The Company is a capital partnership that conducts its business activities with authorized capital which is entirely divided into shares. For this reason, ownership of The Company is based on shares. Therefore at the time of establishment, The Founders must take shares and make a capital deposit into The Company to be established with a capital amount equal to the nominal value of the shares taken as evidenced by a valid proof of deposit, with the provision of capital that must be issued and fully paid up is at least 25% from authorized capital The Company as referred to in Articles of Association (vide Article 33 Paragraph (1) and (2) Act No. 40/2007 regarding The Limited Liability Company as amended with The Act No. 6 of 2023 concerning Stipulated Government Regulation In Lieu Of Law Number 2 Of 2022 into The Act, hereinafter referred to as “Act No. 40/2007”).
Based on Article 34 Act No. 40/2007, deposit of the share capital can be made in the form of:
- Money; and/or
- Other forms, with the assessment of its share deposit are determined based on fair value as stipulated in accordance with the market price by The Experts who are not affiliated with The Company.
According to Article 36 Paragraph (1) Act No. 40/2007, The Company is prohibited to pulled out shares for:
- Owned by The Company; or
- Owned by another Company, whose shares are directly or indirectly owned by The Company.
The prohibited for Company to owned the shares for The Company itself, because in principle share issuance have purpose to collect the capital, therefore the obligation to deposit the capital must be charged to another party (vide Article 36 Paragraph (1) Act No. 40/2007). But in specific condition, The Company can owned the shares which issued by The Company itself that is among other things through Shares Buyback mechanism.
Shares Buyback is the Corporate Action to buyback the shares which owned by Sharesholder whether for specific purpose such as changed composition of ownership with Company control structure or based on request from Sharesholder itself. The Sharesholder can propose a request in order to the shares owned by itself to buyback by Company with fair value, if the Sharesholder doesn’t approve Corporate Action which result the disadvantages to Sharesholder or Company, because:
- Amendment Articles of Association;
- Assignment or surety against Company assets which value more than 50% The Company’s net worth;
- Merger, Consolidations, Acquisition or Separations (spin off).
(vide Article 62 Paragraph (1) Act No. 40/2007).
But according to Article 62 Paragraph (2) Act No. 40/2007, in case the shares as request to buyback by Company exceeding the shares buyback limit by Company that is maximal 10% from value of issued shares, then The Company must strive to remaining shares purchased by Third Party.
Based on Article 37 Paragraph (1) Act No. 40/2007, Shares buyback by The Company can conducted, with conditions:
- Shares buyback doesn’t make a result The Company’s net worth be smaller than total issued shares plus legal reserve that has been set aside; and
- Total nominal value of all shares that buyback by The Company and nominal value of all Pledge of Shares / Fiduciary Guaranty for shares which owned by The Company itself / another Company whose shares are directly or indirectly owned by The Company, doesn’t exceeding the shares buyback limit by Company that is maximal 10% from value of issued shares.
Shares buyback by The Company, may only conducted with approval General Meeting of Shareholders of The Company as referred to Article 38 Paragraph (1) Act No. 40/2007. But, General Meeting of Shareholders of The Company may delegate such authority to The Board of Commissioners for a term of not more than 1 (one) years as regulated to Article 39 Paragraph (1) Act No. 40/2007. For this reason, before The company conduct shares buyback, there are several things to be aware of, include:
- Identify amount of shares value that will be buyback, therefore doesn’t exceeding the shares buyback limit by Company that is maximal 10% from value of issued shares; and
- Held a General Meeting of Shareholders of The Company, if General Meeting of Shareholders of The Company doesn’t delegate such authority to The Board of Commissioners.
Regarding a General Meeting of Shareholders of The Company, here are some stages that must be considered for legitimacy of Decision Shares Buyback by The Company, include:
1. Notice General Meeting Of Shareholders Of The Company
Board of Directors conduct a notice to Shareholder in term of 14 (Fourty) day before held a General Meeting of Shareholders of The Company with Registered Mail and/or Announcement in Newspaper as referred to Article 82 Paragraph (1) and Paragraph (2) Act No. 40/2007. According to Article 82 Paragraph (3) Act No. 40/2007, the Notice General Meeting of Shareholders of The Company, have contains include:
- Date and time held a General Meeting of Shareholders of The Company;
- Venue of General Meeting of Shareholders of The Company;
- Agenda General Meeting of Shareholders of The Company, in case approval shares buyback by The Company;
- Information about material that will be discussed at General Meeting of Shareholders of The Company already available at The Company Office from the date conduct a notice General Meeting of Shareholders of The Company until the date held a General Meeting of Shareholders of The Company.
For Publicly Listed Limited Liability Company, before conducted notice General Meeting of Shareholders of The Company, must be preceded with announcement regarding will be conducted notice General Meeting of Shareholders of The Company that conduct at least 14 (Fourty) day before notice General Meeting of Shareholders of The Company as referred to Article 83 Act No. 40/2007.
If Notice General Meeting of Shareholders of The Company, doesn’t heed the provision above, Decision General Meeting of Shareholders of The Company still legitimate, if all shareholders / representative with voting rights present and the Decision approved with one accord as regulated to Article 82 Paragraph (5) Act No. 40/2007.
2. Requirement of Quorum
According to Article 38 Paragraph (2) Act No. 40/2007, requirement of quorum approval shares buyback by The Company adhering requirement quorum for General Meeting of Shareholders of The Company regarding Amendment of Articles of Association. For this reason, General Meeting of Shareholders of The Company regarding approval shares buyback by The Company may be held if attended by Sharesholder / Representative who represents at least 2/3 part of all shares with voting rights, unless Articles of Association determined a larger quorum of attendance as referred to Article 88 Paragraph (1) Act No. 40/2007.
In case, General Meeting of Shareholders of The Company for the first time doesn’t fulfilled requirement of quorum, then Second General Meeting of Shareholders of The Company can held for a term at the shortest 10 (ten) day and at the latest 21 (twenty one) day after General Meeting of Shareholders of The Company for the first time has been held (vide Article 86 Paragraph (9) Act No. 40/2007). Second General Meeting of Shareholders of The Company can held, if attended by Sharesholder / Representative who represents at least 3/5 part of all shares with voting rights, unless Articles of Association determined a larger quorum of attendance as referred to Article 88 Paragraph (3) Act No. 40/2007.
But if Second General Meeting of Shareholders of The Company also doesn’t fulfilled requirement of quorum, The Company may propose an application to Chief of District Court which jurisdiction include domiciled of The Company to stipulated quorum for Third General Meeting of Shareholders of The Company as referred to Article 86 Paragraph (5) Act No. 40/2007.
Third General Meeting of Shareholders of The Company can held for a term at the shortest 10 (ten) day and at the latest 21 (twenty one) day after Second General Meeting of Shareholders of The Company has been held (vide Article 86 Paragraph (9) Act No. 40/2007). The notice Third General Meeting of Shareholders of The Company conduct at the latest 7 (seven) day before the implementation date with the mention that Second General Meeting of Shareholders of The Company has been held and doesn’t fulfilled requirement of quorum, therefore Third General Meeting of Shareholders of The Company will be held with quorum that stipulated by Chief of District Court, as regulated to Article 86 Paragraph (6) Act No. 40/2007.
3. Requirement Number of Votes
According to Article 38 Paragraph (2) Act No. 40/2007, requirement of Number of Votes approval shares buyback by The Company adhering requirement Number of Votes for General Meeting of Shareholders of The Company regarding Amendment Articles of Association. For this reason, Decision General Meeting of Shareholders of The Company for approval shares buyback by The Company is legitimate if get approval by Sharesholder / Representative who represents at least 2/3 part of Number of Vote that issued in General Meeting of Shareholders of The Company, unless Articles of Association determined a larger Number of Vote for Decision making as referred to Article 88 Paragraph (2) Act No. 40/2007.
After obtained approval by General Meeting of Shareholders of The Company about Shares Buyback by The Company, in case General Meeting of Shareholders of The Company doesn’t delegate such authority to The Board of Commissioners. The Company can conduct shares buyback against the shares which owned by Sharesholder, with provision shares which owned by The Company can’t be used to issue a voting in General Meeting of Shareholders of The Company and doesn’t count in determined Number of Quorum that has been fulfilled as referred to Act No. 40/2007 and/or Articles of Association, and the shares that owned by The Company doesn’t have a right to obtain dividen (vide Article 40 Act No. 40/2007).
In addition, The Company also can only possess shares which buyback for a term at the latest 3 (three) years as referred to Article 37 Act No. 40/2007, therefore in the time of 3 (three) years, The Company must determined about shares will be sell or retractable back with decrease in capital as referred to The Explanation of Article 37 Paragraph (4) Act No. 40/2007.
