Skip to main content

OJK Issues New Rule on IPO Lock-Up Period

By August 14, 2017July 12th, 2021No Comments


On 21 June 2017, the Indonesian Financial Services Authority (Otoritas Jasa Keuangan or “OJK“) issued OJK Rule No. 25/POJK.04/2017 on Restriction on Shares Issued prior to Public Offering (“New Rule“). The New Rule replaces Bapepam Rule No. IX.A.6 as attached to the decision of the Chairman of Bapepam No. Kep-06/PM/2001 on Restriction on Shares Issued prior to Public Offering.

The New Rule does not provide significant changes from the previous rule. However, OJK sets out administrative sanctions for any party breaching the New Rule and further specifies how the restriction is implemented.

Key Provisions

An initial public offering (“IPO“) may be deemed as a preferred form of exit by private equity firms or founding shareholders due to favorable tax rates. Before a company undertakes an IPO, caution should be applied when it issues new shares or equity securities to any party (for example, its pre-IPO shareholders).

A party, that acquires equity securities from the company with a price, a conversion value or an execution price below the IPO share price during the period of 6 (six) months before the company submits an IPO registration statement to OJK, is prohibited from transferring a certain or an entire portion of ownership on such equity securities to other parties up until 8 (eight) months after the registration statement is declared effective by OJK as set out in the New Rule.

OJK further clarifies in the New Rule that although a shareholder may already own a certain portion of his total shares in the company before “the period of 6 (six) months” and he subsequently subscribes for the remaining shares with a subscription price lower than the IPO share price during “the period of 6 (six) months”, he must not transfer all those shares to other parties up until 8 (eight) months after the registration statement is declared effective by OJK.

The above restriction, widely known as a lock-up period, does not apply to ownership on equity securities either directly or indirectly by central government, regional government or  authorized institution in a banking restructuring program under the prevailing laws and regulations (“Exempted Party“).

For the purpose of the IPO, the company must report the typical equity securities to OJK and disclose it in the IPO prospectus. The disclosure must include at least:

  1. the name of the holder of equity securities;
  2. the number of acquired equity securities;
  3. the value amount received by the company, form of payment and method of valuation;
  4. the transaction and/or exercise dates; and
  5. the transfer plan on the equity securities up until 8 (eight) months following the effective statement from OJK (only applicable for the Exempted Party).

Sanctions for Non-Compliance

The New Rule details the administrative sanctions which OJK can impose on parties that violate (including cause the violation of) the New Rule, which are:

  1. written warning;
  2. fines;
  3. limitation of business activities;
  4. suspension of business activities;
  5. revocation of business license;
  6. cancellation of approvals; and/or
  7. cancellation of registrations.

Under the New Rule, fines, limitation and suspension of business activities, revocation of business license, and cancellation of approvals and registrations can be imposed with or without warning letters. Fines may be imposed separately, or cumulatively with other administrative sanctions as mentioned above.

Please note that OJK is also authorized to carry out certain actions like delaying the issue of an effective statement for public offering transactions.

Our Corporate and Securities Practice Group

We act as strategic partners for our clients advising on a full range of corporate needs strategizing on corporate growth plans and subsequent need to access the capital markets.

Our lawyers handle all aspects of securities offerings, from due diligence to drafting of the required disclosure documents to be filed with capital market authority and stock exchange, preparing related agreements as well as providing day-to-day assistance to our clients, including counsel on broker-dealer compliance and corporate governance.

Barli Darsyah and Annisa Evasari
This publication is a summary overview of Indonesian laws and regulation prepared by Indrawan Darsyah Santoso team for discussion purposes only. The summary captures selected sections of the regulations and is not intended to be relied upon as legal advice.
For further information on the above subject, please contact:
Barli Darsyah
Back to Insights
T: +62 21 2506737
F: +62 21 2506738