Bapepam issues new rules for public companies

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replacing the outdated tender offer regulation.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)