Bapepam issues new rules for public companies

JAKARTA (JP): Publicly listed companies wishing to change their core businesses must involve an independent consulting company in the decision, according to a new capital market regulation.

The regulation, one of two new regulations issued by the Capital Market Supervisory Agency (Bapepam) on Monday, stipulates the change in core business should be based on a consultant's recommendation.

"The involvement of an independent consultant is important to protect minority shareholders and to ensure that the change in core business will give shareholders added value," Freddy Saragih, the head of the financial assessment bureau at Bapepam, said while unveiling the regulations.

The new regulation was issued amid a controversy surrounding life insurance company PT Lippo Life's recent decision to expand its activities into the Internet business.

The insurance company has changed its name to PT Lippo E-Net to mark its commitment to the Internet. The public perceived the change in the company's name and the transfer of most of its life insurance portfolio to other companies as a change in the company's core business.

Analysts said this change would harm the investing public in the short term given the lack of disclosure from the company regarding its move. The company's management, however, denied it had shifted its core business.

The new regulation also requires a company's management to provide detailed explanations to the public about any planned changes in its core business, Freddy added.

Companies also must have adequate human resources in the area of the new core business before they can make the move.

Freddy said the feasibility study and the explanation to the public had to be completed at least 28 days prior to the company's shareholders meeting to vote on the move. He added that a report on the feasibility study had to be easily accessible by the general public.

If shareholders reject the shift in core businesses, the company's management can resubmit the proposal only after 12 months, Freddy said.

Takeover

Bapepam also issued a regulation on the acquisition of more than 20 percent of a company's shares through the stock market, replacing the outdated tender offer regulation.

Under the new company takeover regulation, an investor wishing to purchase 20 percent or more of a company's shares must also be willing to buy the remaining shares held by minority shareholders, if these shares are offered for sale.

Minority shareholders, or those who own less than 20 percent of a company's shares, should be given the opportunity to keep their shares or sell them, particularly if they do no longer trust in the company's prospect.

"The investor is subject to Bapepam's company takeover regulation, because the (above) investor is considered the one who will control the company," said Freddy.

Under the previous tender offer regulation, investors purchasing 20 percent or more of a company's shares were required to carry out a tender offer, but did not have to purchase additional shares offered by the remaining minority shareholders.

Bapepam also revised regulations on the guidelines of financial reporting by companies and the rules surrounding rights issues.

In the revised version of the regulation on rights issues, shareholders entitled to buy a company's rights shares are those registered 11 days after the shareholders meeting. Under the previous regulation, shareholders had to be registered one day prior to the shareholders meeting if they wished to purchase a company's rights shares. (udi)