Indonesia corporate law transformed in 1996 with the introduction of two major pieces of fundamental corporate law reform legislation. On 7 March 1996, a new Law on Limited Liability Companies (the "new Company Law") came into force. This provides the basis for the first time in Indonesia of a comprehensive set of company law principles. Upon its commencement, a number of old laws dealing with company law issues which are essentially unchanged from the Dutch colonial period (including the general principles of Indonesian company law contained in the mind nineteenth century Dutch Commercial Code) were revoked.

Also, on January 1996, a new Law on Capital Markets came into force. In essence this restates in legislative form many of the basic principles set out in the existing Indonesian capital market regulations which to date have been set out in a series of decrees issued by the Ministry of Finance and the Chairman of the Capital Markets Supervisory Board (known as BAPEPAM). Most significantly however, BAPEPAM is given broader powers of investigation and enforcement under the new Capital Markets to Law.

In addition to these fundamental new pieces of Indonesian legislation, BAPEPAM itself has been active in introducing decrees on a number of areas not previously regulated in the Indonesian capital markets. One of the most important of these new regulations is the Decision of the Chairman of BAPEPAM number KEP/22/PM/1995 ("Decree 22") dated 16 August 1995 concerning Tender Offers (penawaran tender). This regulation introduced for the first time in Indonesia a set of rules regulating the conduct of takeovers of listed Indonesian companies.

THE GENERAL PRINCIPLE - MANDATORY OFFER
In essence, Decree 22 requires that a general tender offer (an "Offer") be made in the prescribed manner whenever shares of a listed company are purchased through the Stock Exchange by a party resulting in ownership by that party of 20% or more of the issued and fully paid shares in the company with the aim of controlling the company.

Central to the operation of Decree 22 is the concept of "control". Control (pengendalian) is defined in Decree 22 as the power to influence the conduct of a company except by virtue of an official position in the company (for example by a position on the Board of Directors). A party which has an interest in more than 25% of the voting shares of a company is expressly deemed by Decree 22 to control that company, except if that party can establish that it does not exercise control. Conversely, a party which has an interest in less than 25% of the voting shares of a company is expressly deemed not to control the company except if that party can be shown to exercise actual control.

OFFER PRICE REGULATED
Decree 22 requires that the offer price in relation to any Offer must be higher than :

1. the highest offer price previously offered by the Offeror within a period of 180 days prior to the announcement of the Offer; and
2. the highest market price of shares in the target company on the Stock Exchange in the last 90 days prior to the announcement of the Offer.

The consideration for an Offer may be the exchange of shares in other companies.The Chairman of BAPEPAM has power to waive this price requirement. Also, along with other terms of the Offer, the offer price may be changed during the course of the Offer.

CONDITIONAL OFFERS
An Offer may be made subject to conditions but may not distinguish between different classes of shareholders. This reflects BAPEPAM's general policy of equal treatment for all shareholders.

Also, although an offeror may announce a proposal to change the management and/or staff of the target company following the takeover, such changes may not be made a condition of the Offer.

OFFER PROCEDURE
Decree 22 requires that any Offer for control of a listed company must be made in accordance with the following procedure :

1. A party which intends to make an Offer for equity stocks must announce the planned offer in the Indonesian press. This announcement must set out :

(a) the identify of the Offeror:
(b) any conditions attaching to the Offer:
(c) the number of equity securities (including other convertible and exchangeable securities with right to obtain shares) of the target company already possessed by the offeror: and
(d) the statement from an independent accountant, bank or securities underwriter that the offeror has sufficient funds to finance the Offer.

The text of the announcement must be submitted to BAPEPAM and the target company not later than 2 days prior to the announcement being published in press.

Once announcement about an offer has been made in the press, the offer cannot be cancelled without the prior consent of BAPEPAM.

2. An offer Statement is required to be lodged with BAPEPAM, the Stock Exchange, the target company and the Offeror under any concurrent offers for the target company within 5 days after making the announcement referred to in 1.

3. The Offer Statement will become effective on the 15th day after it is lodged with BAPEPAM in a complete form (which in practice is determined by BAPEPAM) or upon BAPEPAM issuing a statement that the Offer Statement is effective.

4. Offer forms may only be distributed to shareholders upon the Offer Statement becoming effective.

5. The Offer Statement must be published in the Indonesian press within two days of the Offer Statement becoming effective.

6. The Offer Period in respect of an Offer must last for at least 30 days but may be extended to a total of 90 days with the prior approval of the Chairman of BAPEPAM. Any extension of the Offer Period shall be for at least 15 days and must be announced in the Indonesian press.

ACCEPTANCE OF THE OFFER
All shareholders in the target company are entitled to accept the Offer as announced in the press. All transactions in the context of the Offer are required to be settled within 12 days after close of the Offer period.

If the Offer is for a stated percentage of shares in the target company bu a larger number of acceptances are received, the Offeror is required to acquire shares from each of the accepting shareholders in proportion to the number of shares represented by the acceptances received. This is in line with BAPEPAM's general principle of equal treatment of all shareholders in listed companies. The fair allocation of successful acceptance between accepting shareholders in the case of over-acceptance is required to be audited by an independent accountant whose report must be submitted to BAPEPAM.

An Offerer which wishes to accept the offer for shares may withdraw the acceptance at any time prior to close of the Offer period.

RESPONSE FROM TARGET COMPANY
The target company (or any party affiliated with the target company or any party which has made a concurrent Offer for the same shares) may make a written statement either supporting or opposing the Offer. If the Offer is opposed, the statement must set out any reasons for the opposition and must be lodged wit BAPEPAM.

In addition, the Board of Directors of the target company is required to publish a statement in the Indonesian press setting out any information in the Offer Statement which it knows, or reasonably believes, is false or misleading.

As a separate requirement, the target company is prohibited from conducting transactions with the aim of preventing a change in control as a consequence of an Offer being made at any time from the initial announcement of the intended Offer to the expiry of the Offer period.

VARIATIONS TO OFFER
As stated above, the terms of an Offer (including the offer price and other conditions of the Offer) may be varied during the Offer period. Details of any amendments to the Offer must be lodged with BAPEPAM and the variation will become effective at the expiry of 15 days after all details are lodged with BAPEPAM or earlier upon declaration by BAPEPAM.

MARKET MANIPULATION
Decree 22 contains a general obligation on the Offeror and its affiliates to maintain the secrecy of an Offer for a period of 15 days prior to the initial announcement of the intended Offer.

Also, an offeror is not permitted to purchase or sell equity securities which are the subject of the Offer for a period commencing 15 days before the initial announcement of the Offer is made up to the end of the Offer period.

Introduction

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