On 22 July 2019, the Indonesia Stock Exchange (“IDX“) issued Rule No. I-V on Specific Provisions for the Listing of Shares and Equity Securities other than Shares on the IDX Acceleration Board – another attempt to encourage more IPOs by start-ups or small-sized companies, but those companies are generally not able to meet listing requirements of the other two boards of IDX (i.e. Main Board and Development Board).
The Main Board is intended for big companies with a good track record in their operation, while the Development Board is intended for medium-sized companies that are in a development stage and not yet able to fulfil the listing requirements of the Main Board.
The Acceleration Board is a listing segment for small and medium enterprises (“SMEs“) that undertake IPOs with limited amount of fundraising (i.e. a maximum of IDR 250 billion) as set forth in the Indonesian Financial Services Authority (Otoritas Jasa Keuangan) rule regarding requirements on public offering registration statements by SMEs.
The SMEs must have the following qualifications:
- they have total asset value: (i) not more than IDR 50 billion (only applicable for the SMES that are categorized as small-scale issuers), or (ii) more than IDR 50 billion but not more than IDR 250 billion (only applicable for the SMES that are categorized as medium-scale issuers); and
- they are not directly or indirectly controlled by: (i) a controller of a big issuer or public company; and/or (ii) a company with total asset value more than IDR 250 billion.
Unlike listing on the Main Board and Development Board where normal listed companies must already put in place corporate governance tools (including independent commissioners, an audit committee and a corporate secretary), the SMEs may have them later after their listing on the Acceleration Board.
For listing on the Acceleration Board, IDX provides more lenient standards:
- A company, still having a loss position, is allowed to make its stock market debut on the Acceleration Board provided that it will obtain operating profits (based on its financial projection) at the latest at the end of the sixth financial year after its listing. In contrast, IDX requires the typical company to generate operating and net profits at the latest at the end of the second financial year if it is listed on the Development Board.
- The IPO shares can be listed at a minimum price of IDR 50 per share (while IDX requires a minimum price of IDR 100 per share for listing on the Main Board and Development Board).
- At the completion of IPO, there must be a minimum of 300 shareholders. This will not be the case for listing on the Main Board because there must be at least 1,000 shareholders post-IPO while the Development Board requires at least 500 shareholders.
- For listing on the Acceleration Board, IDX allows underwriting agreement of the IPO with underwriters is made on a “best efforts” basis. Under the best efforts, the underwriters agree, to do the best they can, to sell as many of the IPO shares as possible to public investors however, they are not responsible for the unsold shares.
- The maximum fine for breaching the listing rules by a company listed on the Acceleration Board is IDR 100 million. IDX may impose fine up to IDR 500 million against the one listed on the Main Board or Development Board, making the same breach.
To give proportionate rules to support the SMEs listing while safeguarding investor protection, the shares held by their controlling shareholders are subject to a lock-up period of six months as of the listing date. Their minority shareholding, upon the listing date, must also represent at least 20% of the total issued and paid-up capital.
SMEs that have been listed on the Acceleration Board can be transferred to join the Development Board or the Main Board based on IDX’s evaluation which will be held every May.
Alternative Sources of Funding
SMEs need capital to start up and keep going until their businesses reach profitability. Providing the Acceleration Board for them to list is another alternative for accessing longer-term capital in the stock market.
Our Corporate and Securities Practice
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 offering, from due diligence to drafting of the required disclosure documents to be filed with the 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.