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23 June 2010
On April 13 2010 the Capital Market and Financial Institutions Supervisory Board issued a regulation(1) regarding the buyback of shares issued by issuers or public companies. This regulation repealed and replaced previous decisions on the same subject matter.(2)
Among the board's considerations for issuing the regulation was the need to implement policies that are in line with provisions on share buybacks of the new Company Law (40/2007).
Provisions of note include the following:
A share buyback must be completed within 18 months of approval at a general shareholders' meeting. The buyback may be conducted through the stock exchange or by way of a tender offer outside of the stock exchange. The regulation also contains a provision on how such a share buyback must be carried out.
A company that conducts a share buyback to fulfil Article 62 of the new Company Law – which specifies the circumstances in which a shareholder has the right to require the company to repurchase its shares, such as where the shareholder deems an act by the company to be detrimental – must first meet disclosure requirements.
Shares that are bought back may be:
• sold back to the public (either through the stock exchange or outside of it);
• withdrawn (causing a reduction in the company's issued capital);
• distributed to the employees under the employees' share purchase plan; or
• distributed under one of the company's equity conversion programmes.
The regulation came into force on its date of issue.
For further information on this topic please contact Hamud Balfas at Ali Budiardjo, Nugroho, Reksodiputro by telephone (+62 21 250 5125), fax (+62 21 250 5121) or email (firstname.lastname@example.org).
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