The Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK) has determined that the previous regulation regarding affiliated and conflict of interest transactions is no longer fit for purpose. To this end, the Head of Bapepam-LK has recently issued Decision No. KEP-412/BL/2009 to repeal and replace the earlier regulation, namely: Decision No. Kep-521/BL/2008. The decision contains perfected Rule No. IX.E.1.
For a brief overview of the latter Decision see ILB No. 996 19/12/2009 on Affiliated and Conflict of Interest Transactions Rule No. IX.E.1.
The rationale of the perfected rule is to provide enhanced legal certainty and protection to shareholders from any transactions that the Issuers or Public Companies are doing with affiliated parties or where any transaction being contemplated contains a conflict of interest.
The reason for the perfection is that over time different types of transactions have given rise to situations that had not previously been contemplated or specifically regulated. Consequently, once Bapepam-LK becomes aware of these new circumstances there is quite often a need to issue amended decisions and rules to ensure that the legal framework is representative of current, and best, practice in the field.
Some of the amendments to the rule, among others, include the definitions of both a conflict of interest and an affiliated transaction.
Definitions under Decision No. Kep-521/BL/2008
Definitions under Decision No. KEP-412/BL/2009
Conflict of Interest is the difference between the Company’s economic interest and those of the board of directors, commissioners, or principal shareholders in certain transactions that may give rise to losses for the Company due to unreasonable price fixing.
Conflict of Interest is the difference between the Company’s economic interest and those of the members of the Board of Directors, the members of the Board of Commissioners, or the principal shareholders which may cause losses to the Company in question.
Affiliated Transaction is a transaction conducted by the Company with an Affiliated Company.
Affiliated Transaction is a transaction conducted by the Company or the Controlled Company with an affiliated Company or any company affiliated with the members of the Board of Directors, members of the Board of Commissioners, or the principal shareholders of the Company.
The decision also stipulates additional types of Affiliated and Conflict of Interest Transactions which are exempted from certain obligations set out under the provisions of this decision. The exemptions for the Affiliated Transactions are enumerated in Point 2(c), and for Conflict of Interest transactions these exemptions are enumerated in Point 3(c).
This decision has been in force since 25 November 2009.
The Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK) has determined that the previous regulation regarding affiliated and conflict of interest transactions is no longer fit for purpose. To this end, the Head of Bapepam-LK has recently issued Decision No. KEP-412/BL/2009 to repeal and replace the earlier regulation, namely: Decision No. Kep-521/BL/2008. The decision contains perfected Rule No. IX.E.1.
For a brief overview of the latter Decision see ILB No. 996 19/12/2009 on Affiliated and Conflict of Interest Transactions Rule No. IX.E.1.
The rationale of the perfected rule is to provide enhanced legal certainty and protection to shareholders from any transactions that the Issuers or Public Companies are doing with affiliated parties or where any transaction being contemplated contains a conflict of interest.
The reason for the perfection is that over time different types of transactions have given rise to situations that had not previously been contemplated or specifically regulated. Consequently, once Bapepam-LK becomes aware of these new circumstances there is quite often a need to issue amended decisions and rules to ensure that the legal framework is representative of current, and best, practice in the field.
Some of the amendments to the rule, among others, include the definitions of both a conflict of interest and an affiliated transaction.
Definitions under Decision No. Kep-521/BL/2008
Definitions under Decision No. KEP-412/BL/2009
Conflict of Interest is the difference between the Company’s economic interest and those of the board of directors, commissioners, or principal shareholders in certain transactions that may give rise to losses for the Company due to unreasonable price fixing.
Conflict of Interest is the difference between the Company’s economic interest and those of the members of the Board of Directors, the members of the Board of Commissioners, or the principal shareholders which may cause losses to the Company in question.
Affiliated Transaction is a transaction conducted by the Company with an Affiliated Company.
Affiliated Transaction is a transaction conducted by the Company or the Controlled Company with an affiliated Company or any company affiliated with the members of the Board of Directors, members of the Board of Commissioners, or the principal shareholders of the Company.
The decision also stipulates additional types of Affiliated and Conflict of Interest Transactions which are exempted from certain obligations set out under the provisions of this decision. The exemptions for the Affiliated Transactions are enumerated in Point 2(c), and for Conflict of Interest transactions these exemptions are enumerated in Point 3(c).
This decision has been in force since 25 November 2009.
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