Background
Article 1 number 11 of Law Number 40 of 2007 on Limited Liability Companies (“Company Law”), regulates on the definition of acquisition as follows:
“Acquisition” means a legal act which is conducted by a legal entity or individual person for taking transfer of shares of a company which has effect of transferring control over aforementioned company”.
The Acquisition as stated in Article 1 number 11 of Company Law, may be conducted in two methods; through the Board of Directors (“BOD”) or directly from shareholders. Thus, each of method is regulated with different legal procedure in Company Law. Then, in the event of acquisition of shares process in Limited Liability Companies (“Company”) there are conditions which has an effect in changing of control or has not an effect in changing of control in aforementioned Company.
Acquisition that has an effect in changing of control in the Company.
A. Procedures of Acquisition through BOD of Company
According to Article 125 paragraph (1) of Company Law, Acquisition shall be conducted through method of acquisition of shares which have already been issued and/or will be issued by Company through BOD of Company or directly from shareholders. In which, whom may be undertaken Acquisition is a legal entities or natural persons. The Acquisition of shares as referred in Article 125 paragraph (1) of Company Law is acquisition of shares which results in transfer of control in relation to relevant company as referred in Article 7 number 11 of Company Law.
The following are the processes of Acquisition through BOD of Company:
1. General Meeting of Shareholders (“GMS”) Resolution
Article 125 paragraph (4) of Company Law, is regulated on acquisitions that is undertaken by legal entities which takes form of a Company, BOD before conducting acquisition must base on GMS resolution which fulfils following attendance quorum provision and provisions on conditions of acquisition set forth in resolution of GMS as contemplated in Article 89 of Company Law, that is at least ¾ (three quarters) of the total number of shares with voting right attended or are represented in the GMS and resolution shall be lawful if approved by at least ¾ (there quarters) of the number of casted votes, unless the articles of association stipulates a larger attendance quorum and/or provisions on conditions for adopting a resolution of GMS.
2. Notification to BOD of Company
According to Article 125 paragraph (5) of Company Law, if acquisition is conducted through BOD, acquiring party must deliver notice of its intention to conduct acquisition to BOD of Company which will be acquired.
3. Composing Plan of Acquisition
According to Article 125 paragraph (6) of Company Law, BOD of target Company and acquiring Company, with approval of BOC of each Company must compose plan of acquisition containing at least:
1. Name and domicile of target Company and acquiring Company;
2. The reasons and explanations of the BOD of the acquiring Company and the BOD of target Company;
3. The financial statements as referred in Article 66 paragraph (2) of Company Law, for the recent of book year from the acquiring Company and target Company;
4. Procedures for valuing and conversion of shares from target Company in relation to shares which will be exchanged if payment for transfer is to be conducted with shares;
5. Number of shares which will be acquired;
6. Readiness of funding;
7. Pro forma consolidated financial statement of acquiring Company after transfer which be composed in accordance with accounting principles which are generally applicable in Indonesia;
8. Method of settlement of right of shareholders who does not approve of acquisition;
9. Method of settlement of status, rights and obligations of members of BOD, Board of Commissioners (“BOC”) and employees of target Company shareholders;
10. Estimate of the period of time for implementation of acquisition, including period of time of grant of authority to transfer shares from shareholders to BOD of Company;
11. Plan of amendments to Article of Association of acquiring company and target Company if any.
4. Announcement of Summary of Plan Hereinafter, BOD of Company is required to announce summary of plan in at least 1 (one) national newspaper and to announce in writing to employee of Company which will conduct acquisition within maximum period of time of 30 days prior to notice of GMS (Article 127 paragraph (2) of Company Law). Aforementioned announcement must also include notice that interested parties may obtain plan of acquisition at office of Company from the date of announcement until date of convening of GMS.
5. Submission of Creditor Objection
Creditors may submit objections to the Company within maximum period of time of 14 (fourteen) days after announcement on acquisition in accordance with aforementioned plan. If within the aforementioned period creditors do not submit the objections, the creditors are deemed to have approved the acquisition. In the event objection of creditor is not settled by the BOD up to and including date of convening of GMS, the objection must be delivered to GMS for purposes of obtaining settlement. If the settlement cannot be reached, Acquisition cannot be implemented.
6. Preparing a Deed of Acquisition Before a Notary
According to Article 128 paragraph (1) of Company Law stated, Plan of Acquisition which has already been approved by GMS must be set forth in a deed of acquisition which is made before a notary in Indonesian language.
7. Notification to Minister
Then, copy of the deed of Acquisition of Company must be attached to delivery of notice to Minister concerning amendments to article of association as contemplated in Article 21 paragraph (3) of Company Law. The provision as referred in Article 29 and Article 30 of Company Law on Company Registry and Announcement also applies in Acquisition. The further provision concerning acquisition of Company is to be stipulated by Government Regulation.
8. Announcement of Result of Acquisition
According to Article 133 paragraph (2) of Company Law, BOD of target Company is required to announce results of acquisition in one or more national newspapers within maximum period of time of 30 days calculated from effective date of acquisition.
B. Acquisition procedures directly from shareholders
Earlier, we have discussed the process of acquisition of shares of Company through BOD of Company. The following are the processes of Acquisitions directly from shareholders that is simpler.
1. Negotiation and Agreement
Acquisition of shares which have already been issued and/or will be issued by Company through directly from shareholders shall be conducted through negotiation and agreement
between acquiring party and shareholders by taking into account the article of association of target Company concerning the transfer of right over shares and contracts that have been made by Company with other parties (Article 125 paragraph (6) and (7) of Company Law). If Acquisition is undertaken by legal entities which take form of Company, BOD must get approval from GMS before conducting negotiation and agreement of purchase of shares from shareholder directly.
2. Announcement of Plan of Agreement
The next procedure, although the Acquisition of shares is undertaken directly from shareholders and does not require prior composition of plan of acquisition but are required to announce the plan of acquisition agreement in at least 1 (one) newspaper and to announce in writing to employee of Company which will conduct acquisition within maximum period of time of 30 days prior to invitation of GMS. This provision is undertaken based on Article 127 paragraph (8) of Company Law, which this provision shall apply mutatis mutandis to publication in the context of Acquisition of shares directly from shareholders in the Company.
3. Submission of Creditor Objection
Thus, Article 127 paragraph (2), (3), (5), (6) and (7) of Company Law, also shall apply. In the event the creditor who is intended to submit the objection to Company may submit within maximum period of time of 14 days after aforementioned announcement. If within aforementioned time period creditors do not submit objections, then creditors are deemed to have approved acquisition. In the event there is an objection from the creditor during the aforementioned period, the objection must be delivered to GMS for purposes of obtaining settlement. If the settlement cannot be reached, Acquisitions cannot be implemented.
4. Preparing Deed of Acquisitions before a Notary.
According to Article 128 paragraph (2) of Company Law, deed of acquisition of shares which is undertaken directly from shareholders must be made by notarial deed in Indonesian language.
5. Notification to Minister
According to Article 131 paragraph (2) of Company Law, copy of deed of transfer of rights over shares must be attached to delivery of notification to Minister on the change of composition of shareholders.
6. Announcement of Result of Acquisition
The last procedure is based on Article 133 paragraph (2) of Company Law, BOD of target Company is required to announce results of acquisition of shares in one or more national newspapers within maximum period of time of 30 days calculated from effective date of acquisitions.
Acquisition that has not an effect in changing of control in the Company.
Definition of Acquisition which is regulated in Article 1 number 11 of Company Law is an Acquisition which results in changing control of Company. However, if the acquisition of shares does not result in changing control of Company, there are conditions in which number of shares will be acquired is shall not be more than 50% shares of the Company.
This type of acquisition does not fall to the definition of Acquisitions in Article 1 number 11 of Company Law, because this acquisition does not have a change of control in the target company.
These are the procedures that a target company does not need to follow:
a. GMS resolution procedures (Article 125 paragraph (4) of Company Law), without disregarding to the provisions of the Articles of Association of the Company;
b. Composition of plan of acquisition procedures (Article 125 paragraph (6) of Company Law);
c. Announcement of summary of plan procedures in at least 1 (one) national newspaper (Article 127 Paragraph (2) of Company Law);
d. preparation of a deed of acquisition before a notary procedure (Article 128 of Company Law)
e. Announcement of acquisition procedures in 1 (one) or more Newspaper (Article 133 of Company Law).
Sofie Widyana P.
