As the “best independent Indonesian law firm in the capital markets space”, our top-ranked Capital Markets team at Makes and Partners (“Makes”) has successfully represented many clients, including giant multi-national company PT Bentoel Internasional Investama, Tbk. (“Client”), in their Go Private transactions in Indonesia.
Previous OJK rulings on Go Private transactions were issued on a case-to-case basis, and subject to a company’s specific circumstances, mainly due to the absence of clear regulations. One of the more recent regulations on this matter, OJK Regulation No. 3/POJK.04/2021 on the Implementation of Capital Market Activities (“POJK 3/2021”), addresses this subjectivity and provides for, among others, a set of clearer, more objective guidelines for Go Private transactions, including on compliance and disclosure requirements to protect public investors/shareholders’ interests, shares buyback as an alternative instrument to implement Go Private transactions, and the grant of authorities to the OJK and IDX in initiating the Go Private process for certain public companies. Notably, our Client’s on-going Go Private transaction is the first Go Private transaction in Indonesia under the purview of POJK 3/2021.
Notwithstanding the above, POJK 3/2021 still does not provide for answers to some of the biggest practical concerns in Go Private transactions, including how the publicly-listed company is “delisted” from the stock exchange and, thereafter, released from the strict governance of Indonesian capital market laws. POJK 3/2021 also does not provide for a “squeeze-out” mechanism which would allow for the compulsory sale of shares of unreachable minority shareholders of a public company wanting to Go Private. Squeeze-out mechanics are crucial to reducing the number of registered shareholders to a certain threshold, taking the relevant company out of the definition of a “public company”. Absent any squeeze-out mechanics for these unreachable shareholders, a company’s Go Private process would be in limbo and subject to the tedious, if not impossible, process of trying to locate these shareholders.
Makes, as out of the box, end-to-end strategist, and top law firm in Indonesia, has formulated a creative legal and commercial solution to assist the Client in overcoming the hurdles brought about by the absence of squeeze-out mechanics by implementing a precedent-setting combination of the OJK and IDX prescribed processes for a Go Private transaction, with the afwezigheid application before the courts under the Indonesian Civil Code (“Makes Creative Squeeze-Out Strategy”).
In general, an afwezigheid application allows an interested party to submit an application for the management of assets belonging to a party whose whereabouts are unknown, so that those assets can be kept, entrusted, and managed by an authorized government institution. Through the Makes Creative Squeeze-Out Strategy, our firm has creatively included intangible assets, such as shares of a publicly-listed company, within the reach of the afwezigheid application process. Our team succeeded in implementing this approach as the district court had issued a decree granting the Client’s request to register all of the shares belonging to the unreachable shareholders under the Heritage Office. Indeed, the success of this novel strategy effectively eliminated issues on the management of shares belonging to unreachable shareholders with a mechanism that is acceptable to the court, OJK, IDX and other relevant government institutions, ultimately making Go Private transactions more efficient and conclusive.
We continue to work with the Client on the other challenging stages of its Go Private process, which is now on its final stages. While there are still some steps to completion, we believe that the Makes Creative Squeeze-Out Strategy was definitely a breakthrough solution to overcoming a perennial challenge faced by our Client’s leaders and management. The precedent success of our Client’s Go Private process would benefit all Indonesian publicly-listed companies who want to Go Private.