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Indonesian capital market: new stock listing regulations at IDX – Finance and Banking

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The Indonesian Stock Exchange (“IDX”), in collaboration with the Financial Services Authority /Otoritas Jasa Keuangan (“OJK”), are currently finalizing a new provision which will modify the decree of the board of directors of IDX n ° Kep-00183 / BEI / 12-2018 on the securities listing regulations n ° IA on the general provisions for the listing of securities participation in IDX (“Draft revised IA rule”).

Such a proposed change to the current layout appears to provide more user-friendly regulation to facilitate future listing of online marketplaces. Bukalapak.com which should first benefit from the motherboard of the new IDX regime in August. GoTo, the holding entity of road transport giant Gojek and market operator Tokopedia, which is also the country’s largest tech startup, valued at $ 18 billion, is expected to follow shortly thereafter.

The modification of the current listing rules aims to make the IDX an attractive place for the IPO (“Initial Public Offering“) for these tech companies. This is to encourage more tech companies to do so in IDX rather than other markets such as the Singapore Stock Exchange or the Hong Kong Stock Exchange.

Below are some speaking engagements that we have compiled from various resources on the proposed changes to the current IDX rulebook:

1. IDX to relax registration requirements on IDX motherboard: In the revised draft AI regulations, IDX is relaxing the regulations to encourage fast-growing, loss-making but highly sought-after tech startups to choose IDX as their listing location.

Under current regulations, potential issuers are required to meet the following conditions to be registered on the IDX motherboard:

  1. Have net tangible assets of at least IDR 100 billion rupees;
  2. Having started the business for 3 (three) consecutive years; and
  3. Have a record operating profit in the last fiscal year.

In the draft new IA regulation, IDX is making adjustments to allow potential issuers to meet 5 (five) alternative requirements, namely (i) tangible net assets and operating profit; (ii) the total profit before tax of the last 2 (two) years and the market capitalization value; (iii) income and market capitalization value; (iv) total assets and market capitalization value; (v) cumulative operating cash flow of the last 2 (two) years and market capitalization value.

This should provide Indonesian companies with broader opportunities to be listed on the IDX motherboard.

2. IDX to adjust the free float rules: The current listing regulations use the term “public shares” or “public float”, which is determined on the basis of shareholders who are not a major shareholder and a controller.

IDX proposed to change the aforementioned definition and uses the term “floating” in the revised draft AI regulations. However, the minimum free float percentage of 7.5% as stipulated in clause V.1 of the current IDX regulations remains in effect under the new regulations.

3. IDX will authorize the listing of the dual class share structure: Another major amendment proposed in the revised draft AI regulation is the implementation of the dual class share structure (“DCS“) with shares with multiple voting rights (“MVS“).

IDX is currently conducting legal research for the implementation of DCS and MVS to find the framework that enables best market practice for such a structure. If IDX authorizes the DCS and MVS structure, it will follow other global stock markets that have authorized such a structure. Many global technology companies have been listed with the MVS structure, including Google, SEA Group (the holding entity of Shopee), and Alibaba.

However, it remains to be seen whether or not IDX will allow these companies to go public with a DCS and MVS structure.

This rule allows MVS holders to have voting rights greater than their share of ownership. MVS is set up to keep control of the founders who are the key people
of the company.

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We will provide further updates on this issue when the new registration policy is promulgated.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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