ICLG

The International Comparative Legal Guide to:

Mergers & Acquisitions 2019
13th Edition
A practical cross-border insight into mergers and acquisitions

Published by Global Legal Group, with contributions from:

Aabø-Evensen & Co Advokatfirma Houthoff Schoenherr

Advokatfirman Törngren Magnell Kelobang Godisang Attorneys SEUM Law
Alexander & Partner Rechtsanwaelte mbB Kılınç Law & Consulting Shardul Amarchand Mangaldas & Co.
Ashurst Hong Kong Law firm Vukić and Partners Skadden, Arps, Slate, Meagher & Flom LLP
Atanaskovic Hartnell Loyens & Loeff and Affiliates
Bär & Karrer Ltd. Maples Group Škubla & Partneri s. r. o.
BBA Matheson SZA Schilling, Zutt & Anschütz
Rechtsanwaltsgesellschaft mbH
Bech-Bruun MJM Limited
Vieira de Almeida
D. MOUKOURI AND PARTNERS Moravčević Vojnović and Partners
in cooperation with Schoenherr Villey Girard Grolleaud
Debarliev Dameski & Kelesoska
Attorneys at Law Motta Fernandes Advogados Wachtell, Lipton, Rosen & Katz
Dittmar & Indrenius Nader, Hayaux & Goebel Walalangi & Partners
(in association with Nishimura & Asahi)
E&G Economides LLC Nishimura & Asahi
WBW Weremczuk Bobeł & Partners
ENSafrica Nobles Attorneys at Law
Ferraiuoli LLC NUNZIANTE MAGRONE WH Partners
Gjika & Associates Oppenheim Law Firm White & Case LLP
GSK Stockmann Popovici Niţu Stoica & Asociaţii Zhong Lun Law Firm
HAVEL & PARTNERS s.r.o. Ramón y Cajal Abogados
 Chapter 28

Indonesia
Luky I. Walalangi

Walalangi & Partners

(in association with Nishimura & Asahi) Siti Kemala Nuraida

1 Relevant Authorities and Legislation 1.2 Are there different rules for different types of
company?

1.1 What regulates M&A?

The general rules set by the Company Law apply to all companies.
For specific sectors, such as banks, multi-finance, mining, insurance
The basic rule governing mergers or acquisitions of Indonesian or public companies, additional rules and requirements apply.
companies is Law No. 40 of 2007 on the Limited Liability Company
(“Company Law”) and its implementing regulation, including
Government Regulation No. 27 of 1998 on Merger, Consolidation 1.3 Are there special rules for foreign buyers?
and Acquisition of a Limited Liability Company (“GR 27/1998”),
which sets out the general requirements for mergers, acquisitions Not all business sectors are open for foreign participation. The
and consolidation, such as mandatory quorum and voting government from time to time issues the so-called Negative List,
requirements for general meetings of shareholders (“GMS”), setting out a classification of certain lines of business (also known as
newspaper announcements, announcements to employees, Klasifikasi Baku Lapangan Usaha Indonesia or “KBLI”) that are
requirements to use a public notary and so on. For public either totally closed for investment (including businesses that are
companies, there are additional specific regulations, including: (i) reserved for small and medium-scale enterprises) or opened for
Law No. 8 of 1995 on the Capital Market; (ii) Financial Service investment with certain conditions; for example (a) limitations on
Authority (OJK) Regulation No. 9/POJK.04/2018 on Public foreign ownership, (b) a requirement for local partnership, (c)
Company Takeovers; (iii) OJK Regulation No. 74/POJK.04/2016 limited permitted locations, and (d) a requirement for special
on the Merger or Consolidation of a Public Company; (iv) OJK licences.
Regulation No. 58 /POJK.04/2017 on the Electronic Submission of
a Registration Statement or Company Action; and (v) OJK
1.4 Are there any special sector-related rules?
Regulation No. 54/POJK.04/2015.
Other relevant rules relating to M&A in Indonesia are, among Yes, different sectors such as banks, multi-finance, insurance and
others: mining have specific additional provisions that must be closely
(i) the merger control rules, set by (a) Law No. 5 of 1999 on the observed.
Prohibition of Monopolistic Practices and Unfair Business
Competition, (b) Government Regulation No. 57 of 2010 on
Business Entity Mergers or Consolidation and Acquisition of 1.5 What are the principal sources of liability?
Company Shares that May Cause Monopolistic Practices and
Unfair Business Competition, and (c) the Business The Company Law and GR 27/1998 require any plan for a merger
Competition Supervisory Board (“KPPU”) Guidelines No. 2 or acquisition to be announced in the nationwide newspapers and to
of 2013;
the target’s employees within 30 days prior to the call of the GMS.
(ii) the labour rights set by Law No. 13 of 2003 on Manpower; Within 14 days of the announcement, any creditors of the target
(iii) the foreign investment rules under (a) Law No. 25 of 2007 on have the right to object to the proposed merger or acquisition to the
Investment, (b) Presidential Regulation No. 44 of 2016 on target’s Board of Directors (“BoD”), and if such objection cannot be
List of Business Fields Closed and Business Fields Open settled by the BoD, it must be resolved by the GMS. Note that the
with Conditions for Investment (“Negative List”), and (c)
merger or acquisition may not proceed until the objection is
Head of Investment Coordinating Board (“BKPM”) No. 6 of
resolved. The employees of the target do not have the same right to
2018 on the Guidelines and Procedures of Investment
Licensing and Facility; “block” the transaction, but they have the right to terminate their
employment and seek severance payment.
(iv) applicable OJK regulations for banks, insurance and multi-
finance companies; and
(v) the online registration system set by Government Regulation
No. 24 of 2018 on the Electronic Integrated Licensing
Services (“GR 24/2018”).

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2 Mechanics of Acquisition 2.9 Are there any limits on agreeing terms with
employees?

2.1 What alternative means of acquisition are there?

In the event of a merger or acquisition, the employees only have two
options: (i) to continue employment under the existing employment
In practice, some parties structure the transaction as a business contract; or (ii) to terminate the employment and receive severance

Indonesia
transfer rather than a shares transfer/shares subscription. payment.

2.2 What advisers do the parties need? 2.10 What role do employees, pension trustees and other
stakeholders play?
The advisers needed by the parties depend on the scale and scope of
the transaction. Potential buyers generally appoint legal and There is no specific role for employees. Please see our response to
financial/tax advisors, but for specific cases such as those involving question 2.9 above.
real property or industrial business, they may also appoint
environmental advisors.
2.11 What documentation is needed?

2.3 How long does it take?

For acquisitions, the following documentation is typically needed:
announcements; GMS Resolutions; a sale and purchase agreement
The length of time it takes depends on the negotiation and due or share subscription agreement; a deed of transfer; the shareholders
diligence process, but from a regulatory perspective, at least 30 register; a collective shares certificate; and notification to or
days. approval from the Ministry of Law and Human Rights (“MOLHR”)
or other relevant government agencies, including the issuance of a
2.4 What are the main hurdles? Business Identification Number (“NIB”) and a relevant merger
report to be submitted to the Business Competition Supervisory
Commission or the KPPU.
From the legal perspective, the hurdles vary depending on the type
of companies and the approval required from government For mergers, the following documentation is typically needed: a
authorities (including the “fit and proper” test for banks, or merger plan; announcements; a deed of merger; the shareholders
insurance or multi-finance companies, or mandatory tender offer register; a collective shares certificate; and notification to or
requirements for public companies). approval from the MOLHR or other relevant government agencies
(including the issuance of a NIB) and a relevant merger report to be
submitted to the KPPU.
2.5 How much flexibility is there over deal terms and
price?
2.12 Are there any special disclosure requirements?
This is a contractual matter under Indonesian law, except in cases of
mandatory tender offer or voluntary tender offer, in which case the In addition to the announcements described above, certain business
price is subject to several minimum pricing requirements. sectors, such as finance and mining, require additional disclosures
to the relevant government authorities. Also, for public companies,
if the information is considered material, they are required to
2.6 What differences are there between offering cash and
other consideration? disclose it to the public.
Additionally, if the acquisition or merger met the threshold which
For other considerations in the form of assets (such as land, requires a merger or acquisition report to be submitted to KPPU, the
equipment or other assets), the law requires these to be assessed by company is also required to submit certain documents such as a
an independent assessor and announced in newspapers. financial report, the company’s profile, the structure of the
company’s group, an acquisition or merger summary, etc.

2.7 Do the same terms have to be offered to all

shareholders? 2.13 What are the key costs?

The right of first refusal is a contractual matter in the Articles of The key costs are the notary fee and advisor (legal, financial) service
Association (“AOA”) of the company, while the pre-emptive right fee, and severance payment to employees if they decide to terminate
is a regulatory requirement; hence the answer is affirmative in the their employment.
event of an issuance of new shares.
2.14 What consents are needed?
2.8 Are there obligations to purchase other classes of
target securities? The following consents are needed: (i) approval from any organs as
required under the target’s AOA; (ii) approval/notification from
Whether there are any obligations depends on the AOA of the target creditors or other parties as may be required under the target’s
company. agreements; (iii) any government having authority over the
In the case of acquisition of a public company resulting in a change company, depending on the target’s sector; and (iv) approval by the
of control, the mandatory tender offer rules apply to the new MOLHR if a merger amends certain key provisions of the AOA.
controller.

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2.15 What levels of approval or acceptance are needed? 4.3 When is an announcement required and what will
become public?
Unless otherwise provided in the company’s AOA, the quorum for
merger and acquisition is at least ¾ of the total amount of shares ■ a pre-acquisition/merger announcement in a newspaper and
with voting rights and approved by at least ¾ of the total number of to employees should be done 30 days before the date of the
GMS to approve the transaction; and
Indonesia

votes cast in the GMS.

■ a post-acquisition/merger announcement within 30 days of
the relevant acquisition or merger becoming effective must
2.16 When does cash consideration need to be committed be made.
and available?
In addition, specifically for the acquisition of a public company,
disclosure of material information must be done two business days
The acquisition of existing shares is a contractual matter between after the information comes to be known and the new controller
the parties. Acquisition by way of issuance of new shares requires must announce the acquisition in a daily newspaper and on the target
prior approval from/notification to the MOLHR. company’s website, Indonesian Stock Exchange’s and/or OJK’s
website within two days of the date of acquisition. In relation to a
3 Friendly or Hostile merger: a pre-merger announcement of the summary of the merger
plan must be made in a national newspaper or on the Indonesian
Stock Exchange and target company’s websites within two business
3.1 Is there a choice? days of the date the target company obtains approval from the OJK
board of commissioners.
This is not a regulatory matter and purely a contractual matter.
4.4 What if the information is wrong or changes?
3.2 Are there rules about an approach to the target?
Indonesia Company Law does not specify a specific measure, but
No, there are no such rules. considering the relevant organ of the company may be held liable
for negligence, the target should re-announce the correct
information.
3.3 How relevant is the target board?
Specifically for the merger of a public company, any change of
information must be announced in a national daily newspaper or on
The BoD of the target has a significant role, because it is required by
the Indonesian Stock Exchange and target company’s websites.
law to act for its company’s interest and not the shareholders. Also,
if the transaction is based on the initiative of the BoD, the Company
Law requires the BoD to prepare a merger or acquisition plan. 5 Stakebuilding

3.4 Does the choice affect process? 5.1 Can shares be bought outside the offer process?

This does not apply in Indonesia as per question 3.1. Listed shares can be bought from the market and the consideration
will follow the market price. However, if the acquisition is made
4 Information through a voluntary tender offer, the buyer must buy through the
prescribed process and period, at the consideration determined in
the announcement of the voluntary tender offer. For non-public
4.1 What information is available to a buyer? companies, shares can only be bought from existing shareholders or
by subscribing new shares.
For private companies, there is no reliable public registry system in
Indonesia where a person can easily and freely access information 5.2 Can derivatives be bought outside the offer process?
on a company. The Minister of Law and Human Rights maintains a
company registration system, but this can only be accessed by a
Yes, derivatives can be bought outside the offer process.
public notary and the information may not be comprehensive.
Therefore, in Indonesian M&A, cooperation of the targets in a due
diligence process is essential as the investor has to rely on the 5.3 What are the disclosure triggers for shares and
information provided by the target(s). For public companies, derivatives stakebuilding before the offer and during
corporate information is generally more available due to disclosure the offer period?
requirements under Indonesian capital market law and regulations.
Disclosure to OJK applies when a buyer acquires 5% or more of a
company’s shares. The same applies to derivatives in the event such
4.2 Is negotiation confidential and is access restricted? derivatives are converted into shares. In addition, disclosure to the
public in a daily nationally circulated newspaper or on the
This is basically a contractual matter, except in relation to public Indonesian Stock Exchange’s website is required if the acquisition
companies. Parties need to carefully observe the insider information or conversion is above 50% or results in a change of control.
rules and the disclosure requirements.

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indirect shareholding is possible through shared ownership of the

5.4 What are the limitations and consequences? target by the bidder’s subsidiary or sister company. Note that this is
subject to any shareholding restriction the target may have relating
There is no limitation except for purchases through a voluntary to its business activities.
tender offer as per question 5.1 above. Any violation of that
mentioned in question 5.1 above is subject to an administrative
8 Target Defences

Indonesia
sanction in the form of a written warning, fines, suspension of
business activity, revocation of licence, and cancellation of any
approval and/or registration.
8.1 Does the board of the target have to publicise
discussions?
6 Deal Protection
No, discussions do not have to be published.

6.1 Are break fees available?

8.2 What can the target do to resist change of control?

This is a contractual matter under Indonesian law.

This is not a regulatory matter in Indonesia.

6.2 Can the target agree not to shop the company or its
assets? 8.3 Is it a fair fight?

This is a contractual matter under Indonesian law. See the response to question 8.2.

6.3 Can the target agree to issue shares or sell assets? 9 Other Useful Facts

Yes, with the appropriate prior approval of the GMS and, if relevant,
9.1 What are the major influences on the success of an
the BoD and/or Board of Commissioners. acquisition?

6.4 What commitments are available to tie up a deal? Governmental authorities’ approvals and preparation of documents
and compliance with the timeline of procedure of acquisition under
This is a contractual matter, but normally break fees are available. Company Law are major influences on the success of an acquisition.

7 Bidder Protection 9.2 What happens if it fails?

There are basically no regulatory penalties, unless contractually

7.1 What deal conditions are permitted and is their agreed otherwise.
invocation restricted?

This is generally based on a contractual agreement between the 10 Updates

parties, taking into account public policy, general corporate
principles such as fair business competition and good faith
10.1 Please provide a summary of any relevant new law or
principles. practices in M&A in your jurisdiction.

7.2 What control does the bidder have over the target In 2017, KPPU introduced a new draft amendment to the Antitrust
during the process? Law. In relation to the Merger Rules, KPPU proposed (i) to change
the requirement from “post-notification” to “pre-notification”, (ii)
As direct control over the target will only arise once the bidder has to amend the definition of “business actor” to also include those
completed the transaction, the bidder usually gains certain indirect conducting business outside Indonesia but affecting the Indonesian
“control” over the target through negative covenants under the market, (iii) to introduce a leniency programme, and (iv) to include
conditional sale and purchase agreement. acquisition of assets as part of the subject for merger control. To
date, the draft is still under discussion.
7.3 When does control pass to the bidder?
Acknowledgment
Control passes to the bidder once it validly becomes a shareholder,
The authors would like to thank Andhika Indrapraja for his
unless there is a contractual limitation through negative covenants.
invaluable assistance during the preparation of this chapter. Mr.
Andhika Indrapraja is a bright young Indonesian qualified lawyer
7.4 How can the bidder get 100% control? with more than three years of experience, assisting clients on M&A,
Real Estate, and General Corporate, with a specific focus on
Under the Indonesia Company Law, a company must have a structuring foreign direct investment, mining, real property and
minimum of two shareholders. Therefore, theoretically a construction.
shareholder may directly hold up to 99.9% control. However, Tel: +6221 5080 8600 / Email: aindrapraja@wplaws.com

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 Walalangi & Partners (in association with Nishimura & Asahi) Indonesia

Luky I. Walalangi Siti Kemala Nuraida

Walalangi & Partners Walalangi & Partners
(in association with Nishimura & Asahi) (in association with Nishimura & Asahi)
Pacific Century Place, 19th Floor, SCBD Lot 10 Pacific Century Place, 19th Floor, SCBD Lot 10
Jl. Jenderal Sudirman Kav. 52–53 Jl. Jenderal Sudirman Kav. 52–53
Jakarta 12190, Indonesia Jakarta 12190, Indonesia
Indonesia

Tel: +6221 5080 8600 Tel: +6221 5080 8600

Email: lwalalangi@wplaws.com Email: snuraida@wplaws.com
URL: www.wplaws.com URL: www.wplaws.com

Luky Walalangi is an expert and a leading lawyer in Banking and Siti Kemala Nuraida is an Indonesian qualified lawyer with more than
Finance, with more than 17 years of experience, whom Asialaw five years of experience focused on banking and finance, multi-finance
Profiles cites as “one of the best corporate lawyers in Indonesia”. He fintech and construction laws and regulations.
is well-respected and highly regarded among leading finance
Prior to joining Walalangi & Partners, she worked as an intern in one of
practitioners. He is recognised by international law journals, including
the most prestigious Singaporean law firms and as an associate in one
Chambers Asia Pacific (in M&A Practice as a recognised practitioner),
of the biggest law firms in Indonesia.
IFLR1000, Asia Pacific Legal 500 and Asialaw Profiles. He was
recognised by Asia Business Law Journal 2018 as one of the A List: While pursuing her law degree, she was active in several campus
Indonesia’s Top 100 Lawyers and was nominated as Managing organisations such as the Students’ Executive Body (Badan Eksekutif
Partner of the Year by ALB Indonesia Law Awards 2018. He was Mahasiswa) and Asian Law Students’ Association (ALSA) where she
recognised by IFLR1000 2018 as a Highly Regarded Lawyer and a served as Director of Local Chapter Universitas Indonesia. She also
leading lawyer in Banking, Competition, M&A, Project Finance and represented Universitas Indonesia’s Law Faculty in a number of
Real Estate Finance. national debate competitions as a participant as well as adjudicator.
After she graduated, she attended a six-month course at King’s
In the most recent 2019 Asialaw Profiles surveys and research, Luky
College, London, on Financial Risk, Stability, and Regulation.
Walalangi was among the five best lawyers. He was also recognised
by Chambers Asia Pacific 2019 as a Leading Individual in M&A and During her years of practice, she has been involved in numerous deals
Corporate and recognised by IFLR1000 2019 as a Highly Regarded and transactions relating to multifinance and fintech industries.
Lawyer.

Walalangi & Partners (W&P) was founded by Mr. Luky I. Walalangi, a highly regarded lawyer with nearly two decades of experience. W&P is a
corporate firm focusing on M&A, Banking & Finance, Real Property, FDI, Antitrust, Debt & Corporate Restructuring, Capital Markets, Employment,
General Corporate and TMT.
W&P is regarded by IFLR1000 as a Recommended Firm and by Asialaw Profiles 2019 as a Recommended Firm in Real Estate, TMT, Banking &
Finance and Corporate M&A. In the ALB 5th Annual ILA 2018, W&P was a finalist for Rising Law Firm and shortlisted for Banking, Real Estate &
Construction Law Firm of the year.
Mr. Luky Walalangi is regarded as a Leading Individual in Corporate/M&A by Chambers Asia Pacific, as a Leading Lawyer by IFLR1000 and as one
of the Five Best Lawyers in Indonesia by Asialaw Profiles. Asia Business Law Journal lists him as one of the A-List: Indonesia’s Top 100 Lawyers.

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