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Does Tax Amnesty Program Adversely Affect Investor Protection?

By November 25, 2016July 12th, 2021No Comments

Policies to support the implementation of Law No. 11 of 2016 on Tax Amnesty (“Tax Amnesty Law“) have been made by the Indonesian Financial Services Authority (Otoritas Jasa Keuangan or “OJK“). OJK recently issued Circular Letter No. 35/SEOJK.04/2016 on Mandatory Tender Offer as a Result of the Acquisition of Public Company in Order to Support the Tax Amnesty Law (“Circular Letter“).

The Circular Letter provides that a taxpayer, being exposed as a new controller of a publicly listed company after disclosing his assets under the tax amnesty program, is exempted from the requirements to make a public disclosure and undertake a mandatory tender offer (“MTO“). The acquired publicly listed company is also not obligated to make an announcement regarding such material event.

It is interesting to see how the Circular Letter will affect public shareholders as they should be able to collect and disseminate information about a change of control in a publicly listed company.

Definition of Control

Bapepam-LK Rule No. IX.H.1 on Takeovers of Public Companies (“Rule IX.H.1“) defines controller as a party that:

  • owns more than 50% of the total paid up shares; or
  • has the ability to determine, directly or indirectly, in whatsoever manner, the management and/or policies of a publicly listed company.

Under Rule IX.H.1, a new controller must announce the takeover via one daily newspaper with nationwide circulation at the latest one business day following the takeover, and then conduct the MTO.

MTO is an offer that must be made by the new controller to purchase the remaining shares of the acquired publicly listed company, and a way for the public shareholders to exit should they not agree with the takeover.


The Circular Letter clarifies one of the general situations set out in point 6.a.10) of Rule IX.H.1 stipulating that the exemptions pertaining to the takeover announcement and MTO only apply to the new controller if the control is acquired through the implementation of policies of a government or state body or institution.

However, under point 6.c of Rule IX.H.1, the new controller that enjoys the exemptions is still required to make a newspaper announcement covering, among others, his identity within two business days following the takeover.

Confidentiality Provisions

Given the Tax Amnesty Law protects the confidentiality of data and information submitted by taxpayers under the tax amnesty program, and it is superior to Rule IX.H.1 in terms of rules and regulations hierarchy, the mandatory disclosure under point 6.c of Rule IX.H.1 should have been exempted. Consequently, it is unclear through which channels the relevant change of control information can be provided to the market in timely manner.

An issue thus arises whether the incentives in the tax amnesty program should reduce the rights of minority shareholders to access reliable information about the identity of the new controller.

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