Government's capital participation in banks
Government's capital participation in banks
From Bisnis Indonesia
Disregarding the pros and cons surrounding the premature issuance of Government Regulation No. 4/1999, the enforcement of this government regulation must be postponed.
We have studied the extent of the protection, security and guarantee related to the government's capital participation in commercial banks subjected to recapitalization.
As it is generally known, the government's capital participation has become a trend. In connection with the practice, attention must first be paid to the different values attached to the shares of a bank as stated in the bank's corporate statute. So we know that there are shares of A series, B series, C series and so forth (known previously as priority shares and ordinary shares).
A series shares may be considered as the shares of the founders or priority shares and in this respect it is clear who holds/owns them. Other shares are ordinary shares and these shares are of different types depending on their value. Obviously there is a basic difference between, say two types of ordinary shares of different values if one share has a nominal value of Rp 500 while the other only Rp 10.
Regarding the different values attached to ordinary shares, a bank owner usually reasons that this difference in value allows a bank to easily find additional capital because it will simply have to issue the shares still in the company's custody. This reason is really bull!
Consider this: the capital is raised by a high percentage and the nominal value of the shares remains the same as that of the initial shares. As for the new shares, let's say only one-third will be paid while the remaining two-thirds can simply be taken out without having to alter the corporate statute.
Therefore, in connection with the government's capital participation, what needs to be done should be a detailed examination of the content of the corporate statute to find out whether all shares are vested with the same rights and obligations. It is logically impossible for a share of a nominal value of Rp 10 to be the same as a share of a nominal value of Rp 500. In this respect there must be a certain clause in the statute that distinguishes between these two kinds of shares.
If the assumption above is correct, there are therefore parties disadvantaged by this situation. Besides, the statute itself is legally defective. In this regard, it is strange that relevant authorities such as the Capital Market Supervisory Board and the Jakarta Stock Exchange can be taken off guard.
One action of utmost importance is to examine the extent the preemptive right inherent shares that the government is supposed to control. This measure would allow the government to determine the business activities of the bank in question, for example the voting rights in the general meeting of shareholders, the right to elect and discharge members of the board of executive directors and the board of commissioners, the right to determine the authority of the board of executive directors and, of course, the policy and business plan that the bank in question is supposed to pursue and implement. Let's see to it that the government's capital participation should not be something only on paper.
Many banks have been embroiled in solvency-related problems because the owners usually extended loans only to their affiliates and also because they did things which flouted prevailing banking provisions and regulations.
TAUFIK KARMADI
Jakarta