To accommodate the rapid and continuing development of start-up companies as well as stimulate their mass funding through listing on the Indonesia Stock Exchange (“IDX”), the Financial Services Authority (Otoritas Jasa Keuangan or “OJK”) has issued the long-awaited OJK Regulation No. 22/POJK.04/2021 (“OJKR 22/2021”), which allows eligible companies that contemplate an IPO to issue shares with multiple voting rights (multiple voting shares or “MVS”) to their eligible shareholders. With the MVS, the eligible shareholders can practically retain control of the company even after the IPO and thereby ensure the accomplishment of the company’s objectives in line with its mission and vision.
- Criteria of Eligible Companies and Shareholders
Not all companies are allowed to issue MVS and not all shareholders are entitled to hold MVS. OJKR 22/2021 sets the specific eligibility criteria for both the issuing companies and the shareholders with respect to the MVS, as explained below:
The companies that are eligible to issue MVS are those that conduct an IPO and meet the following criteria:
- their core business uses technology, which evidently increases productivity, economic growth, and offers social benefits (e.g., job opportunities for the public);
- their shareholders provide a significant contribution to the use of technology;
- having (i) at least 3 years of operation with total assets of at least IDR2 trillion (approximately USD140 million), and (ii) at least 30% annual revenue growth and at least 20% annual asset growth for the last 3 years; and
- never having conducted any public offering of equity securities.
Below are the eligibility criteria for the shareholders to own MVS:
- For the first time upon the IPO:
those approved by the GMS and named in the IPO prospectus;
- At other times after the completion of the IPO:
- those previously disclosed in the IPO prospectus as having the right to hold MVS; and
- any director of the eligible company having a significant contribution to the company’s business growth and approved by the company’s independent shareholders.
- For corporate MVS holders (MVS holders in the form of a juristic person):
- The corporate MVS holder must be directly owned, at least 99%, by MVS holder(s) and/or ex-MVS holder(s);
- The corporate MVS holder’s board of directors has appropriate expertise to support the eligible company’s business; and
- If an Indonesian juristic person, the corporate MVS holder must engage in the management consulting business.
When an MVS holder no longer meets the above criteria, OJKR 22/2021 requires their MVS to be converted into ordinary shares.
- Other Key Provisions
- Lock-Up Period in the Eligible Company
- For MVS holders: 2 years after the effective date of the IPO submission (Registration Statement) (“Effective IPO Submission”).
- For ordinary shareholders already holding shares before the Effective IPO Submission and only if the book value per share is lower than the IPO price: 8 months after the Effective IPO Submission.
- Right of First Refusal
After the expiry of the Lock-Up Period as described in point a(i) above, MVS holders intending to transfer their shares must, by law, offer their shares to the non-transferring MVS holders through the negotiated market.
- Maximum Period of MVS Shares
The MVS are valid for a maximum of 10 years as of the Effective IPO Submission and extendable for another 10 years, subject to the approval of independent shareholders. The MVS must be converted into ordinary shares once the period has lapsed.
- Minimum Voting Rights of Non-MVS Holders
At least 10% of the total voting rights.
- Voting Right Ratios and MVS Holders’ Voting Right Ownership Percentage
OJKR 22/2021 sets the following prescribed voting right ratios of MVS to ordinary shares. As can be seen from the table below, the voting rights owned by MVS holders must be more than 50% but not more than 90% of the total voting rights.
No MVS Percentage from the Total Issued and Paid-Up Capital Voting Right Ratio (MVS to ordinary shares) Effective Voting Rights of MVS Holders a. 10% up to 47.36% 10:1 52.63% up to 90% b. 5% up to <10% 20:1 51.28% up to 68.94% c. 3.5% up to <5% 30:1 52.11% up to 61.17% d. at least 2.44% up to <3.5% 40:1 50.01% up to 59.12%
- Lock-Up Period in the Eligible Company
- Additional IPO Requirements
OJKR 22/2021 also provides for extra requirements for the IPO conducted by an eligible company, such as the submission of additional statement letters and a more descriptive prospectus.
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