ACQUISITION OF PT Y

By: Budidjaja International Lawyers

Acquisition is defined in the Company Law as the acquisition of shares of a target PT

resulting in the transfer of control. ‘Control’ is not defined, but in practice, ‘control’ is
commonly interpreted as the ability to influence the management and policy of the
company, which can be evidenced by: ownership of more than 50 percent of shares,
control over the majority of voting rights or ability to appoint key management of the PT.
Under Indonesian Law, acquisitions are typically structured through (i) the transfer of the
target company’s shares or (ii) in the case of asset acquisition, through the transfer of the
target company’s assets, from the seller to the purchaser. These transfers are usually
conducted through a sale and purchase agreement which will be executed by the parties
who wish to acquire or dispose the relevant company or assets.

A. ACQUISITION SCHEME

(i). 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.

(ii) 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.

To conclude, PT X must fully consider which scheme will it undertake to acquire the stake
of PT Y.

B. DOCUMENTS REQUIRED

In order for PT X to do the acquire 70 percent of the PT Y’s stake, the followings are the
documents which needed to be prepared:
 Announcement
 GMS resolutions
 A sale and purchase agreement
 A deed of transfer
 Shareholders register
 A certificate of collective shares
 Approval from Ministry of Law and Human Rights or other relevant agencies Business
Identification Number

C. FEASIBILITY OF ADDITIONAL LOAN FROM BANK

MANDIRI

The loan from BNI amounted to USD60,000,000 and the planned additional loan from
Bank Mandiri amounted to USD20,000,000 is used to expand its business. Such corporate
action is not a viable option in financing your business as it is required for PT X to
establish its asset under collateral. While the loan from BNI has put PT X’s asset under
previous collateral, the question remains: which assets under management of PT X would
be under collateral for the Bank Mandiri’s financial lending? This requires a meticulous
assessment whether PT X still has another asset to execute such plans. Therefore, PT X
needs a new and free collateral for the additional loan.

D. APPROVAL FROM BKPM

For PTs with foreign capital investment (PT penanaman modal asing – PMA), Law No. 25
of 2007 on Capital Investment (the Investment Law) and its implementing regulations
must be observed, including Capital Investment Coordinating Board (BKPM) Regulation
No. 6 of 2018 on Guidelines and Procedures for Investment Licences and Facilities (as
amended by BKPM Reg No. 5 of 2019) and Presidential Regulation No. 44 of 2016 on the
List of Business Fields Closed for Foreign Investment and Business Fields that are Open,
with Conditions, for Foreign Investment (known as the Negative Investment List), which
prescribes specific foreign shareholding limitations and other restrictions for various
sectors based on type of activity and scale of business.

Acquisition of shares of an existing PT require specific approval by BKPM, which will

examine the proposed shareholding to determine if it complies with the Negative
Investment List and sector specific limitations on foreign shareholding, such as those that
apply in the financial services, mining, and media sectors, among others. Under the
Investment Law, any amount of foreign shareholding (whether at the subsidiary or parent
level) makes a PT a PT PMA, which must comply with the rules limiting foreign
ownership.

Therefore, at the case in the hand, PT X’s acquisition in the PT Y (a PT PMA) requires
approval from BKPM. Transfer of shares and conversion from domestic PT to PT PMA
both require BKPM approval before the amended articles of association can be submitted
to the Ministry of Law and Human Rights.

E. CONSULTATION WITH KPPU

Law No. 5 of 1999 on Prohibition of Monopoly Practices and Unfair Business

Competition (the Antimonopoly Law) prohibits unaffiliated PTs from conducting any
business combination that will lead to a monopoly or unfair competition. If a business
combination causes combined asset value or total sales to exceed minimum thresholds, the
Commission for Supervision of Business Competition (KPPU) must be notified within 30
working days from the date the business combination takes effect. Government Regulation
No. 57 of 2010 on Mergers, Consolidations and Acquisitions that Cause Monopoly
Practices and Unfair Business Competition sets minimum thresholds of 2.5 trillion rupiah
for combined assets and 5 trillion rupiah for total sales.

Therefore, if the combination of PT Y and PT X exceeds the 2.5 trillion rupiah threshold,
it is required to do a consultation. A consultation with the KPPU may be necessary to
determine whether the acquisition should be reported to the KPPU or would trigger
monopoly or unfair business competition.