The Financial Services Authority (Otoritas Jasa Keuangan — "OJK") recently issued a new rule on annual reports for listed and public companies. To implement this new rule, on 3rd August 2016, the OJK issued OJK Circular Letter No. 30/SEOJK.04/2016.
Implication for Listed and Public Companies
An annual report serves as the BOD and BOC's accountability report as well as a source of information for investors hence the OJK intends to increase the quality and accessibility of the annual reports. To achieve this, the OJK provides several additional provisions for the preparation and submission of annual reports. Under the new rule, the OJK also sets administrative sanctions if listed and public companies fail to submit an annual report or breach the rule.
What The Rule Says
The new rule does not provide significant changes from Rule X.K.6. However, the new rule sets out administrative sanctions for listed and public companies that fail to submit reports or comply with the new rule.
We set out below the key changes of the new rule and circular letter.
BOC reports of listed and public companies are required to include the following additional items:
- A report on the supervision of the implementation of the company's strategy.
- The commissioners' perspective on the implementation of the company's corporate governance.
- The frequency and manner of advisement to members of the company's BOD.
There are several additional requirements to provide more detail in company profiles in an annual report, including the following:
- If the company has changed its name during the financial year, that must be noted. The reason for the change of name and the date on which the name change came into effect should also be noted.
- The BOD's and BOC's profiles must now include, in addition to the requirements set out in the previous regulations, any concurrent positions of the members of the BOD and the BOC, whether as a member of a BOD, BOC, committee, or other positions.
- The commissioners' profiles, including profiles of independent commissioner(s).
- Information on the shareholding structure and classifications:
- Shareholding by local institutions
- Shareholding by foreign institutions
- Shareholding by local individuals
- Shareholding by foreign individuals
Management Analysis and Discussion
The circular letter requires several additional requirements in the Management Analysis and Discussion section of an annual report:
- The company must disclose the reasons behind its capital structure policy.
- The company must now disclose its investments in capital goods realised in the last financial year. The following information must be included:
- The type of capital goods investment
- The objective of capital goods investment
- The value of capital goods investment
Under the circular letter, the following corporate governance requirements must also be included in the annual report:
- Corporate governance information for the BOD must also include, in addition to the requirements in the previous regulations:
- a statement from the BOD that it has a guideline or charter for its governance; and
- the procedure, basis for determination, structure, and the amount of remuneration for each director, as well as information on the correlation between their remuneration and the performance of the company.
- Additional information that must be included in corporate governance information for the BOC includes:
- duties and responsibilities of the BOC;
- a statement from the BOC that it has a guideline or charter for its governance;
- the procedure, basis for determination, structure, and the amount of remuneration for each commissioner;
- the company's policy for assessment of each director's and commissioner's performance, and its implementation;
- assessment of the performance of other committees established to implement the duties of the BOC.
- The listed and public companies must include information on their committees, such as on dual positions of the committee members.
- If a Nomination and Remuneration Committee has not been appointed, the following must be included in the BOC's summary:
- reasons why the committee has not been established; and
- the procedure for nomination and remuneration in the relevant financial year.
Use of Language
The new rule obliges listed companies and public companies to use at least Indonesian and English languages for the annual reports. If there is any inconsistency in the annual report, the Indonesian language version will prevail.
Under the new rule, the annual reports of a listed and public company whose securities are offered within and outside Indonesia must be submitted within 4 months after the end of the company's financial year. Previously, Rule X.K.6 regulated that the submission deadline for the annual report would be subject to the requirements set by the foreign capital market authority.
Listed and public companies must submit 2 hard copies and a soft copy of their annual reports to the OJK. The new rule introduces the use of the OJK's electronic system to submit the soft copy version (please click here). If there is a time difference in the submission of the hard copy and the soft copy, the OJK will record the earliest receiving time as the submission time.
The new rule details the administrative sanctions from which the OJK can impose on parties that violate the rule, which are (in no particular order):
- Written warning
- Limitation of business activities
- Suspension of business activities
- Revocation of business license
- Cancellation of approvals
- Cancellation of registrations
The OJK may also impose "additional administrative sanctions" and/or carry out "certain actions". Certain actions could include delaying the issue of an effective statement or statement of no additional response for rights issue transactions.
The provisions under the new rule will be applicable for 2017 annual reports (i.e. annual reports published in 2017), though several provisions will already apply for 2016 annual reports. The following are some of the provisions that will apply for 2016 annual reports:
- The annual report submission obligation for newly listed companies whose effective statement is obtained between the end of its financial year and the annual report submission deadline is included under the new rule.
- The recording time, if there is a time difference in submitting the hard copy and soft copy of the annual report.
- The calculation of days with regards to late submission of annual reports to the OJK.
There is no significant changes to the new rule for the annual report. However, there are several requirements that must be considered and included in the 2017 annual report, among others, the remuneration of the BOD and BOC.
Hadiputranto, Hadinoto & Partners, Member of Baker & McKenzie International - 14th September 2016