The Head of the Capital Market and Financial Institutions Supervisory Board (‘Bapepam-LK’) recently issued Decision No. KEP-105/BL/2010 on the Repurchase of Shares by Issuing Companies or Public Companies: it repeals and replaces Head of Bapepam-LK Decisions No. KEP-45/PM/1998 and No. KEP-401/PM/2008, in order to align the regulation on share buy-backs with Law No. 40 of 2007 on Limited Liability Companies (“Company Law”), which replaced Law No. 1 of 1995.
The new Rule No. XI.B.2 on Share Repurchase is contained in the Attachments to the Decision.
Companies typically repurchase or ‘buy-back’ their shares when they want to decrease the supply of shares to either increase the value of existing shares, or to prevent threats of majority control by another buyer.
According to Head of Bapepam-LK Rule No. IX.J.1, share buy-backs require prior approval in a General Meeting of Shareholders. The necessary announcement of the meeting must also announce certain minimal information on what is proposed, which is specified in Point 2 of the new Rule No. XI.B.2.
The buy-back of shares must be done within 18 months of approval being issued in the General Meeting of Shareholders. It can be done through the stock exchange, or through a tender offer outside of the stock exchange; both methods are elaborated by the Rule.
In a General Meeting, shareholders may also request a company to repurchase their shares in the event as provided by Article 62 of the Company Law, an event where the shareholders do not agree with specific corporate actions (e.g. merger and acquisition). In that event, the company must announce the following to both the public and Bapepam-LK: (1) description of the buy-back; (2) name(s) of the shareholders whose shares may be repurchased by the company; (3) price, and price determination method for the shares; (4) period of allowance for repurchase.
The results of any repurchase must be submitted to Bapepam-LK every 6 months, in June and December, using the form contained in this Decision’s Attachments.
Bought-back shares can be re-assigned and re-sold, both in and outside of the stock exchange. Methods (e.g., employee stock option plans) and procedural requirements are contained in Point 4 of Rule No. XI.B.2.
The Rule also contains numerous, detailed timelines for a wide array of buy-back situations.
The Decision has been in force since 13 April 2010.
The Head of the Capital Market and Financial Institutions Supervisory Board (‘Bapepam-LK’) recently issued Decision No. KEP-105/BL/2010 on the Repurchase of Shares by Issuing Companies or Public Companies: it repeals and replaces Head of Bapepam-LK Decisions No. KEP-45/PM/1998 and No. KEP-401/PM/2008, in order to align the regulation on share buy-backs with Law No. 40 of 2007 on Limited Liability Companies (“Company Law”), which replaced Law No. 1 of 1995.
The new Rule No. XI.B.2 on Share Repurchase is contained in the Attachments to the Decision.
Companies typically repurchase or ‘buy-back’ their shares when they want to decrease the supply of shares to either increase the value of existing shares, or to prevent threats of majority control by another buyer.
According to Head of Bapepam-LK Rule No. IX.J.1, share buy-backs require prior approval in a General Meeting of Shareholders. The necessary announcement of the meeting must also announce certain minimal information on what is proposed, which is specified in Point 2 of the new Rule No. XI.B.2.
The buy-back of shares must be done within 18 months of approval being issued in the General Meeting of Shareholders. It can be done through the stock exchange, or through a tender offer outside of the stock exchange; both methods are elaborated by the Rule.
In a General Meeting, shareholders may also request a company to repurchase their shares in the event as provided by Article 62 of the Company Law, an event where the shareholders do not agree with specific corporate actions (e.g. merger and acquisition). In that event, the company must announce the following to both the public and Bapepam-LK: (1) description of the buy-back; (2) name(s) of the shareholders whose shares may be repurchased by the company; (3) price, and price determination method for the shares; (4) period of allowance for repurchase.
The results of any repurchase must be submitted to Bapepam-LK every 6 months, in June and December, using the form contained in this Decision’s Attachments.
Bought-back shares can be re-assigned and re-sold, both in and outside of the stock exchange. Methods (e.g., employee stock option plans) and procedural requirements are contained in Point 4 of Rule No. XI.B.2.
The Rule also contains numerous, detailed timelines for a wide array of buy-back situations.
The Decision has been in force since 13 April 2010.
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