OJK issued the Circular Letter No. 3/SEOJK.04/2020, which in essence allows public companies to conduct shares buyback without prior GMS approval.
| Iswahjudi Karim, Rizki Karim
As the COVID-19 outbreak intensifies globally, so too its impact on the world’s economy, Indonesia’s included. Observing the condition of the Indonesian stock market from the beginning of 2020 until early March, the Indonesian composite Index (“IHSG”) has suffered a significant drop of approximately 18.46%. That being the premise, the financial service authority, OJK, implemented a number of measures, one of them being the Circular Letter No. 3/SEOJK.04/2020 on Other Significantly Fluctuating Market Conditions for the Performance of Buyback of Shares Issued by Issuers or Public Companies (“OJK Circular 3/2020”).
In essence, OJK Circular 3/2020 allows the exercise of shares buyback by issuers or public companies alike to be done without prior consent of a general meeting of shareholders. The maximum amount of shares that can be bought back must not exceed 20% out of the paid-up capital, provided that the current floating shares amount to a minimum of 7.5% of the paid-up capital. For information, as a form of protection towards companies’ wealth, Indonesian Company Law allows the maximum amount of shares buyback amounting to 10% out of the paid-up capital, unless determined otherwise by a regulation in the capital market sector. 
The issuance of OJK Circular 3/2020 is an implementation of the existing OJK Regulation No. 2/POJK.04/2013 on Buyback of Shares Issued by Issuers or Public Companies in Significantly Fluctuating Market Conditions (“POJK 2/2013”). Under POJK 2/2013, a significantly fluctuating market condition occurs when the IHSG suffers a cumulative drop of 15% within three days or any other condition as determined by OJK. The economic recession on both national and regional scale along with the aforementioned drop of 18.46% in the IHSG have triggered OJK to issue OJK Circular 3/2020. It is hoped that the issuance of OJK Circular 3/2020 could mitigate the unfavorable market condition.
Any companies wishing to exercise shares buyback pursuant to OJK Circular 3/2020 must also comply with the procedures as set out in POJK 2/2013. Moreover, OJK has also issued the Circular Letter No. S-89/D/04/2020, which further clarifies the shares buyback procedures as set out in OJK Circular 3/2020 and POJK 2/2013. We will be discussing these separately with our respective clients.
For more comprehensive discussion on the general impact of the COVID-19 outbreak to trades in Indonesia, see our previous newsletter, Corona Virus Outbreak: Infecting Trade in Indonesia.
 OJK Circular 3/2020, Part III, 2
 Law Number 40 Year 2007 on Company Law, Article 37(1)
 POJK 2/2013, Article 1.1
 OJK Circular 3/2020, Part III, 1