making requirements as regulated in Article 89 paragraph (1) of the Limited Liability Company Act. Furthermore, in accordance with Article 87 paragraph (1) of the Limited Liability Company Act, the decision of the GMS is taken based on deliberation for consensus.

c. The GMS of the CCB owning the SBU approves the following:

1) The Separation to be carried out;

2) The Separation Plan;

3) The concept of the Separation Deed; and

4) The draft deed of establishment of the SCB resulting from Separation.

d. Shareholders who do not agree with the GMS decision can only use their right to request their shares to be purchased at a fair price by the CCB owning the SBU as regulated in Article 62 paragraph (1) of the Limited Liability Company Act.

e. The use of this right does not stop the implementation process of Separation as regulated in Article 126 paragraph (3) of the Limited Liability Company Act.

f. The GMS approval is recorded in a Separation Deed made by a notary in the Indonesian language as regulated in Article 128 paragraph (1) of the Limited Liability Company Act.

6. Legal Entity Approval of the SCB Resulting from Separation

a. The Board of Directors of the SCB owning the SBU submits an application for legal entity approval of the SCB resulting from Separation to the Minister no later than 60 (sixty) days from the date of the deed of establishment of the SCB resulting from Separation, accompanied by a copy of the Separation Deed as regulated in Article 10 paragraph (1) of the Limited Liability Company Act.

b. After all requirements are met completely, the Minister issues a decision regarding the approval of the legal entity of the Company, signed electronically, no later than 14 (fourteen) days as regulated in Article 10 paragraph (6) of the Limited Liability Company Act.

B. Business License

1. Submission of Application for Business License

After the GMS approves the Separation, the next step for the CCB owning the SBU is to submit an application for a business license to OJK. It should be noted that principle approval is only valid for 6 (six) months from the date the principle approval is granted, including the GMS process as described above.

The CCB owning the SBU submits the application for a business license as follows:

a. The CCB owning the SBU submits the application for the business license of the SCB resulting from Separation no later than 6 (six) months from the date the principle approval is granted, accompanied by documents as regulated in Article 13 of POJK SBU Separation. In addition, the documents submitted also include the application documents for the business license of the SCB resulting from Separation regulated in Section II Letter B of BI Circular SCB.

b. The CCB owning the SBU submits written information to Bank Indonesia regarding the application for a business license to OJK simultaneously with the submission of the application for the business license of the SCB resulting from Separation to OJK, as regulated in Article 5 paragraph (2) of PBI Integrated Licensing.

2. Implementation of Business Activities of the SCB Resulting from Separation

a. The SCB resulting from Separation that has obtained a business license from OJK submits a written application to Bank Indonesia to obtain the necessary licenses as regulated in Article 6 paragraph (2) of PBI Integrated Licensing.

The licensing application to Bank Indonesia is submitted through the Bank Indonesia Licensing Front Office in accordance with PBI Licensing Front Office.

Bank Indonesia regulations governing the organization of payment systems and financial market infrastructure organized by Bank Indonesia (BI-RTGS System, BI-SSSS, BI-ETP, and SKNBI) have regulated changes in membership status in the BI-RTGS, BI-SSSS, BI-ETP, and SKNBI systems due to the separation of the SBU from the CCB.

b. The SCB resulting from Separation carries out business activities no later than 20 (twenty) working days from the date the business license for the SCB resulting from Separation is obtained as regulated in Article 17 paragraph (1) of POJK SBU Separation.

The implementation of business activities of the SCB resulting from Separation is marked by the transfer of rights and obligations of the SBU from the CCB to the SCB resulting from Separation.

c. The implementation of business activities of the SCB resulting from Separation is reported to OJK no later than 7 (seven) working days after the date of implementation, attaching the financial report of the SCB resulting from Separation as regulated in Article 17 paragraph (3) of POJK SBU Separation.

3. Revocation of SBU Business License

After the SCB resulting from Separation obtains the transfer of rights and obligations from the CCB, the SBU business license owned by the CCB is revoked. The revocation of the SBU business license is carried out as follows.

a. The CCB submits an application for revocation of the SBU business license to OJK no later than 7 (seven) working days after the rights and obligations of the SBU are transferred to the SCB as regulated in Article 18 paragraph (1) of POJK SBU Separation.

b. The application for revocation of the SBU business license is attached with documents as regulated in Article 18 paragraph (2) of POJK SBU Separation.

Directorate of Sharia Banking Regulation and Licensing

III. SEPARATION OF SBU THROUGH TRANSFER OF RIGHTS AND OBLIGATIONS

TO A SHARIA COMMERCIAL BANK

POJK SBU Separation regulates another mechanism to carry out SBU Separation, namely by transferring the rights and obligations of the SBU to an existing SCB. This transfer can be done either against an SCB within 1 (one) business group or outside the business group. Separation with this mechanism is simpler because it only goes through 1 (one) licensing stage at OJK. The procedure for Separation of SBU by transferring rights and obligations to an existing SCB is carried out as follows.

A. Separation Plan

1. Drafting the Separation Plan

a. The Board of Directors of the CCB owning the SBU and the receiving SCB jointly draft the Separation Plan.

b. In drafting the Separation Plan, the Board of Directors of the CCB owning the SBU and the receiving SCB need to pay attention to the scope of information as stipulated in Article 23 of POJK SBU Separation.

c. In drafting the Separation Plan, the Board of Directors of the CCB owning the SBU and the receiving SCB coordinate with their respective OJK supervisors regarding the development of the Separation Plan draft to ensure that the Separation Plan complies with POJK SBU Separation and other related regulatory provisions.

d. Before the Separation Plan is submitted to OJK, the Board of Commissioners of the CCB owning the SBU and the receiving SCB provide approval for the Separation Plan as regulated in Article 22 paragraph (1) letter a of POJK SBU Separation.

2. Submission of the Separation Plan

a. The CCB owning the SBU and the receiving SCB submit the separation plan documents to OJK as regulated in Article 22 paragraph (2) of POJK SBU Separation. The submission of the Separation Plan is done no later than simultaneously with the announcement of the summary

Guidelines for the Separation of Sharia Business Units

Directorate of Sharia Banking Regulation and Licensing

of the Separation Plan. The announcement of the summary of the Separation Plan is carried out in at least 1 (one) newspaper and in writing to the employees of the CCB owning the SBU within a period of at least 30 (thirty) days before the convening of the GMS as regulated in Article 127 paragraph (2) of the Limited Liability Company Act.

b. The announcement of the summary of the Separation Plan also contains a notification that interested parties can obtain the Separation Plan at the office of the CCB owning the SBU from the date of announcement until the date the GMS is held as regulated in Article 127 paragraph (3) of the Limited Liability Company Act.

c. The CCB owning the SBU submits the Separation Plan as material information or facts to the OJK supervisor no later than 2 (two) working days after the principle approval is received by the CCB owning the SBU, using a format referring to Section III of the Appendix of OJK Circular Transparency and Publication of SCB and SBU Reports.

3. Objections by Creditors

Announcements to the public are not only intended for transparency but also to provide an opportunity for parties related to the CCB owning the SBU regarding the Separation Plan to be implemented. One interest that needs to be protected in the Separation is the interest of creditors. In the Separation process, creditors have certain rights regulated in regulatory provisions as follows.

a. Creditors can submit objections to the CCB owning the SBU within a period of at most 14 (fourteen) days after the announcement of the summary of the Separation Plan to the public as regulated in Article 127 paragraph (4) of the Limited Liability Company Act.

b. If within the period of at most 14 (fourteen) days creditors do not submit objections, creditors are deemed to have approved the Separation as regulated in Article 127 paragraph (5) of the Limited Liability Company Act.

c. In the event that creditor objections cannot be resolved by the Board of Directors of the CCB owning the SBU by the date the GMS is held, the objections must be submitted in the GMS for resolution as regulated in Article 127 paragraph (6) of the Limited Liability Company Act.

d. Resolution by the Board of Directors or GMS can be in the form of resolving objections or establishing a resolution scheme agreed upon with creditors, which is contained in a deed made by a notary in the Indonesian language.

e. Until such resolution is reached, Separation cannot be implemented as regulated in Article 127 paragraph (7) of the Limited Liability Company Act.

4. Implementation of GMS

The GMS is one of the important processes in decision-making to carry out Separation. In accordance with Article 127 paragraph (1) of the Limited Liability Company Act, the GMS in the context of Separation is carried out according to the GMS procedures regulated in Article 87 paragraph (1) and Article 89 of the Limited Liability Company Act. The CCB owning the SBU carries out the GMS in the context of Separation as follows.

a. The convening of the GMS is done within a period of at least 14 (fourteen) days before the date the GMS is held, without counting the convening and the date of the GMS as regulated in Article 82 paragraph (1) of the Limited Liability Company Act. The convening of the GMS is done by registered letter and/or advertisement in a newspaper. The GMS invitation must state the date, time, place, and agenda of the meeting, accompanied by a notification that the material for the corporate action of Separation is available at the office of the CCB owning the SBU from the date of convening the GMS until the date the GMS is held as regulated in Article 82 paragraph (3) of the Limited Liability Company Act. In addition, in accordance with Article 83 paragraph (4) of the Limited Liability Company Act, the CCB owning the SBU provides copies of the corporate action material for Separation to shareholders free of charge if requested.

b. The GMS to approve Separation can be held if at least 3/4 (three-quarters) of the total shares with voting rights are present or represented at the GMS, and the decision is valid if approved by at least 3/4 (three-quarters) of the votes cast, unless the articles of association determine a larger quorum for attendance and/or provisions regarding GMS decision-making requirements as regulated in Article 89 paragraph (1) of the Limited Liability Company Act. Furthermore, in accordance with Article 87 paragraph (1) of the Limited Liability Company Act, the decision of the GMS is taken based on deliberation for consensus.

c. The GMS of the CCB owning the SBU approves the following:

1) The Separation to be carried out;

2) The Separation Plan;

3) The concept of the Separation Deed; and

4) The draft deed of establishment of the SCB resulting from Separation.

d. Shareholders who do not agree with the GMS decision can only use their right to request their shares to be purchased at a fair price by the CCB owning the SBU as regulated in Article 62 paragraph (1) of the Limited Liability Company Act.

e. The use of this right does not stop the implementation process of Separation as regulated in Article 126 paragraph (3) of the Limited Liability Company Act.

f. The GMS approval is recorded in a Separation Deed made by a notary in the Indonesian language as regulated in Article 128 paragraph (1) of the Limited Liability Company Act.

5. Legal Entity Approval of the SCB Resulting from Separation

a. The Board of Directors of the SCB owning the SBU submits an application for legal entity approval of the SCB resulting from Separation to the Minister no later than 60 (sixty) days from the date of the deed of establishment of the SCB resulting from Separation, accompanied by a copy of the Separation Deed as regulated in Article 10 paragraph (1) of the Limited Liability Company Act.

b. After all requirements are met completely, the Minister issues a decision regarding the approval of the legal entity of the Company, signed electronically, no later than 14 (fourteen) days as regulated in Article 10 paragraph (6) of the Limited Liability Company Act.

B. Separation Approval

1. Submission of Application for Separation Approval

After the GMS approves the Separation, the next step for the CCB owning the SBU is to submit an application for separation approval to OJK. It should be noted that principle approval is only valid for 6 (six) months from the date the principle approval is granted, including the GMS process as described above.

The CCB owning the SBU submits the application for separation approval as follows:

a. The CCB owning the SBU submits the application for separation approval no later than 6 (six) months from the date the principle approval is granted, accompanied by documents as regulated in Article 13 of POJK SBU Separation. In addition, the documents submitted also include the application documents for separation approval regulated in Section II Letter B of BI Circular SCB.

b. The CCB owning the SBU submits written information to Bank Indonesia regarding the application for separation approval to OJK simultaneously with the submission of the application for separation approval to OJK, as regulated in Article 5 paragraph (2) of PBI Integrated Licensing.

2. Implementation of Business Activities of the SCB Resulting from Separation

a. The SCB resulting from Separation that has obtained separation approval from OJK submits a written application to Bank Indonesia to obtain the necessary licenses as regulated in Article 6 paragraph (2) of PBI Integrated Licensing.

The licensing application to Bank Indonesia is submitted through the Bank Indonesia Licensing Front Office in accordance with PBI Licensing Front Office.

Bank Indonesia regulations governing the organization of payment systems and financial market infrastructure organized by Bank Indonesia (BI-RTGS System, BI-SSSS, BI-ETP, and SKNBI) have regulated changes in membership status in the BI-RTGS, BI-SSSS, BI-ETP, and SKNBI systems due to the separation of the SBU from the CCB.

b. The SCB resulting from Separation carries out business activities no later than 20 (twenty) working days from the date the separation approval is obtained as regulated in Article 17 paragraph (1) of POJK SBU Separation.

The implementation of business activities of the SCB resulting from Separation is marked by the transfer of rights and obligations of the SBU from the CCB to the SCB resulting from Separation.

c. The implementation of business activities of the SCB resulting from Separation is reported to OJK no later than 7 (seven) working days after the date of implementation, attaching the financial report of the SCB resulting from Separation as regulated in Article 17 paragraph (3) of POJK SBU Separation.

3. Revocation of SBU Business License

After the SCB resulting from Separation obtains the transfer of rights and obligations from the CCB, the SBU business license owned by the CCB is revoked. The revocation of the SBU business license is carried out as follows.

a. The CCB submits an application for revocation of the SBU business license to OJK no later than 7 (seven) working days after the rights and obligations of the SBU are transferred to the SCB as regulated in Article 18 paragraph (1) of POJK SBU Separation.

b. The application for revocation of the SBU business license is attached with documents as regulated in Article 18 paragraph (2) of POJK SBU Separation.

Sharia Banking Regulation and Licensing Directorate draft separation in 1 (one) daily newspaper in Indonesian that circulates nationally. b. Separation of UUS with the mechanism of transfer to the receiving BUS may result in the formation of a KUB, so the bank as the parent company or the parent company executor submits documents to OJK as referred to in Article 6 paragraph (1) of the OJK on Consolidation of Commercial Banks.

Announcement of the Draft Separation Plan
a. In the Separation process with the mechanism of transfer of rights and obligations to the receiving BUS, there is an obligation for the BUK owning the UUS and the receiving BUS to make announcements related to information or material facts and corporate actions of the Separation.

Based on the OJK on Transparency and Publication of Bank Reports,
Separation is information or a material fact that must be announced. Therefore, the Board of Directors of the BUK owning the UUS and the receiving BUS must announce the summary of the draft Separation plan to the public via the website no later than 2 (two) working days after the existence of information or material facts as regulated in Article 27 paragraph (2) of the OJK on Transparency and Publication of Bank Reports. In this case, the existence of information or material facts is marked by the approval of the draft Separation plan by each Board of Commissioners of the BUK owning the UUS and the receiving BUS.
Based on the Limited Liability Company Law, the summary
of the draft Separation plan must be announced at least in 1 (one) newspaper and in writing to employees of the BUK owning the UUS within a period of no later than 30 (thirty) days before the convening of the GMS as regulated in Article 127 paragraph (2) of the Limited Liability Company Law. b. The announcement of the summary of the draft Separation plan also includes notification that interested parties can

Sharia Banking Regulation and Licensing Directorate obtain the draft Separation plan at the office of the BUK owning the UUS starting from the date of announcement until the date the GMS is held as regulated in Article 127 paragraph (3) of the Limited Liability Company Law.
c. The BUK owning the UUS and the receiving BUS
submit the Separation plan as information or a material fact to the OJK supervisor no later than 2 (two) working days after the draft Separation plan is approved by each Board of Commissioners of the BUK owning the UUS and the receiving BUS using a format referring to Roman III of the Appendix of the SEOJK on Transparency and Publication of Reports of BUS and UUS.

Objection Submission by Creditors
Announcements to the public, in addition to being intended as transparency, also serve to provide an opportunity for parties related to the BUK owning the UUS and the receiving BUS regarding the Separation plan to be implemented. One interest that needs to be protected in the Separation is the interest of creditors. In the Separation process, creditors have certain rights regulated in statutory provisions as follows. a. Creditors may submit objections to the BUK owning the UUS and the receiving BUS within a period of no later than 14 (fourteen) days after the announcement of the summary of the draft Separation plan to the public as regulated in Article 127 paragraph (4) of the Limited Liability Company Law. b. If within the period of no later than 14 (fourteen) days the creditor does not submit an objection, the creditor is deemed to have approved the Separation as regulated in Article 127 paragraph (5) of the Limited Liability Company Law.
c. In the event that creditor objections by the date the GMS is held cannot be resolved by the Board of Directors of the BUK owning the UUS and the receiving BUS,
the objections must be submitted to the GMS for

Sharia Banking Regulation and Licensing Directorate resolution as regulated in Article 127 paragraph (6) of the Limited Liability Company Law. d. Resolution by the Board of Directors or the GMS may consist of resolving the objection or establishing a resolution scheme agreed upon with the creditor, which is contained in a deed made by a notary in the Indonesian language. e. Until such resolution is reached, Separation cannot be implemented as regulated in Article 127 paragraph (7) of the Limited Liability Company Law.

Implementation of the GMS
The GMS is one of the important processes in decision-making to carry out Separation. In accordance with Article 127 paragraph (1) of the Limited Liability Company Law, the GMS for the purpose of Separation is carried out using the GMS procedures regulated in Article 87 paragraph (1) and Article 89 of the Limited Liability Company Law. The BUK owning the UUS and the receiving BUS each conduct the GMS for the purpose of Separation as follows. a. The convening of the GMS is done within a period of no later than 14 (fourteen) days before the date the GMS is held, without counting the convening and the date of the GMS as regulated in Article 82 paragraph (1) of the Limited Liability Company Law. The convening of the GMS is done by registered letter and/or by advertisement in a newspaper. The GMS notice must include the date, time, place, and agenda of the meeting, accompanied by notification that the materials for the corporate action of Separation are available at the office of the BUK owning the UUS and the receiving BUS from the date the GMS is convened until the date the GMS is held as regulated in Article 82 paragraph (3) of the Limited Liability Company Law. Additionally, in accordance with Article 83 paragraph (4) of the Limited Liability Company Law, the BUK owning the UUS and the receiving BUS provide copies of the materials for the corporate action of Separation to shareholders free of charge if requested. b. The GMS to approve Separation may be held if in the meeting at least 3/4 (three-quarters) of the number of all shares with voting rights are present or represented at the GMS and the decision is valid if approved by at least 3/4 (three-quarters) of the number of votes cast, unless the articles of association determine a larger quorum for attendance and/or regulations regarding GMS decision-making requirements as regulated in Article 89 paragraph (1) of the Limited Liability Company Law. Furthermore, in accordance with Article 87 paragraph (1) of the Limited Liability Company Law, the decision of the GMS is taken based on deliberation for consensus.
c. The GMS of the BUK owning the UUS and the receiving BUS approves the following matters:

The Separation to be carried out;
The draft Separation plan;
The concept of the Separation deed; and
The draft amendment to the articles of association of the receiving BUS.
d. Shareholders who disagree with the GMS decision may only exercise the right to request their shares be purchased at a fair price by the BUK owning the UUS and the receiving BUS as regulated in Article 62 paragraph (1) of the Limited Liability Company Law. e. The exercise of this right does not stop the process of implementing Separation as regulated in Article 126 paragraph (3) of the Limited Liability Company Law. f. The GMS approval is recorded in the Separation deed made by a notary in the Indonesian language as regulated in Article 128 paragraph (1) of the Limited Liability Company Law. g. In the event of changes to the articles of association of the receiving BUS, the changes are approved by the GMS and stated in a deed made by a notary in the Indonesian language as regulated in Article 21 paragraph (4) of the Limited Liability Company Law.

Sharia Banking Regulation and Licensing Directorate

B. Separation Approval

Submission of Separation Approval Application
After the Separation plan receives approval from the GMS of the BUK owning the UUS and the receiving BUS, the results of the GMS are submitted to OJK as an application for Separation approval. OJK provides Separation approval to the BUK owning the UUS and the receiving BUS within a period of 14 (fourteen) days from the date the complete application documents are received as regulated in Article 25 paragraph (2) of the OJK on Separation of UUS. Thus, OJK approval is given before the GMS results are submitted to the Minister. The application for Separation approval is done as follows. a. The BUK owning the UUS and the receiving BUS jointly submit the application for Separation approval to OJK no later than 3 (three) working days after the GMS decision approving Separation, accompanied by documents as regulated in Article 24 paragraph (2) of the OJK on Separation of UUS. b. The BUK owning the UUS submits written information to Bank Indonesia regarding the plan to implement the Separation of the UUS simultaneously with the submission of the application for Separation approval to OJK as regulated in Article 5 paragraph (1) of the BI on Unified Licensing.
Approval or Notification to the Minister
After obtaining Separation approval from OJK:
a. The receiving BUS submits an amendment to the articles of association to the Minister no later than 30 (thirty) days calculated from the date of the notarial deed containing the amendment to the articles of association, to obtain approval or as a notification to the Minister as regulated in Article 21 paragraph (3) and paragraph (7) of the Limited Liability Company Law. b. The BUK owning the UUS that has obtained approval from OJK submits a written application to

Sharia Banking Regulation and Licensing Directorate Bank Indonesia to obtain the necessary licenses as regulated in Article 6 paragraph (1) of the BI on Unified Licensing.
The license application to Bank Indonesia is submitted through the Bank Indonesia Licensing Front Office in accordance with the BI on Licensing Front Office.
Regulations of Bank Indonesia regarding the organization of payment systems and financial market infrastructure organized by Bank Indonesia (BI-RTGS System, BI-SSSS, BI-ETP, and SKNBI) have regulated regarding changes in membership status in the BI-RTGS, BI-SSSS, BI-ETP, and SKNBI systems due to the separation of the UUS from the conventional bank.

Implementation of Separation
a. Separation approval from OJK is valid starting from:

the date of the Minister's approval or a later date determined in the Minister's approval; or
the date the notification of amendment to the articles of association is received by the Minister, or a later date determined in the Separation deed,
as regulated in Article 26 paragraph (1) of the OJK on Separation of UUS. b. The resulting BUS from the Separation reports the implementation of the Separation to OJK no later than 7 (seven) working days after the implementation date, accompanied by documents as regulated in Article 26 paragraph (2) of the OJK on Separation of UUS.

Revocation of UUS Business License
After the receiving BUS obtains the transfer of rights and obligations from the BUK, the UUS business license owned by the BUK is revoked. The revocation of the UUS business license is done as follows. a. The BUK submits an application for revocation of the UUS business license to OJK no later than 7 (seven) working days after the rights and obligations of the UUS are transferred to the BUS as regulated in Article 27 paragraph (1) of the OJK on Separation of UUS. b. The application for revocation of the UUS business license is accompanied by documents as regulated in Article 27 paragraph (2) of the OJK on Separation of UUS.

Sharia Banking Regulation and Licensing Directorate

IV. SEPARATION OF UUS BY TRANSFER OF RIGHTS AND OBLIGATIONS TO A BUK UNDERGOING A CHANGE OF BUSINESS ACTIVITY TO A BUS
The Separation mechanism in the OJK on Separation of UUS also accommodates BUKs owning UUS to carry out Separation by transferring rights and obligations to a BUK. Separation of UUS to another BUK must be preceded by a change in the business activity of the BUK to become a BUS in accordance with the OJK on Change of Business Activity. A license for the change of business activity of the BUK to a BUS is granted first before granting Separation approval.

A. Application for License for Change of Business Activity

The application for a license for change of business activity of another BUK is submitted simultaneously with the submission of the Separation plan as regulated in Article 32 paragraph (2) of the OJK on Separation of UUS.
Documents submitted by another BUK for the purpose of applying for a license for change of business activity refer to Roman I letter A of the SEOJK on Change of Business Activity.

B. OJK Approval
Separation approval can only be given after another BUK has obtained a license for change of business activity to become a BUS as regulated in Article 32 paragraph (3) of the OJK on Separation of UUS.

V. BANKING SYNERGY
In the context of Separation, it is possible for the resulting BUS from the Separation or the receiving BUS to conduct banking synergy cooperation with the parent BUK. The BUK owning the UUS may submit an application for approval to implement banking synergy with the resulting BUS from the Separation or the receiving BUS. The application for banking synergy is submitted simultaneously with the application for Separation.

A. Separation of UUS by Establishing a BUS

The BUK owning the UUS drafts a cooperation agreement for the implementation of banking synergy with the resulting BUS from the Separation as regulated in Article 9 paragraph (2) letter a of the OJK on Separation of UUS.
The draft cooperation agreement for the implementation of banking synergy contains information at least in accordance with Article 8 paragraph (2) of the OJK on Banking Synergy.
Simultaneously with the application for principle approval, the BUK owning the UUS may submit an application for approval to implement banking synergy accompanied by the draft cooperation agreement for the implementation of banking synergy and other documents as regulated in Article 9 paragraph (2) of the OJK on Separation of UUS.
Simultaneously with the application for business license, the BUK owning the UUS submits the cooperation agreement for the implementation of banking synergy and other documents as regulated in Article 14 paragraph (1) of the OJK on Separation of UUS.
The resulting BUS from the Separation that will implement banking synergy with the BUK owning the UUS is exempt from the requirement to include the banking synergy plan in the business plan of the resulting BUS from the Separation in accordance with the OJK on Banking Synergy as regulated in Article 9 paragraph (4) of the OJK on Separation of UUS.
The OJK on Banking Synergy regulating the BUS as the party submitting the application for approval to implement banking synergy is exempt in the OJK on Separation of UUS because the resulting BUS from the Separation has not yet been established.

B. Separation of UUS by Transfer of Rights and Obligations to a BUS

The BUK owning the UUS and the receiving BUS draft a cooperation agreement for the implementation of banking synergy as regulated in Article 22 paragraph (1) letter i of the OJK on Separation of UUS.
The draft cooperation agreement for the implementation of banking synergy contains information at least in accordance with Article 8 paragraph (2) of the OJK on Banking Synergy.
The BUK owning the UUS and the receiving BUS may submit an application for approval to implement banking synergy by submitting the drafted cooperation agreement for the implementation of banking synergy and other supporting documents at the time of submitting the Separation plan of the UUS to OJK as regulated in Article 22 paragraph (1) letter i of the OJK on Separation of UUS.
The BUK owning the UUS and the receiving BUS submit the cooperation agreement for the implementation of banking synergy and other supporting documents at the time of applying for Separation approval of the UUS to OJK as regulated in Article 24 paragraph (2) letter f of the OJK on Separation of UUS.

Sharia Banking Regulation and Licensing Directorate

VI. RELATED PROVISIONS

A. Ownership of Commercial Bank Shares
The BUK owning the UUS that carries out the Separation of the UUS is exempt from the provisions in the OJK regarding the ownership of commercial bank shares, so it can own more than 40% (forty percent) of the resulting BUS from the Separation as referred to in Article 16 of the OJK on Consolidation of Commercial Banks.

B. Capital Participation by Local Government-Owned Banks Local government-owned banks that carry out the Separation of the UUS are exempt from the provisions regarding the limit of capital participation in the OJK regarding business activities and office networks based on the bank's core capital, so they can make capital participation in the resulting BUS from the Separation exceeding:

15% (fifteen percent) of the bank's capital for BUKU 2;
25% (twenty-five percent) of the bank's capital for BUKU 3; and
35% (thirty-five percent) of the bank's capital for BUKU 4,
as referred to in Article 18 of the OJK on Consolidation of Commercial Banks.

C. Banks that are Public Companies
In the event that the BUK owning the UUS or the receiving BUS is a public company, it is necessary to also pay attention to regulations related to public companies, including OJK Number 15/POJK.04/2020 concerning the Plan and Organization of the General Meeting of Shareholders of Public Companies.

VII. CLOSING
Thus, this Guidebook on the Separation of Sharia Business Units is compiled to serve as a basic guide and consideration in the implementation of the Separation of UUS. It is hoped that with the compilation of this guidebook, it can provide ease for the industry, specifically BUKs that will carry out the Separation of UUS. May this guidebook be useful and be used as best as possible.

Financial Services Authority
Menara Radius Prawiro, Bank Indonesia Office Complex Jl. MH. Thamrin No.2 Jakarta 10350 Photo from Floriane Vita/unsplash.com