The Business Competition Supervisory Commission (Komisi Pengawas Persaingan Usaha/KPPU) recently issued KPPU Regulation No. 3/2019 which updates the provisions with regard to a requirement to submit written notification by businesses within 30 days following the event ofa merger, consolidations, or acquisitions transaction, including assets acquisition, which is treated as shares acquisition whereby the said asset acquisition results in (a) transfer of control over such asset and/or (b) increased ability of the acquiring business entity to exert market control within that particular business sector.
Business entities that will conduct the merger, consolidation, or acquisition transactions outside of the territory of Republic of Indonesia are also obliged to submit written notification to the KPPU.
The aforementioned written notification is required if:
(a) the subsequent valuation of the total assets which stems from the merger or consolidation of business entities, or acquisition of company shares, resultedin what amounts to more than IDR 2,500,000,000,000 in assets; or
(b)the total salesvaluation of the business entity resulting from the merger or consolidation of business entities, or acquisition of company shares amounts to IDR 5,000,000,000,000 or more.
The requirement to notify in writing also applies for mergers or consolidations of business entities, or acquisitions of companies’ shares/companies’ assets for companies in banking sector in which the subsequent relevant calculated valuation amount exceeds IDR20,000,000,000,000.
The value of asset and/or sales valuation of the business entities resulting from the merger or consolidation of business entities, or acquisition of company’s shares or assets is calculated from the total value of sales and/or asset of the last audited year of each entity that conducts merger, consolidation and/or shares/asset acquisition added with the value of asset and/or sales of all business entities that are directly or indirectly controlled by the business entity that conducts merger, consolidation and or shares/asset acquisition.
The regulation also requires 3 years-audited financial reports for the Notification submission for the following actions:
1. Shares acquisition: the acquiring business entity including its holding and the subisidiaries and the acquired business entity and its subsidiaries;
2. Assets acquisition: the acquiring business entity and the acquired business entity;
3. Merger: the business entity that receives mergers including its holding and the subsidiaries and the merged business entities and its subsidiaries;
4. Consolidation: the business entities that result the new business entity including the new business entity’s holding and the subsidiaries.
For a case in whichthe merger/takeover happens between two parties whereby only one of the involved parties conducts a merger or consolidation of business entities, or acquisition of company shares in the banking sector and the other party engages in a different business sector, then the relevant party shall notify the KPPU in writing if the subsequentassets valuation as a result of the merger or consolidation of business entities or,if the company’s assets exceeds IDR2,500,000,000,000 or,if the sales (market?) value of the company as a result of the merger or consolidation of business entities, or acquisition of companies’ shares/assetsexceeds IDR5,000,000,000,000.
Notificationsshall be written in Indonesian language (by including cover letter and supporting documents)and shall be submitted to the KPPU within no later than 30 days following the legal effective date of the merger, consolidation, or acquisitions transaction by the following parties or their authorized legal consultants of the following entities:
1. The business entity that receives mergers;
2. The new business entity which results from consolidations;
3. The business entity that conducts acquisitions; or
4. The business entity that receives or acquires the assets.
If the KPPU determines that the Notification does not meet the abovementioned values or that the business events conducted fallsinto what can be categorized as transactions between affiliated companies,the KPPU will then issue Stipulation of No-Requirement-to-Notify.
The requirement to submit written notification is excludedfor mergers, consolidations, or acquisition transaction that are conducted by and/or between “affiliated parties”. The term “affiliated parties” refers to the parties that are determined/categorized to have one or more of the following relationships:
1. Relation between companies that are, directly or indirectly, controlling or being controlled by the company that conducts the merger, consolidations, or acquisition transaction;
2. Relation between two companies that are being controlled, either directly or indirectly, by the same party/parties; or
3. Relation between a company and its’ ultimate shareholders (controlling business).
Affliated relationship as mentioned in number (1), (2) and (3) shall mean control through ownership of shares more than 50% of the company’s shares. The aforementioned controling oweneship may be less than 50% of the company’s shares, however, the ownershipshall be able toaffect/influence and/or determine the management policyof such company.Nonetheless, the obligation to report is still imposed when the affliated relationshipis due to the ability of the owner of shares to appoint members of Board of Directors and/or Board of Commissioners or employees whom then became part of the process of the merger, consolidation, or acquisition transaction and/or company’s asset.
KPPU willprocess the submitted notification initially only by registering the date of receipt and then issuing the receipt back to the notifying business entities.. After the receipt, KPPU shall then conduct a clarification and examine the submitted information and documents within a 60 days period. Should it be required, KPPU will ask the notifying business entities to complete their request for additional information which may include additional supporting documents for the KPPU’s valuation processs.
The KPPU will then issue the result of their valuationprocesss through Stipulation of Notification by KPPU stating (a) the absence of any alleged monopolistic practices or unfair business competition that results from themerger or consolidations of business entities, or acquisitions of company shares and/or company’s assets or (b) the existenceany alleged monopolistic practices or unfair business competition practices that resultsfrom the merger or consolidations of business entities, or acquisitions of company shares and/or company’s assets.Additionally KPPU may also issue a Conditional Approval to the merger or consolidations of business entities, or acquisitions of company shares and/or company’s assets which may require structural adjustment and/or adjustment to the notifying business entitites’ behaviour.