LEGAL MEMORANDUM

Legal Basis
1. Law Number 8 Year 1995 concerning Capital Market (Capital Market Law)
Legal Memorandum
I.

General Overview of Initial Public Offering (IPO)

A Public Offering is an offer to sell Securities to the public, made by an Issuer
in ways stipulated in Capital Market Law and its implementing regulations
(Article 1 paragraph 15 of Capital Market Law). The emission of securities can
be interpreted as an act of the issuance of certain type of securities for the
first time and the act of distribution of these securities to the public through
a public offering with the intention to raise capital. In practice, Public offering
is conducted through the primary market that takes place within a limited
time. In this case, the offer of securities is made directly by the issuer to
potential investors with the help of Underwriters and the sales agent (if any).
When the process in primary market comes to an end, investors then can
trade in back the securities on the secondary market (stock). The offering
price in primary market is determined jointly by the issuer and underwriter,
while the price making of securities in stock is based on the law of supply
and demand that applies in practice. Issuers are allowed to conduct an offer
earlier before obtaining an effective statement from the Financial Services
Authority (OJK). The initial offer is an invitation either directly or indirectly
by using the initial prospectus, which aims to identify the interest of potential
buyers and estimated price of the offer of securities.

II.

Parties who conduct IPO

Companies or issuers who are go public by issuing securities can be:
1) State-owned Enterprises that consist of:
a. State Owned Enterprise (BUMN);
b. Regional Owned Enterprise (BUMD).

III.

2) Private Companies that consist of:

a. National Private Company;
b. Foreign Private Company;
c. Joint Ventures.
The Advantages and Disadvantages of IPO
The advantages of conducting an IPO for company are as follows:
The company wants the potential for additional capital gain instead of
going through debt financing;
ii. The company can increase the liquidity of the company toward the
interests of majority shareholders and minority shareholders;
iii. The company can make an offer of securities in the secondary market;
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iv. The company can increase prestige and publicity of company;
The disadvantages of conducting an IPO for company are as follows:
i.
ii.
iii.
iv.
v.
IV.

The company should spend additional cost to register the securities for
public offering;
Increase in spending and exposure of potential liability with respect to
registration and periodic reports;
Loss of control over the management problems due to the dilution of
share ownership;
The requirement to announce the amount of the company's earnings
and dividend distribution;
Securities that are issued may not be bought by the public in
accordance with the price set out by the company.

The Process of IPO in Indonesia

The process of an IPO can be divided into 3 (three) steps, inter alia: PreEmission Process, Emission Process, and After Emission Process that will be
explained below.
1. Pre emission process
Issuer Intern Preparation
a. Company who wishes to conduct IPO (the Company) shall obtain
the approval from House of Representatives: Commission VI and
Commission XI (State Owned Company) in the case when the
company is a state owned company;
b. The Company will perform due diligence toward its financial
condition, asset and obligation to another party and also toward
another partys obligation to company and the fund raising plan.
Due diligence will show whether the company needs to restructure
its capital, finance, assets, organization, or certain positions in the
executive ranks and commissioners. From legal audit performed by
the Company, the Company will get the knowledge about the
amount and status of assets owned by the Company, the
Companys debt to the other party, the other partys receivables to
Company that has not been settled. Legal due diligence will
produce a number of recommendations for action that must be
performed in order to meet the requirements of the IPO;
c. The Company then arranges the plan for IPO that must be
approved by the general meeting of shareholders (GMS). GMS
decisions will be the legal basis for IPO , GMS will also decide on
changes/amendment to articles of association of company;
d. The Company determines the underwriters, professional support,
and supporting institution for IPO.
Supporting Professional who is required are:
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Public Accountant to perform legal audit to the financial

statements of the issuer for the last two years;
Notary to create a document on changes to articles of
association , agreements in relation to IPO ; and the minutes of
meeting;
Legal Consultants to give a legal opinion on all matters
relating to the law for IPO.

While supporting institutions needed are:

Trustee which will act to represent the interests of the
bondholders as creditors;
Securities Administration Bureau (PT KPEI);
Custodian (PT KSEI).
e. The Company prepares all documents and agreements necessary to
conduct an IPO;
f. The company makes a preliminary contract with the stock
exchange;
g. The company makes public expose.

In OJK
a. The Company will inform the company registration statement to OJK;
b. OJK will deliver effective notice of the registration statement within 45
days after examining the documents, scope and clarity of the
information, and transparency according to the legal aspects,
accounting, finance, and management.
2. Emission Process
a. Offering conducted by a syndicated underwriters and selling agents in
the primary market;
b. Allotment to investors by a syndicated underwriters and issuers in the
primary market;
c. Delivery of securities to investors in the primary market;
d. Issuer lists effect on the secondary market (in stock exchange);
e. Trading of securities in the secondary market (in stock exchange).
3. After emission process
After the emission process, the issuer is obliged to deliver information, which
are:

Periodic reports, e.g.: annual reports and semi-annual reports

(continuous disclosure);
The report of important and relevant events, e.g. acquisitions, change
of directors (timely disclosure).
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V.

Timeline of IPO Process in Indonesia

The timeline and duration of IPO process in Indonesia can be seen in Appendix 1
and 2:

LEGAL MEMORANDUM

Appendix 1: IPO PROCESS & TIMELINE IN INDONESIA

(3) Request for Amendment

/ Additional
information

(9)
Effectiveness
Statement
1

(4) Disclosure of
Additional
Information

(1)Internal
Preparation

(15) Report of
Allotment &
Public Offering
Result

(8) Disclosure of
Price & Additional
Information

10

(7) Book
Building

(5) Brief Prospectus

Publication Permit

(13)
Refund/Distributio

1 - 5
2

Suspension

(2) Registration
Statement

(11) End of
Public
Offering

(10) Announcement of
Additional Information
Regarding Brief Prospectus
(6) Statement of Brief
Prospectus

(12) Allotment

(14) Listing in
Stock Exchange
5

The process described above is

pursuant to BAPEPAM
Regulation Number IX.A.2
The days referred to shall mean
working days
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Appendix 2: IPO PROCESS & TIMELINE IN INDONESIA