The following section of this document presents the legal framework of the Indonesian capital market. The common law enforcement policy in the capital market is to enforce administrative sanctions rather than criminal sanctions. An example is enforcement by the Financial Services Authority (FSA), the UK's capital market watchdog.
The implementation of these codes is laid down in Indonesian Company Law, the Capital Markets Act and its Implementing Regulations. 65 Recital point a of the decision of the Chairman of the Supervisory Agency for Capital Markets and Financial Institutions, number: KEP-259/BL/2008 on open business takeover (Bapepam-LK rule number IX.H.1 2008). In principle, the Capital Markets Act does not specifically facilitate shareholders with regard to their rights in a listed company.
The Implementation of Shareholder’s Protection in Indonesian Listed Companies
Based on the above wording, this provision broadly applies to 'any person, a company, a partnership, an association or any organized group, whether he/she acts as plaintiff or defendant'74. The Market Law for this provision also states that there must be a violation of the Capital Market Law and or its implementing regulations and the losses arising from its violation must be proven before a lawsuit can be filed against the violator. In practice, it is unclear whether the violation must first be proven by the authorities, OJK or it can be proven through the court together with the claim for compensation. In one case, the court interprets Bapepam LK (now OJK) as an extrajudicial organization and based on its function, any violation of the capital market law must first be proven by the Authority before any claim for compensation due to the violation in the law of capital market and its implementation regulations.
75 The court refers to Article 5 of the Capital Law, which states that the organization has the authority "to inspect and investigate any person with respect to suspected violations of this law or its implementing provisions".76 If this decision is followed by other next In these cases, it will be a lengthy process for investors to claim compensation for violations of capital markets law and its implementing rules. On the other hand, if Article 111 of the Capital Market Law is defined in a broad interpretation, the Indonesian court can also infringe on capital market law to decide on the award of damages.
PT Bumi Resources Tbk case
It has been alleged that PT Bumi Resources Tbk's acquisition of three coal companies violated capital market rules. While the board of directors, Bapepam LK stated that the purchase was a material transaction and changed the primary business activity, PT Bumi Resources Tbk insisted that the purchase was not a material transaction because the corporate actions cannot be interpreted as one act. Through its subsidiary, PT Bumi Resources Investment (whose shares are controlled by Bumi Resources) took over the three.
78 Bumi Resources was established in 1973 and went public in 1990 under the name PT Bumi Modern Tbk in which its shares were listed on the Jakarta Stock Exchange and the Surabaya Stock Exchange. Previously, the majority of Bumi Resources shares were held by PT Asuransi Jiwa Bersama Bumiputera 1912 as the controlling shareholder, but in 1997 the shares were sold by PT Asuransi Jiwa Bersama Bumiputera 1912 to PT Bakrie Capital Indonesia. At that time 20% of the capital in 2007 was IDR 2.47 trillion and in 2008 it was about IDR 3.48 trillion.87 If the above financial ratio was related to the value of three corporate actions by PT Bumi Resources Tbk, then those three transactions are included in the definition of material transaction in Regulation No. IX.E.2 2001.
The argument of the management of PT Bumi Resources Tbk was that these transactions did not take place in a series of transactions because they were carried out at different times, with different parties and with different objects. After the investigation, however, Bapepam-LK concluded that the acquisitions did not constitute a material transaction, because these transactions took place in different financial years.90 As a result, PT Bumi Resources Tbk was exempt from the material transaction violation. PT Bumi Resources Tbk took advantage of regulatory loopholes to avoid the obligation to obtain approval from the General Meeting of Shareholders in accordance with capital markets regulatory procedures and requirements.
PT Media nusantara Citra Tbk case
While the company and its parent, PT Bakrie & Brothers are already heavily indebted, these transactions will also place additional burdens on the company.89. After the Supreme Court's decision was released, MNC Group's share price fell by 10.34%. After the price drops, IDX temporarily suspended share trading to avoid unfair trading.96 IDX's Head of Services Appraisal has stated that the decision to suspend the MNC group's share trading followed the Supreme Court's ruling on the TPI ownership dispute.97
Although it has been noted that there is a significant reform through stricter disclosure rules with a focus on monitoring and enforcement of rules and regulations, this case shows that the implementation of timely and reliable disclosure is either not necessary or desirable on the part of companies. . While Hary lent TPI money, he insisted on the right to convert the debt into equity. Nowadays, MNC TV is controlled by MNC Group which is owned by Harry Tanoesodibjo who bought PT Berkah Karya Bersama.
Although the dispute was between Tutu and PT Berkah karya Utama, this company is related to Hary Tanoe. Additionally, the subject of the dispute was Berkah's ownership of MNC Group (formerly TPI TV). Although, Hary Tanoe insisted that the TPI ownership dispute has nothing to do with MNC Group, the company he controls, when TPI shares were transferred from Siti Hardiyanti Rumana to PT Berkah Karya Bersama, the owner of PT Berkah Karya Utama was Hary Tanoe.
PT Sumalindo Tbk case
Improving Commitment to Detecting and Punishing Violations by Financial Supervisory Agency
Several criticisms were directed at the role of Bapepam LK (now OJK) in handling the above cases. 107. Basically, Bapepam-LK has the authority to "inspect and investigate any person, issuers and public companies in relation to alleged violations of the Capital Market Act or its implementing regulation".111 The question from this case, which I. 109 Bapepam-LK number rules X.K.1 On the disclosure of information that must be published immediately, item 1.
110 Bapepam-LK Rule Number X.K.1 Regarding Disclosure of Information to be Immediately Made Public, point 2 k. In the Sumalindo Tbk case, Bapepam LK (now OJK) can get involved to ensure the public interest in proving the legal reliability of the Indonesian capital market. Having said that, Bapepam LK (now OJK) should be involved in this case to ensure the protection of minority shareholders.
In addition, the mandate conferred by law gives Bapepam-LK discretion in enforcing capital markets regulations. In the case of Indonesia, since there is nothing in the legal framework that explicitly or implicitly requires the authority to adopt such an approach in enforcing the law, the result may be a political decision by Bapepam-LK. After investigating the reasons on the side of the financial regulatory system, the measures taken by Bapepam-LK could be understandable.
Conclusion and Recommendations
On the other hand, specific priority areas may be the target of action because of the implications they entail in terms of risk to statutory objectives. What is lacking in Bapepam-LK's approach is that there are no clear risk-based tools that can be used in measuring the overall risk that jeopardizes the authority's objectives, for example a mechanism that can assess the risk against on the basis of a number of criteria. probability and impact factors. Since the above-mentioned behavior exists in Indonesian corporate governance, it is necessary to introduce a mechanism to improve Indonesian corporate governance with a measure to prevent that opportunistic behavior that might lead to the expropriation of the shareholders.
An alternative measure to raise awareness among Indonesian listed companies about the importance of good corporate governance, in addition to another harsh law, is to introduce a mechanism that assesses companies' performance based on their compliance with corporate governance standards. Instead of formulating the ASEAN scorecard through regulation, the publication of scores based on corporate governance implementation could motivate companies to improve corporate governance. While this is not necessary because the debt securitization market relies on ratings, investors could use corporate governance scores as investment metrics.
By weighing the performance of corporate governance through a rating mechanism, investors can choose whether they want to participate through shares in the company or not. Furthermore, as part of overall efforts to improve corporate governance standards and practice in the Indonesian capital markets, strengthening law enforcement should be prioritized. However, it should be noted that the main function of the supervisory agency in this area is to contribute to the effectiveness of the economic system as a whole.
Articles/Books/Reports
Prosser, Tony, ‘Regulation and Social Solidarity Journal of Law and Society 364, cited in Justin O’Brien, Private Equity, Corporate Governance and the Dynamics of Capital Market Regulation, (Imperal College Press, 2007). Tabalujan, Benny Simon, 'Why Indonesian Corporate Governance Failed - Suspicions about Legal Culture' (2002) Revised Working Paper - Columbia Journal of Asia Law. Wulandari, Etty R and Asheq R Rahman, Political Patronage, Cross Holings and Corporate Governance in Indonesia, quoted in Ferdinand A Gul and Judy SL Tsui, The Governance of East Asian Corporations-Post Asian Financial Crisis, (2004) Palgrave Macmillan.
Zweigert, Konrad en hein Kotz, An Introduction to Comparative Law, (Oxford University Press, 1998) 4 aangehaal in Yozua Makes, 'Challenges and Opportunities for the Indonesian Securities Takeover Regulations: General Framework and Analysis from Dutch Law and Theoretical Perspectives' (2012) ) Maak Internasionale Regsjoernaal.
Cases
Legislation
Other
