Download Actio#20 A. DEFINITION OF SHARES
Law Number 40 of 2007 concerning Limited Liability Companies (Company Law) make many references to shares.
For example, Article 1 number 1 Company Law states that a Limited Liability Company is a legal entity that carries out business activities with an authorized capital divided into shares.
In addition, Company Law regulates many aspects of shares including the types of shares. Curiously, Company Law does not specifically and expressly define the word “shares”.
In this regard, Company Law only states that shares are movable objects that gives rights to the owner as stipulated in the Company Law.
The rights of shareholders as mentioned earlier are:1 attending and voting in the General Meeting Shareholder (GMS); receiving payment of dividends and participating in the remaining assets from liquidation; exercising other rights under Company Law.
Subsequently, Article 51 Company Law also states that the shareholders are given proof of share ownership for the shares that they own.
Meanwhile, Law Number 8 of 1995 concerning the Capital Market (Capital Market Law), also makes
many references regarding the term shares.
For example, Article 1 number 5 of Capital Market Law provides that shares are a part of securities, along with other securities instruments such as bonds and so on.
Like the Company Law, although Capital Market Law makes several references to shares, the Capital Market Law does not expressly state the definition of “shares”.
It is surprising that a more specific definition of shares is found in Government Regulation
Number 136 of 2000 concerning Procedures for Selling Confiscated Goods That Are Excluded
from Auction Sales in the Context of Collecting Taxes in Forced Letter (GR 136/2000).
Article 1 number 10 GR 136/2000 states that shares are a letter of proof of ownership of the capital share of a limited liability company that entitles dividends and others according to the amount of the paidup capital.
B. CLASSIFICATION OF SHARES
Article 53 paragraph (1) Company Law states that articles of association of a Limited Liability
Company can stipulate 1 (one) or more classifications of shares, which means that in a company it is possible to have several types or classifications of shares. This means that different shares in a company may have different rights attached to the shares depending on the type or classification of shares they own.
Company Law states that in a company must at least contain “common shares”, if in such a company’s articles of association, the company issues more than one classification of shares.
Thus, common share are required for the Company to exist and be registered. The common shares mean shares which carry the voting rights to make decisions in the GMS regarding all matters related to the management of the Limited Liability Company, have the right to receive dividends payment and receive the remaining wealth from the liquidation.
Apart from common shares, there are also several different classifications of shares regulated by Company Law. Article 53(4) of Company Law reads and provides for classifications including:
a. shares with voting rights or without voting rights;
b. shares with special rights to nominate members of the Board of Directors and/or members of the Board of Commissioners;
c. shares that after a certain period are recalled or exchanged for another classification of shares;
d. shares entitled to holders to be preferred to receive dividends than shareholders of other classifications on the cumulative or noncumulative distribution of dividends;
e. shares that entitle their holders to be preferred from shareholders of other
classifications for the return of remaining assets of the Company in case of liquidation.”
Some of the abovementioned classifications must be regulated or stated in the company’s articles of association.
Furthermore, Elucidation of Article 53 (4) of Company Law also states that “The various classifications of share do not necessarily indicate that the classifications are independent, separate from each other,
but it can be a combination of 2 (two) or more classifications.“
In addition to the classification of shares mentioned in Company Law, there are several classifications of shares regulated by other regulations such as Golden Shares (Dwiwarna) and Multiple Shares.
1. Dwiwarna Shares
In Appendix S-BUMN 163/2017 regarding the Submission of Draft Standards for the Articles of Association of Non-Banking of Publicly Listed State-Owned Enterprises (SOEs), defines Series A Dwiwarna shares as shares specially owned by the Republic of Indonesia which gives privileges to its owner.
Such privileges include the following:
“The privileges of Dwiwarna series A
shareholders are:
(1).The rights to approve in the GMS on the following matters:
a. Approval on amendments to the Articles of Association
b. Approval on capital change;
c. Approval on the appointment and dismissal of members of the Board of Directors and the Board of Commissioners;
d. Agreements relating to mergers, acquisitions, spin-off, and dissolutions;
e. Approval on remuneration of Members of the Board of Directors and Board of Commissioners;
f. Approval on asset transfer based on the articles of association which requires the approval of the GMS;
g. Approval on the participation and reduction of the percentage of capital participation in other companies that based on the articles of association that need the approval of the GMS;
h. Approval on the use of profits;
i. Approval on long-term investments and financing that are not operational in nature which based on the articles of association, requires the approval of the GMS.
(2). The right to propose Candidates for Members of the Board of Directors and Candidates for Members of the Board of Commissioners;
(3). The right to propose the agenda of the GMS;
(4). The right to request and access company data and documents;
with the mechanism of exercising the rights referred to in accordance with the provisions in the Articles of Association and laws and regulations. “
2. Multiple Shares
Multiple Shares is a new classification of shares that only existed after the Financial Services Authority (Otoritas Jasa Keuangan – OJK) issued Regulation Number 22 /POJK.04/2021 concerning the Application of Shares Classification with Multiple Voting Rights by Issuers with High Growth and Innovation Rates which Conducting Public Offerings of Equity Securities in the Form of Shares (POJK 22/2021).
Multiple Voting Rights Shares are a classification of shares in which 1 (one) share grants more than 1 (one) voting right to shareholders who meet the requirements.
Issuers (parties or companies that conduct public offerings in the Indonesia Stock Exchange) that
conduct public offering of shares with Multiple Voting Rights must have these shares regulated in the company’s articles of association.
The period of the Shares with Multiple Voting Rights is a maximum of 10 (ten) years from the effective date of the Registration Statement in the context of a Public Offering, which can then be extended 1 (one) time with an extension of a maximum period of 10 (ten) years on condition
that the approval from the Independent Shareholders in the GMS.
10 Any shareholder with Multiple Voting Rights is prohibited from transferring part or all of the Shares with Multiple Voting Rights in his possession for 2 (two) years after the Registration Statement becomes effective.
C. TRANSFER OF SHARES
Shares are movable-intangible property and therefore generally, the transfer of rights to shares
is not much different from the transfer of rights of other movable property, for example through the mechanism of a sale and purchase agreement following by the transfer of shares.
This may become more complicated by several special rules governing the registration of the transfer.
Any consideration of the applicable procedures requires us to first ascertain the type of the company.
In general, there are Public Limited Liability Companies and Private Limited Liability Companies.
The transfer mechanism in the Private Company is commonly regulated in the Company’s Articles of Association and Company Law.
Transfers are regulated in Article 56 of the UUPT. The transfer of rights to shares is carried out by making a deed of transfer or transfer of rights, and the deed can be in the form of an authentic deed or a private deed.
The process of transferring rights over shares under Article 56 of
Company Law is as follows:
“(1) The transfer of rights to shares shall be made by deed of transfer of rights.
(2) The deed of transfer of rights as referred to in paragraph (1) or a copy thereof shall be submitted in writing to the Company.
(3) The Board of Directors shall record the transfer of rights to shares, the date, and day of the transfer of rights in the shareholders’ register or special register as referred to in Article 50 paragraphs (1) and (2) and notify the change in the composition of shareholders to the Minister of Law and Human Rights to be recorded in the Company’s register no later than 30 (thirty) days from the date of recording the transfer of rights.
(4) In the event that the notice referred to in subsection (3) has not been made, the Minister rejects the application for approval or notice executed on the basis of the composition and name of the shareholder which has not been notified.
(5) Provisions on procedures for transferring rights to shares traded in the capital market shall be regulated in the laws and regulations in the field of capital markets. “
Meanwhile, the transfer of rights to shares in a Public Limited Liability Company is carried out based on the provisions of laws and regulations in the capital market sector, as previously mentioned in Article 56 paragraph (5).
In this case, shareholders only need to sell the shares through the secondary market where the relevant shareholders purchase the shares.
D. CONCLUSION
There are many classifications of shares under Indonesian law so that shareholders can have
flexibility in determining the classification of shares that are the most suitable for their needs, investment appetites, and risk profiles.
The range of classifications is likely to continue to grow in accordance with business developments and the needs of shareholders and the company.
The expanded range of these special classifications will affect the mode and procedures for transfers. Dwiwarna shares for example can only be held by the Republic of Indonesia.
These Dwiwarna shares cannot be transferred to any other party.
In multiple shares, there is a period of prohibition on the transfer of shares for 2 (two) years after the Registration Statement becomes effective.
Likewise, with the transfer of shares of a Public Limited Liability Company, the transfers must comply with the general law as well as specific provisions, laws, and regulations in the capital markets. (SCN/MRA)
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