An Opportunity for Tech-Companies: OJK Regulates e-GMS Mechanism for Public Companies
by Rahmat Adrian (firstname.lastname@example.org) and Clara Viriya (email@example.com)
The utilization of information technology in doing business in various industries has become more popular from time-to-time. Not only to ease in undertaking faster operational activities, it underpins the company in performing corporate actions that are hindered by geographical boundaries - one of which is conducting general meeting of shareholders (“GMS”).
Under the elucidation of Law Number 40 of 2007 regarding limited liability company (“Company Law”), it allows the company to carry out GMS using electronic media, such as teleconference, video conference or other form of electronic media that enables all the GMS participants to witness firsthand. Nonetheless, according to Indonesia Financial Services Authority (“OJK”) summary released of POJK regarding the Implementation of Electronic General Meeting of Shareholders that they encountered an obstacle and it could not be effectively performed by public companies with large numbers of shareholders and extensive geographical spread. Further, such obstacles are highlighted under the article 23 paragraph (1) letter c of Government Regulation in lieu of Law Number 1 of 2020 on State Financial Policy and Stability of Financial Systems for the Management of COVID-19 and/or Encounter the Threat to National Economy and/or Stability of Financial Systems (“Perppu 1/2020“) which granting OJK to stipulates regulation on the utilization of information technology in conducting the GMS or other form of meetings.
In order to maintain efficiency and effectiveness of public companies in undertaking business decisions during the COVID-19 pandemic, as well as, to increase shareholders participation in the GMS of public companies, on April 21, 2020, OJK issued OJK Regulation No. 15/POJK.04/2020 on the Planning and Conducting GMS of Public Companies (POJK 15/2020). Under POJK 15/2020, shareholders of public companies may electronically authorize third parties to represent and vote on behalf of them at the GMS. Electronic authorization is carried out using electronic GMS System (e-GMS) provided by the e-GMS provider or a system provided by the public company. As of the same date, OJK issued OJK Regulation No. 16/POJK.04/2020 on the Implementation of Electronic GMS (POJK 16/2020).
Public listed company (“Public Company”) could organize GMS utilizing its sole e-GMS system or provided by a Depository and Settlement Institute (Lembaga Penyimpanan dan Penyelesaian or LPP) appointed by the OJK, which in this case is the Indonesia Central Securities Depository/Kustodian Sentral Efek Indonesia or KSEI, or other party approved by the OJK. The other party approved by the OJK as referred to above must be in the form of a legal entity duly incorporated and domiciled in the Republic of Indonesia.
In order to use its own e-GMS system, e-GMS provider other than LPP (including the Public Company) must integrate its e-GMS system or have entered into a cooperation with LPP and securities administration bureau to ensure that the shareholders have the right to attend the GMS.
e-GMS Provider's obligations
To ensure the availability and operability of the e-GMS, the providers shall comply with the following provisions:
Registered as electronic system provider from the competent authority;
Provide access to e-GMS participants to attend e-GMS;
Have a standard operating procedure (“SOP”) on conducting e-GMS;
Ensure the implementation of the GMS electronically;
Ensure the e-GMS operation and security;
Inform the e-GMS participants regarding the e-GMS system features and updates;
Provide the audit track record of all data processing at the e-GMS for the purposes of supervision, law enforcement, dispute resolution, verification and testing;
Have data centers and disaster recovery centers in the territory of Indonesia, in the secured and different location from the main data center. (It does not apply to public company)
Meet the minimum standards of IT system, IT security, system disruptions and failures, and the transfer of IT system;
Store all data in relation to the e-GMS; and
Liable for any losses incurred due to the error and omissions in the provision and management of e-GMS.
e-GMS providers shall ensure that their e-GMS system have the following features:
Display the rules, materials and the agenda of the GMS;
Enable the GMS participants to participate and interact throughout the GMS;
Calculate the GMS attendance quorum;
Cast a vote and calculate mechanisms, including if there is more than 1 (one) share classifications;
Record all interactions in the GMS, such as audio, visual, audio visual, electronic records of non-audio visual; and
Electronic appointment of proxy.
e-GMS providers shall have a code of conduct covering the terms and procedures of e-GMS (“e-GMS code of conduct”) and it becomes effective as of the date it has obtained the OJK’s approval. E-GMS code of conduct shall at least include the following:
Requirement and registration procedures and/or access grants to the e-GMS participants, as well as the cancellation of registration;
Procedures of e-GMS utilization;
Rights and obligations of the e-GMS participants;
Access limit of e-GMS participation;
Confidentiality, integrity and availability of information on the implementation of GMS;
Reporting and data collection mechanism for the fulfillment of public company’s reporting obligations;
Protection of personal data in accordance with the prevailing laws; and
Temporary suspension of e-GMS participant.
During the implementation of e-GMS, public company shall provide information relating to the plan to carry out the GMS electronically in the notification of the GMS agenda to the OJK, announcement of the GMS, and summons for the GMS.
Nonetheless, public company holding GMS electronically shall remain conduct GMS with physical present of at least the chairmen of the GMS, 1 (one) director and/or 1 (one) commissioner, and capital market professionals to assist the implementation of GMS. Under a certain condition, based on government’s order or with the approval from the OJK, public company may not carry out a physical GMS or limit the physical presence of shareholders either partially or entirely during the GMS.
Shareholders of public company (or its proxy) may physically or electronically attend the GMS. Whereas, the public company may stipulate the numbers of shareholders (or its proxy) to physically attend the GMS. Electronic attendance at the GMS shall replace physical presence of shareholders and count as fulfillment of attendance quorum.
The e-GMS shall be sequentially and efficiently held which at least include the following agenda:
Determination of attendance quorum;
Discussion of issues raised by the shareholders (or its proxy) in each of the GMS agenda;
Decision making of each of the GMS agenda in accordance with the decision-making quorum; and
Voting in the e-GMS is conducted electronically after the summons for the GMS until the opening of each the GMS agenda which requires voting in the GMS. E-GMS provider shall keep confidential of any votes that have been approved until the vote count is conducted. Shareholders who have voted electronically prior to the GMS was held are considered valid in attending the GMS. Shareholders with valid voting rights who attended the GMS electronically, but, were abstain during the voting are considered valid at the GMS and cast the same votes as the majority vote of shareholders.
E-GMS minutes must be made in a notarial deed form by a notary registered in the OJK without requiring the signatures of the GMS participants. The e-GMS provider must handover the copy of minutes to the notary which at least include the following:
List of the shareholders who attended electronically;
List of the shareholders who appointed proxy electronically;
Recapitulation of attendance quorum and decision quorum; and
Transcript records of all interactions the e-GMS.
Appointment of Proxy via Electronic System
The public company is obliged to provide alternative electronic appointment of proxy for shareholders to attend and vote at the GMS. Whereas, the shareholders who intend to appoint a proxy shall conduct appointment at least 1 (one) business day prior to the GMS. Further, shareholders may indicate their vote on every agenda of the GMS upon the electronic appointment of proxy, as well as, to change their proxy or their votes. Parties who can act as a proxy via electronic are:
Participants administering the shareholders’ securities accounts or sub accounts;
Parties provided by the public company; or
Parties appointed by the shareholder.
The proxy appointed must be competent according to the law and is not a member of the board of directors, commissioners, or the employee of the public company. The appointment and revocation of proxy, as well as the granting and changing of votes through e-GMS system is considered valid for all parties and does not require signatures (tanda tangan basah) unless otherwise stipulated differently by the e-GMS provider and/or the prevailing laws.
The public company must amend their articles of association in accordance with POJK 15/2020 no later than 18 (eighteen) months as of the issuance of POJK 15/2020. As of the date of POJK 15/2020 becomes effectives, the OJK Regulation Number 32/POJK.04/2014 on the Planning and Conducting of GMS of Public Company (POJK 32/2014) as amended with OJK Regulation Number 10/POJK.04/2017 on the Amendment of POJK 32/2014 is revoked and declared invalid.
Any violation of the provisions in POJK 15/2020 and POJK 16/2020 shall be sanctioned administratively. The sanctions may include, as follow:
Restrictions on business activities;
Suspension of business;
Revocation of business license;
Cancellation of approval; and/or
Cancellation of registration.
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