Regulation of the Financial Services Authority of the Republic of Indonesia Number 42/POJK.04/2020 Concerning Affiliated Transactions and Conflicts of Interest Transactions

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REGULATION OF THE FINANCIAL SERVICES AUTHORITY REPUBLIC OF INDONESIA NUMBER 42 /POJK.04/2020 CONCERNING AFFILIATED TRANSACTIONS AND CONFLICTS OF INTEREST TRANSACTIONS BY THE GRACE OF GOD THE ALMIGHTY THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY, Considering: a. that in order to increase the protection of independent shareholders and the quality of disclosure by public companies in affiliated transactions and conflicts of interest transactions, it is necessary to adjust regulations regarding affiliated transactions and certain conflict of interest transactions; b. that the existing regulations related to affiliated transactions and certain conflict of interest transactions are no longer in line with market needs and best practices in the capital market, so they need to be replaced;
c. that based on the considerations as referred to in letters a and b, it is necessary to establish a Regulation of the Financial Services Authority concerning Affiliated Transactions and Conflicts of Interest Transactions;
Recalling: 1. Law Number 8 of 1995 concerning the Capital Market (State Gazette of the Republic of Indonesia Year 1995

FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA

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);
DECIDING:
Establishing: A REGULATION OF THE FINANCIAL SERVICES AUTHORITY CONCERNING AFFILIATED TRANSACTIONS AND CONFLICTS OF INTEREST TRANSACTIONS.
CHAPTER I
GENERAL PROVISIONS
Article 1
In this Regulation of the Financial Services Authority, the following terms are defined as:

1. Affiliation is:
   a. family relationship due to marriage and descent up to the second degree, both horizontally and vertically; b. relationship between a party and employees, directors, or commissioners of that party;
   c. relationship between 2 (two) companies where there is 1 (one) or more members of the board of directors or board of commissioners who are the same;
   d. relationship between a company and a party, directly or indirectly, controlling or controlled by that company; e. relationship between 2 (two) companies that are controlled, directly or indirectly, by the same party; or f. relationship between a company and a principal shareholder.
2. Controller of a Public Company, hereinafter referred to as Controller, is the Controller as referred to in the Regulation of the Financial Services Authority concerning the takeover of public companies.
3. Affiliated Transaction is any activity and/or transaction carried out by a public company or a controlled company with an Affiliate of the public company or an Affiliate of the members of the board of directors, board of commissioners, principal shareholder, or Controller, including any activity and/or transaction carried out by a public company or a controlled company for the benefit of an Affiliate of the public company or an Affiliate of the members of the board of directors, board of commissioners, principal shareholder, or Controller.
4. Conflict of Interest is the difference between the economic interests of a public company and the personal economic interests of members of the board of directors, board of commissioners, principal shareholder, or Controller that can harm the public company in question.
5. Conflict of Interest Transaction is a transaction carried out by a public company or a controlled company with any party, whether with an Affiliate or a party other than an Affiliate, which contains a Conflict of Interest.
6. Public Company is an issuer that has conducted a public offering of equity securities or a public company.
7. Controlled Company is a company that is controlled directly or indirectly by a Public Company.
8. 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.
9. Independent Shareholder is a shareholder who does not have a personal economic interest in relation to a specific transaction and:
   a. is not a member of the board of directors, member of the board of commissioners, principal shareholder, and Controller; or b. is not an Affiliate of the members of the board of directors, board of commissioners, principal shareholder, and Controller.
10. Principal Shareholder is a party who, directly or indirectly, owns at least 20% (twenty percent) of the voting rights of all issued shares with voting rights of a company or a smaller amount as determined by the Financial Services Authority.
11. Public Offering is the activity of offering securities carried out by an Issuer to sell securities to the public based on procedures regulated in the Law concerning the capital market and its implementing regulations.
12. Registration Statement is a document that must be submitted to the Financial Services Authority by an Issuer in the context of a Public Offering or a public company.
13. Public Company is a Corporation whose shares are owned by at least 300 (three hundred) shareholders and has paid-up capital of at least Rp3,000,000,000.00 (three billion rupiah) or a number of shareholders and paid-up capital determined by Government Regulation.
14. Employee is all workers who receive wages and/or salaries from the Public Company.
15. Appraiser is an individual who, with their expertise, conducts valuation activities in the capital market.
16. Website is a collection of web pages containing information or data that can be accessed through an internet network system.

CHAPTER II
AFFILIATED TRANSACTIONS
Section One
Scope of Transactions
Article 2
A Public Company that conducts an Affiliated Transaction in:
a. 1 (one) transaction; or b. a series of transactions for a specific purpose or activity, must comply with the provisions of this Regulation of the Financial Services Authority.
Section Two
Procedures
Article 3
(1) A Public Company that conducts an Affiliated Transaction as referred to in Article 2 must have adequate procedures to ensure that the Affiliated Transaction is carried out in accordance with prevailing business practices. (2) The Public Company must keep documents related to the implementation of the procedures as referred to in paragraph (1) for the document retention period in accordance with applicable legislation.
Article 4
(1) A Public Company that conducts an Affiliated Transaction must:
a. use an Appraiser to determine the fair value of the object of the Affiliated Transaction and/or the fairness of the said transaction; b. announce disclosure of information on every Affiliated Transaction to the public;
c. submit the disclosure of information as referred to in letter b and supporting documents to the Financial Services Authority; and
d. first obtain approval from Independent Shareholders in the GMS, in the event:

1. the value of the Affiliated Transaction meets the material transaction value threshold that requires GMS approval;
2. the Affiliated Transaction may disrupt the continuity of the Public Company's business; and/or
3. conducting an Affiliated Transaction that, based on the Financial Services Authority's consideration, requires approval from Independent Shareholders.
   (2) The time period between the valuation date as referred to in paragraph (1) letter a and:
   a. the date of the Affiliated Transaction; or b. the date of the GMS implementation in the event the Affiliated 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 disclosure of information and documents to the Financial Services Authority as referred to in paragraph (1) letter c must be done:
   a. at the latest 2 (two) working days after the date of the Affiliated Transaction; or b. simultaneously with the GMS announcement, in the event the Affiliated 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 implementation. (5) The documents as referred to in paragraph (1) letter c must include:
   a. the Appraiser's report; and b. other supporting documents.
   Article 5
   A Public Company is not required to carry out the procedures as referred to in Article 3 and is not required to comply with the provisions as referred to in Article 4 paragraph (1) if it conducts an Affiliated Transaction as follows:
   a. the use of any facility provided by the Public Company to members of the board of commissioners, members of the board of directors, and/or Principal Shareholders in the event the Principal Shareholder also serves as an Employee and the facility is directly related to their responsibilities to the Public Company and in accordance with the Public Company's policy, and has been approved by the GMS; b. transactions of the Public Company with Employees, members of the board of directors, or members of the board of commissioners of that Public Company or with Employees, members of the board of directors, or members of the board of commissioners of the Controlled Company on the same terms, provided that such has been approved by the GMS;
   c. remuneration, including salaries, pension fund contributions, and/or special benefits provided to members of the board of directors, members of the board of commissioners, and Principal Shareholders in the event the Principal Shareholder also serves as an Employee, if the total amount of such remuneration is disclosed in the periodic financial reports, provided that such has been approved by the GMS;
   d. ongoing transactions that have been conducted before the Public Company conducts the initial public offering or before the submission of the Registration Statement as a Public Company, with the conditions:
4. the transaction has been disclosed in the prospectus of the initial public offering or in the disclosure of information of the Registration Statement of the Public Company; and
5. the terms and conditions of the transaction have not undergone changes that could harm the Public Company; and/or
   e. ongoing transactions conducted after the Public Company conducts the initial public offering or after the Registration Statement as a Public Company becomes effective, with the conditions:
6. the initial transaction underlying the subsequent transaction has met this Regulation of the Financial Services Authority; and
7. the terms and conditions of the transaction have not undergone changes that could harm the Public Company.
   Article 6
   (1) A Public Company is not required to carry out the procedures as referred to in Article 3 and is not required to comply with the provisions as referred to in Article 4 paragraph (1) if it conducts an Affiliated Transaction as follows:
   a. transactions carried out as implementation of legislation or court decisions; b. transactions between:
8. a Public Company and a Controlled Company whose shares are owned by at least 99% (ninety-nine percent) of the paid-up capital of the Controlled Company;
9. among Controlled Companies whose shares are owned by at least 99% (ninety-nine percent) by the Public Company in question; or
10. a Controlled Company with a company whose shares are owned by the Controlled Company by at least 99% (ninety-nine percent) of the paid-up capital of that company;
    c. transactions with a transaction value not exceeding 0.5% (zero point five percent) of the paid-up capital of the Public Company or not exceeding the amount of Rp5,000,000,000.00 (five billion rupiah), using the lower value;
    d. loan transactions received directly from banks, venture capital companies, financing companies, or infrastructure financing companies, both domestic and foreign; e. 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; f. transactions to add or reduce equity participation to maintain ownership percentage after the participation has been held for at least 1 (one) year; g. 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 said Sharia financial services institution; and/or h. transactions in the context of restructuring conducted by a Public Company that is controlled directly or indirectly by the government. (2) The Public Company must report the Affiliated Transaction as referred to in paragraph (1) to the Financial Services Authority at the latest by the end of the 2nd (second) working day after the date of the Affiliated Transaction.
    Article 7
    (1) In the event that a Public Company is a financial services institution in certain conditions, the Affiliated Transaction conducted by the Public Company is not required to carry out the procedures as referred to in Article 3 and is not required to comply with the provisions as referred to in Article 4 paragraph (1). (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 Affiliated Transaction as referred to in paragraph (1) to the Financial Services Authority at the latest by the end of the 2nd (second) working day after the date of the Affiliated Transaction.
    Article 8
    (1) A Public Company is not required to comply with the provisions as referred to in Article 4 paragraph (1) if it conducts an Affiliated Transaction that is a business activity carried out to generate business income and is carried out routinely, repeatedly, and/or continuously. (2) In carrying out transactions as referred to in paragraph (1), the procedures as referred to in Article 3 are only carried out at the beginning of the transaction. (3) In the event of changes to the terms and conditions of an Affiliated Transaction that is a business activity as referred to in paragraph (1), and such changes have the potential to harm the Public Company, the Public Company must resume carrying out the procedures as referred to in Article 3.
    Article 9
    (1) Affiliated Transactions as referred to in Article 8 paragraph (1) must be disclosed in the annual report or annual financial report of the Public Company.
    (2) The disclosure as referred to in paragraph (1) must include information:
    a. type of Affiliated Transaction; b. the transacting party;
    c. nature of the Affiliation relationship;
    d. transaction value; and e. a statement from the board of directors that the Affiliated Transaction has gone through the procedures as referred to in Article 3.
    (3) In the event that the disclosure of information as referred to in paragraph (2) is included 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.
    Section Three
    Disclosure of Information
    Article 10
    Disclosure of information as referred to in Article 4 paragraph (1) letter b must contain at least:
    a. a description of the Affiliated Transaction, containing at least:
11. transaction date;
12. transaction object;
13. transaction value;
14. name of the party conducting the transaction and relationship with the Public Company; and
15. nature of the Affiliation relationship of the party conducting the transaction with the Public Company;
    b. in the event the Public Company uses an Appraiser to value the transaction object, a summary of the Appraiser's report containing at least:
16. party identity;
17. valuation object;
18. valuation purpose;
19. assumptions and limiting conditions;
20. valuation approach and methods; and
21. value conclusion;
    c. a summary of the Appraiser's report regarding the fairness of the transaction, containing at least:
22. party identity;
23. valuation object;
24. valuation purpose;
25. assumptions and limiting conditions;
26. valuation approach and methods; and
27. opinion on the fairness of the transaction;
    d. pro forma impact of the transaction on the financial condition of the Public Company prepared based on at least the financial report with limited review, with the condition that the date of the financial report is the same as the date of the valuation report, in the event the transaction has the potential to disrupt the continuity of the Public Company's business; e. explanation, consideration, and reasons for conducting the Affiliated Transaction, compared to if a similar transaction were conducted with a non-Affiliated party; f. the Public Company's plan, data of the acquired company, and other related information, if the Affiliated Transaction conducted is a company takeover transaction; g. summary of the report from independent experts or consultants, if there is a report from independent experts or consultants; h. a statement from the board of directors that the Affiliated Transaction has gone through the procedures as referred to in Article 3; and
    i. a statement from the board of commissioners and board of directors that the Affiliated Transaction:
28. does not contain a Conflict of Interest; and
29. all material information has been disclosed and the information is not misleading.

CHAPTER III
CONFLICTS OF INTEREST TRANSACTIONS
Section One
Procedures
Article 11
(1) A Public Company that conducts a Conflict of Interest Transaction must:
a. use an Appraiser to determine the fair value of the object of the Conflict of Interest Transaction and/or the fairness of the said transaction; b. announce disclosure of information on every Conflict of Interest Transaction to the public;
c. submit the disclosure of information as referred to in letter b and supporting documents to the Financial Services Authority; and
d. first obtain approval from Independent Shareholders in the GMS.
(2) The time period between the valuation date and the GMS implementation date must be at most 6 (six) months.
(3) The announcement as referred to in paragraph (1) letter b and the submission of disclosure of information and documents as referred to in paragraph (1) letter c must be done simultaneously with the GMS announcement for Conflict of Interest Transactions. (4) In the event of changes or additions to information as referred to in paragraph (3), such changes or additions to information must be announced at the latest 2 (two) working days before the GMS implementation. (5) The documents as referred to in paragraph (1) letter c must contain at least:
a. information about the transaction plan as referred to in paragraph (1) letter b; b. the Appraiser's report;
c. data of the company to be acquired or divested, if the transaction object is shares, containing at least:

1. audited opening position report, for companies that have been established but have not yet conducted business activities;
2. audited financial reports for the last 2 (two) consecutive years, for companies that have been established for at least 2 (two) years and have conducted business activities;
3. audited financial reports adjusted to the period of establishment, for companies that have been established but for less than 2 (two) years and have conducted business activities;
4. capital structure; and
5. management structure,
   if such data is not yet available to the public and not yet available at the Financial Services Authority; d. summary of the report from independent experts or consultants, if there is a report from independent experts or consultants; e. a statement from the board of commissioners and board of directors that the material information presented has been disclosed completely and is not misleading; and f. other supporting documents.
   Article 12
   (1) A Public Company is not required to comply with the provisions as referred to in Article 11 paragraph (1) if it conducts a Conflict of Interest Transaction as follows:
   a. transactions with a transaction value not exceeding 0.5% (zero point five percent) of the paid-up capital of the Public Company or not exceeding the amount of Rp5,000,000,000.00 (five billion rupiah), using the lower value; b. transactions carried out as implementation of legislation or court decisions;
   c. transactions between:
6. a Public Company and a Controlled Company whose shares are owned by at least 99% (ninety-nine percent) of the paid-up capital of the Controlled Company;
7. among Controlled Companies whose shares are owned by at least 99% (ninety-nine percent) by the Public Company in question; or
8. a Controlled Company with a company whose shares are owned by the Controlled Company by at least 99% (ninety-nine percent) of the paid-up capital of that company;
   d. 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 said Sharia financial services institution; and/or e. transactions in the context of restructuring conducted by a Public Company that is controlled directly or indirectly by the government. (2) The Public Company must report the Conflict of Interest Transaction as referred to in paragraph (1) to the Financial Services Authority at the latest by the end of the 2nd (second) working day after the date of the Conflict of Interest Transaction.
   Article 13
   (1) In the event that a Public Company is a financial services institution in certain conditions, the Conflict of Interest Transaction conducted by the Public Company is not required to carry out the procedures as referred to in Article 11 paragraph (1). (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 Conflict of Interest Transaction as referred to in paragraph (1) to the Financial Services Authority at the latest by the end of the 2nd (second) working day after the date of the Conflict of Interest Transaction.
   Article 14
   A Public Company is not required to comply with the provisions as referred to in Article 11 paragraph (1) if it conducts a Conflict of Interest Transaction as follows:
   a. the use of any facility provided by the Public Company to members of the board of directors, members of the board of commissioners, and/or Principal Shareholders in the event the Principal Shareholder also serves as an Employee, and the facility is directly related to their responsibilities to the Public Company and in accordance with the Public Company's policy, and has been approved by the GMS; b. transactions of the Public Company either with Employees, members of the board of directors, or members of the board of commissioners of that Public Company or with Employees, members of the board of directors, or members of the board of commissioners of the Controlled Company, or transactions of the Controlled Company either with Employees, members of the board of directors, or members of the board of commissioners of that Controlled Company or with Employees, members of the board of directors, or members of the board of commissioners of the Public Company on the same terms, provided that such has been approved by the GMS;
   c. remuneration, including salaries, pension fund contributions, and/or special benefits provided to members of the board of commissioners, members of the board of directors, and Principal Shareholders

which also serves as an Employee, if the total amount of such remuneration is disclosed in periodic financial reports, provided that such has been approved by the General Meeting of Shareholders;

d. ongoing transactions conducted after the Public Company has carried out an Initial Public Offering or after the Registration Statement as a Public Company has become effective, with the requirements:

1. the initial transaction underlying subsequent transactions has met the requirements of this Financial Services Authority Regulation; and
2. the terms and conditions of the transaction have not undergone changes that could harm the Public Company.

Second Section
Information Disclosure

Article 15
Information disclosure as referred to in Article 11 paragraph (1) letter b must contain at least:
a. a description of the transaction, containing at least:

1. the object of the transaction;
2. the value of the transaction;
3. the name of the party conducting the transaction and its relationship with the Public Company; and
4. the nature of the Conflict of Interest of the relevant party in the transaction;
   b. in the event the Public Company uses an Appraiser to conduct an appraisal of the transaction object, a summary of the Appraiser's report containing at least:
5. party identity;
6. the object of appraisal;
7. the purpose of appraisal;
8. assumptions and limiting conditions;
9. appraisal approaches and methods; and
10. value conclusion;

c. a summary of the Appraiser's report regarding the fairness of the transaction, containing at least:

1. party identity;
2. the object of appraisal;
3. the purpose of appraisal;
4. assumptions and limiting conditions;
5. appraisal approaches and methods; and
6. opinion on the fairness of the transaction;
   d. pro forma impact of the transaction on the financial condition of the Public Company, prepared at least based on financial reports with limited review, with the financial report date being the same as the appraisal report date; e. an explanation, consideration, and reason for conducting the transaction, compared to if a similar transaction without Conflict of Interest were conducted; f. the Public Company's plan, data on the acquired company, and other related information, if the transaction conducted is a company acquisition transaction; g. a summary of the report from an independent expert or consultant, if there is a report from an independent expert or consultant; and h. a statement from the Board of Commissioners and the Board of Directors stating that all material information has been disclosed and such information is not misleading.

CHAPTER IV
DISCLOSURE AND IMPLEMENTATION OF PROCEDURES FOR AFFILIATE TRANSACTIONS AND CONFLICT OF INTEREST TRANSACTIONS

Article 16
Public Companies are required to disclose the results of the implementation of Affiliate Transactions and/or Conflict of Interest Transactions that have been approved by Independent Shareholders in the annual report.

Article 17
(1) In the event that Affiliate Transactions and/or Conflict of Interest Transactions approved in the General Meeting of Shareholders have not been implemented within a period of 12 (twelve) months from the date of the General Meeting of Shareholders' approval, the Public Company is required to:
a. disclose in the annual report; and b. provide a special explanation regarding the non-implementation of such Affiliate Transactions and/or Conflict of Interest Transactions in the nearest General Meeting of Shareholders. (2) In the event that Affiliate Transactions and/or Conflict of Interest Transactions as referred to in paragraph (1) will be implemented, the Public Company is required to follow the procedures in this Financial Services Authority Regulation and first obtain renewed approval from the General Meeting of Shareholders for such transaction.

Article 18
In the event that an Affiliate Transaction that must first be approved by Independent Shareholders in the General Meeting of Shareholders or a Conflict of Interest Transaction is not approved by Independent Shareholders in the General Meeting of Shareholders, the plan for such transaction can only be requested for General Meeting of Shareholders approval again at the earliest 12 (twelve) months after the implementation of the General Meeting of Shareholders that did not approve the Affiliate Transaction that must first be approved by Independent Shareholders in the General Meeting of Shareholders or such Conflict of Interest Transaction.

CHAPTER V
ANNOUNCEMENT MEDIA

Article 19
(1) Announcements of Affiliate Transactions and/or Conflict of Interest Transactions 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 Affiliate Transactions and/or Conflict of Interest Transactions 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 Indonesian 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) days after the date of such announcement.

Article 20
The implementation of announcement provisions through the Website provided by the Financial Services Authority for announcements of Affiliate Transactions and/or Conflict of Interest Transactions as referred to in Article 19 paragraph (2) letter b is determined by the Financial Services Authority.

CHAPTER VI
OTHER PROVISIONS

Article 21
In the event a Public Company or Controlled Company conducts transactions other than Affiliate Transactions and Conflict of Interest Transactions that may disrupt the continuity of the Public Company's business, the Public Company is required to implement the procedures as referred to in Article 11 paragraph (1).

Article 22
In the event:
a. Affiliate Transactions and/or Conflict of Interest Transactions; or b. transactions as referred to in Article 21, are conducted by:

1. a Controlled Company that is not a Public Company and whose financial reports are consolidated with the Public Company, the Public Company is required to conduct procedures as regulated in this Financial Services Authority Regulation; or
2. a Controlled Company that is a Public Company and whose financial reports are consolidated with the Public Company, only the aforementioned Controlled Company is required to conduct procedures as regulated in this Financial Services Authority Regulation.

Article 23
In the event an Affiliate Transaction is conducted through an Initial Public Offering, the Public Company is only required to comply with the provisions of legislation in the capital market sector regarding Initial Public Offerings.

Article 24
(1) In the event the value of an Affiliate Transaction meets the criteria for material transactions as referred to in the Financial Services Authority Regulation regarding material transactions and changes in business activities, the Public Company is only required to comply with the provisions of the Financial Services Authority Regulation regarding material transactions and changes in business activities. (2) In the event the value of a Conflict of Interest Transaction meets the criteria for material transactions as referred to in the Financial Services Authority Regulation regarding material transactions and changes in business activities, the Public Company is required to comply with this Financial Services Authority Regulation and the Financial Services Authority Regulation regarding material transactions and changes in business activities.

Article 25
In the event an Affiliate Transaction and/or Conflict of Interest Transaction is a transaction acquiring a Public Company as referred to in the Financial Services Authority Regulation regarding the acquisition of Public Companies, the Public Company is required to comply with this Financial Services Authority Regulation and the Financial Services Authority Regulation regarding the acquisition of Public Companies.

Article 26
In the event a Public Company conducts a transaction with an investment manager whose portfolio of securities contains shares of the Public Company with a quantity of at least 20% (twenty percent) of all fully paid-up shares with voting rights, the Public Company is required to follow the provisions as regulated in this Financial Services Authority Regulation.

CHAPTER VII
ADMINISTRATIVE SANCTIONS

Article 27
(1) Any party that violates the provisions as referred to in Article 2, Article 3, Article 4 paragraph (1), paragraph (2), paragraph (3), and paragraph (4), Article 6 paragraph (2), Article 7 paragraph (3), Article 8 paragraph (3), Article 9, Article 10, Article 11 paragraph (1), paragraph (2), paragraph (3), and paragraph (4), Article 12 paragraph (2), Article 13 paragraph (3), Article 15, Article 16, Article 17, Article 18, Article 19, Article 21, Article 22, Article 24, Article 25, and Article 26 shall be subject to administrative sanctions.

(2) Sanctions as referred to in paragraph (1) shall also be imposed on parties who cause the occurrence of violations as referred to in paragraph (1).
(3) Sanctions as referred to in paragraph (1) and paragraph (2) shall be 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) 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 prior imposition of administrative sanctions in the form of a written warning as referred to in paragraph (4) letter a. (6) 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. (7) The procedure for imposing sanctions as referred to in paragraph (3) shall be carried out in accordance with the provisions of legislation.

Article 28
In addition to administrative sanctions as referred to in Article 27 paragraph (4), the Financial Services Authority may take specific actions against any party that violates the provisions of this Financial Services Authority Regulation.

Article 29
The Financial Services Authority may announce the imposition of administrative sanctions as referred to in Article 27 paragraph (4) and specific actions as referred to in Article 28 to the public.

CHAPTER VIII
CLOSING PROVISIONS

Article 30
Upon the commencement of this Financial Services Authority Regulation, the Decision of the Chairman of the Capital Market Supervisory Board and Financial Institutions Number: Kep-412/BL/2009 dated November 25, 2009 regarding Affiliate Transactions and Conflict of Interest in Certain Transactions along with Regulation Number IX.E.1 which is its annex is revoked and declared invalid as of October 21, 2020.

Article 31
The provisions as referred to in Article 1, Article 2, Article 3, Article 4, Article 5, Article 6, Article 8, Article 9, Article 10, Article 11, Article 12, 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, and Article 29, shall take effect on October 21, 2020.

Article 32
This Financial Services Authority Regulation shall take effect upon being promulgated.

This copy is in accordance with the original
Director of Law 1
Legal Department signed
Mufli Asmawidjaja

To ensure everyone knows, it is ordered to promulgate this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.

Determined in Jakarta on July 1, 2020
CHAIRMAN OF THE COMMISSIONERS BOARD
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
WIMBOH SANTOSO

Promulgated in Jakarta on July 2, 2020
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2020 NUMBER 157

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 42 /POJK.04/2020
REGARDING
AFFILIATE TRANSACTIONS AND CONFLICT OF INTEREST TRANSACTIONS

I. GENERAL
The Financial Services Authority, as an institution having the function as a regulator of the financial services sector, specifically 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, particularly Independent Shareholders. To improve the quality of information disclosure, increase compliance of capital market participants, and provide legal certainty in the framework of protecting the interests of investors, particularly Independent Shareholders, the Financial Services Authority needs to improve the provisions regulating Affiliate Transactions and Conflict of Interest Transactions by Public Companies currently in force. Provisions regulating Affiliate Transactions and Conflict of Interest Transactions were previously regulated in Regulation Number IX.E.1, annex of the Decision of the Chairman of the Capital Market Supervisory Board Number: Kep-412/BL/2009 dated November 25, 2009 regarding Affiliate Transactions and Conflict of Interest in Certain Transactions. Over the past 10 (ten) years, both the capital market in Indonesia and in other countries have undergone changes and developments, so it is necessary to improve such regulations by considering currently applicable provisions, prevailing practices, and best practices in the capital market, market needs, and international standards.

II. ARTICLE BY ARTICLE

Article 1
Sufficiently clear.

Article 2
What is meant by "Affiliate Transaction" includes among others:

1. participation in business entities, projects, and/or specific business activities;
2. purchase, sale, transfer, use, 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. mortgaging the assets of the Public Company and/or Controlled Company for loans from third parties; and
7. providing corporate guarantees.

Letter a
Sufficiently clear.

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

1. there is dependency and/or continuity between planned transactions;
2. gradual acquisition of other companies' securities for the purpose of control or investment;
3. gradual divestment of company securities for divestment purposes resulting in loss of control; and
4. acquisition or divestment of a single 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 object of shares purchased is the same, namely shares of PT A, and indicates the Public Company's intention 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)
What is meant by "adequate procedures" includes among others procedures that compare the terms and conditions of transactions equivalent to transactions conducted between parties without Affiliate relationships. Conditions indicating that a transaction is conducted in accordance with prevailing business practices include, among others, if an Affiliate Transaction is conducted by meeting the arm's-length principle.

Paragraph (2)
Sufficiently clear.

Article 4
Paragraph (1)
Letter a
Sufficiently clear.

Letter b
Sufficiently clear.

Letter c
Sufficiently clear.

Letter d
Number 1
What is meant by "value limit" is the value limit as referred to in the Financial Services Authority Regulation regarding material transactions and changes in business activities.

Number 2
Examples of Affiliate Transactions that may disrupt the continuity of the Public Company's business, among others:

1. transactions that may cause the Public Company's pro forma business income to decrease by 80% (eighty percent) or more; or
2. transactions that may cause the Public Company to incur a current year loss on a pro forma basis.

Number 3
Sufficiently clear.

Paragraph (2)
Sufficiently clear.

Paragraph (3)
Letter a
What is meant by "date of Affiliate Transaction" is the date of signing the agreement, provided that 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 Affiliate Transaction:

1. PT A Tbk sells land to PT B, where PT A Tbk and PT B are entities controlled by the same party. The agreement contains a suspensive condition that the sale and purchase transaction becomes effective if PT B has first obtained approval from the General Meeting of Shareholders for the said transaction. Thus, the date of the Affiliate Transaction is the date of the implementation of the General Meeting of Shareholders of PT B that approved the said transaction.
2. PT A Tbk buys shares of PT X which has common directors with PT A Tbk. The agreement contains a suspensive condition that the sale of shares of PT X becomes effective if PT X has divested all its shareholdings in PT Z. Thus, the date of the Affiliate Transaction is the date of divestment of all shares of PT Z by PT X.

Letter b
This provision aims to ensure that public shareholders receive complete information regarding the plan to implement the transaction, so that the announcement of information disclosure and the announcement of the General Meeting of Shareholders must be conducted simultaneously. What is meant by "submission of documents conducted simultaneously with the announcement of the General Meeting of Shareholders" is that the submission of documents to the Financial Services Authority is conducted on the same day as the announcement of the General Meeting of Shareholders.

Paragraph (4)
Sufficiently clear.

Paragraph (5)
Letter a
Sufficiently clear.

Letter b
What is meant by "other supporting documents" includes among others the sale and purchase agreement document.

Article 5
Letter a
Sufficiently clear.

Letter b
Transactions of a Public Company with Employees, members of the Board of Directors, or members of the Board of Commissioners of such Public Company, as well as with Employees, members of the Board of Directors, or members of the Board of Commissioners of a Controlled Company, such as the provision of loans and assistance in payment of insurance premiums, are conducted by the Public Company or Controlled Company to all Employees, members of the Board of Directors, or members of the Board of Commissioners with the same terms, according to policies established by the Public Company.

Letter c
Sufficiently clear.

Letter d
Sufficiently clear.

Letter e
Sufficiently clear.

Article 6
Paragraph (1)
Letter a
Sufficiently clear.

Letter b
Sufficiently clear.

Letter c
Sufficiently clear.

Letter d
Sufficiently clear.

Letter e
Sufficiently clear.

Letter f
Sufficiently clear.

Letter g
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 h
What is meant by "restructuring" is a restructuring transaction in the context of improving or maintaining the continuity of business and has received approval from the ministry overseeing the company in government control.

Paragraph (2)
Sufficiently clear.

Article 7
Sufficiently clear.

Article 8
Paragraph (1)
What is meant by "Affiliate Transaction that constitutes business activity" is a transaction that will be conducted routinely, repeatedly, and/or continuously in the context of carrying out new business activities that will generate business income and has received approval from the General Meeting of Shareholders regarding changes 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 machines, purchase of land for investment property, sale of receivables, sale of non-performing assets, leasing assets used for production activities, purchasing or building assets used for production activities and included in capital expenditure (Capital Expenditure/CAPEX).

Paragraph (2)
Sufficiently clear.

Paragraph (3)
Sufficiently clear.

Article 9
Sufficiently clear.

Article 10
Letter a
Sufficiently clear.

Letter b
Information regarding party identity must contain 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 c
Sufficiently clear.

Letter d
Sufficiently clear.

Letter e
Sufficiently clear.

Letter f
Sufficiently clear.

Letter g
Sufficiently clear.

Letter h
Sufficiently clear.

Letter i
Sufficiently clear.

Article 11
Paragraph (1)
Sufficiently clear.

Paragraph (2)
Sufficiently clear.

Paragraph (3)
This provision aims to ensure that public shareholders receive complete information regarding the plan to implement the transaction, so that the announcement of information disclosure and the announcement of the General Meeting of Shareholders need to be conducted simultaneously. What is meant by "submission of documents conducted simultaneously with the announcement of the General Meeting of Shareholders" is that the submission of documents to the Financial Services Authority is conducted on the same day as the announcement of the General Meeting of Shareholders.

Paragraph (4)
Sufficiently clear.

Paragraph (5)
Letter a
Sufficiently clear.

Letter b
Sufficiently clear.

Letter c
Sufficiently clear.

Letter d
Sufficiently clear.

Letter e
Sufficiently clear.

Letter f
What is meant by "other supporting documents" includes among others the sale and purchase agreement document.

Article 12
Paragraph (1)
Letter a
Sufficiently clear.

Letter b
Sufficiently clear.

Letter c
Sufficiently clear.

Letter d
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 e
Sufficiently clear.

Paragraph (2)
Sufficiently clear.

Article 13
Sufficiently clear.

Article 14
Letter a
Sufficiently clear.

Letter b
Transactions of a Public Company, whether with Employees, members of the Board of Directors, or members of the Board of Commissioners of such Public Company, or with Employees, members of the Board of Directors, or members of the Board of Commissioners of a Controlled Company, or transactions of a Controlled Company, whether with Employees, members of the Board of Directors, or members of the Board of Commissioners of such Controlled Company, or with Employees, members of the Board of Directors, or members of the Board of Commissioners of a Public Company, such as the provision of loans and assistance in payment of insurance premiums, are conducted by the Public Company or Controlled Company to all Employees, members of the Board of Directors, or members of the Board of Commissioners with the same terms, according to policies established by the Public Company.

Letter c
Sufficiently clear.

Letter d
Sufficiently clear.

Article 15
Letter a
Sufficiently clear.

Letter b
Information regarding party identity must contain at least:

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

Letter c
Sufficiently clear.

Letter d
Sufficiently clear.

Letter e
Sufficiently clear.

Letter f
Sufficiently clear.

Letter g
Sufficiently clear.

Letter h
Sufficiently clear.

Article 16
Sufficiently clear.

Article 17
Sufficiently clear.

Article 18
Sufficiently clear.

Article 19
Sufficiently clear.

Article 20
Sufficiently clear.

Article 21
Examples of transactions that may disrupt the continuity of a Public Company's business include:

1. transactions that may cause a reduction in the Public Company's business revenue by 80% (eighty percent) or more; or
2. transactions that may cause the Public Company to incur a loss in the current year.

Article 22
Sufficiently clear.

Article 23
Sufficiently clear.

Article 24
Sufficiently clear.

Article 25
Sufficiently clear.

Article 26
Sufficiently clear.

Article 27
Sufficiently clear.

Article 28
The term "specific actions" includes, among other things, the postponement of the implementation of an Extraordinary General Meeting of Shareholders.

Article 29
Sufficiently clear.

Article 30
Sufficiently clear.

Article 31
Sufficiently clear.

Article 32
Sufficiently clear.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6532