OJK clarifies guidelines for share buybacks by publicly listed companies amid volatile Covid-19 coronavirus market conditions
23 March 2020
In response to this situation, the Indonesian Financial Services Authority (Otoritas Jasa Keuangan, OJK) issued OJK Circular No. 03/SEOJK.04/2020 on Other Conditions as Market Conditions of Significant Fluctuation for Buyback of Shares Issued by Issuers or Public Companies (SEOJK 3/2020) on 10 March 2020. SEOJK 3/2020 declared that the Covid-19 outbreak qualifies as significantly fluctuated market condition and therefore the requirement to obtain shareholders' approval for a buyback of shares by publicly listed companies is temporarily lifted. We have already seen listed companies take advantage of this regulatory relief, with companies such as PT Medco Energi Internasional Tbk and PT Bukit Asam (Persero) Tbk. recently announcing intentions to buyback shares.
Clarifications on SEOJK 3/2020
While SEOJK 3/2020 is much welcomed and a breath of fresh air for publicly listed companies looking to conduct a share buyback, several unanswered questions remained and were clarified by OJK through Letter No. S-89/D.04/2020 dated 16 March 2020 (16 March Letter). The 16 March Letter elucidates the timing of the disclosure and mechanism for refloat of the treasury shares:
- Timing of buyback disclosure: OJK clarified that the disclosure of the publicly listed company's intention to buyback shares must be: a.at the latest 7 exchange days after the publicly listed company calculates and is aware that the IDX Composite (Indeks Gabungan Harga Saham, IHSG) within 3 consecutive days has decreased by 15% or more; or
b.any time after SEOJK 3/2020 was issued up until 7 exchange days after SEOJK 3/2020 is revoked.
- Mechanism for refloat of the treasury shares: OJK clarified that the pricing for refloated treasury shares using the daily trade closing price in IDX from the preceding trading day is only applicable for resales through the IDX regular market. If the resale is done through IDX negotiated market, the publicly listed company can only use the following price: a.the average buyback price of the shares; or
b.the average of the highest daily trading prices on the IDX within the last 90 days prior to the resale, whichever results in the highest price.
OJK clarified that the requirement under POJK 2/2013 to disclose the identity of the purchaser to the resales of the treasury shares is only applicable if the resale is conducted over the counter and will not be applied to resales through the IDX (including the regular market or the negotiated market).
The public also queried on whether publicly listed companies can resell a maximum of 20% of the bought back shares on a daily basis through both the IDX regular and negotiated market, OJK responded that this is only applicable to resales conducted through the IDX regular market.