- Regulations
- Listing Rules
- Accounting And Auditing Standards
- Official Codes and Guidelines
1. Regulations
Amendment to Takeover Regulations
On June 30, 2008, Bapepam released its amendment to the takeovers regulation, which state that a mandatory offer can only be triggered once a shareholder crosses the 50% threshold. Previously the threshold was 25%. Furthermore, there will no longer be the opportunity to take a company private or delist a company. An investor can make the mandatory offer for 100% of all the shares of the company, but within two years the acquirer will have to release 20% of its shares to the public after the tender offer is completed.
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2. Listing Rules
New JSX Listing Rules (July 2000)
In July 2000, the Jakarta Stock Exchange (JSX) released a set of new listing regulations that, among other things, raised the bar on corporate governance. Major new provisions included a minimum percentage of independent directors (30%) on the Board of Commissioners; the mandatory introduction of audit committees; a requirement for company secretaries; and tougher sanctions for late disclosure. An excerpt from the new listing regulations that outlines these governance measures is attached.
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3. Accounting And Auditing Standards
Financial Accounting Standards
The Financial Accounting Standards Board (DSAK) of the Indonesian Institute of Accountants (IAI) issues and revises accounting standards. The IAI website, which provides the accounting standards, is only in Bahasa.
IAS Plus: www.iasplus.com
IAS Plus, a website run by Deloitte, provides up-to-date information on accounting standards in Indonesia.
World Bank ROSC on Accounting and Auditing Standards, June 2005
On June 30, 2005, the World Bank issued a ROSC (Reporting on the Observance of Standards and Codes) on the accounting and auditing standards of Indonesia. The report concluded that while the “statutory regulator’s audit engagement reviews have been strengthened in the last few years, noncompliance with established accounting and auditing standards still exists due to weak enforcement and relatively light administrative sanctions and fines”. It made a series of recommendations to further improve the accounting and auditing professions, such as:
- The oversight framework for auditors needed to be consistent with international best practices.
- Enacting the Public Accountancy Law.
- Prioritising adoption of International Financial Reporting Standards (IFRS) and International Standards of Auditing (ISA), even though Indonesian Financial Accounting Standards would be converged with IFRS by 2008 and the Indonesian Institute of Accountants had decided to fully adopt ISAs for the 2007 financial year audits.
- Streamlining reporting requirements of various regulatory bodies.
- Developing a different framework for financial reporting and auditing of small and medium enterprises and non-listed companies.
- Implementing laws and regulations to protect whistleblowers in order to encourage reporting of violations of noncompliance.
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4. Official Codes and Guidelines
Indonesia's Code of Good Corporate Governance (October 2006)
In 2004, the Indonesian government transformed the National Committee for Corporate Governance into the National Committee on Governance (NCG), made up of the Public Governance Sub-Committee and the Corporate Governance Sub-Committee. The Corporate Governance Sub-Committee was tasked with reviewing and revising the existing national code of corporate governance, to make it more relevant in today’s corporate world.
The sub-committee, composed of members from the NCG and representatives from related institutions such as Bank Indonesia, State Ministry of Administrative Reform and the Indonesia Chamber of Commerce, released its revised version in October 2006. While it is not mandatory, the government expects businesses to adopt the Code’s basic principles when they formulate codes of best practice for themselves.
The revised Code includes the “needs and relevancy of pre-requisite conducive situation for GCG (good corporate governance)” including “the role of authorities, business community, and public and society at large”, and what is expected at the company level: the general meeting of shareholders, the Board of Commissioners and the Board of Directors. Two new sections that have been added are business ethics and the code of conduct because it was felt that the crisis affecting the Indonesian economy was due in large part to inconsistent implementation of good corporate governance, especially in terms of business ethics.
Amendments to Regulation Of Bank Indonesia Regarding Good Corporate Governance Implementation By Commercial Banks (October 2006)
In October 2006, Bank Indonesia amended the good corporate governance regulation it issued in January. The amendments were mainly to do with the roles and duties of the Board of Commissioners and the Board of Directors.
Bank Indonesia Regulation Concerning Good Corporate Governance Implementation By Commercial Banks(January 2006)
In January 2006, Bank Indonesia issued this regulation, which acknowledged that good corporate governance practices were imperative in today’s banking world to cope with increasing risk complexity, improve the performance of a bank, protect the interests of shareholders, increase compliance of prevailing regulations and the general code of conduct in the banking industry, as well as strengthen the internal conditions of national banks.
The regulations state that good corporate governance implementation in banks should always be based on five main principles:
- transparency
- accountability
- responsibility to maintain the prevailing laws and regulations as well as prudential bank management
- independency from undue influence/pressure from any parties
- fairness in fulfilling the rights of stakeholders arising from agreements and prevailing laws and regulations
Each bank has to perform a regular self-assessment on the adequacy of good corporate governance implementation and prepare a report. Sanction will be imposed on banks that fail to comply with provisions in the regulation.
Indonesian Code for Good Corporate Governance (March 2001)
In May 2000, the National Committee on Corporate Governance (NCCG), a high-level advisory group appointed by the Indonesian government, produced a draft of Indonesia's first code on corporate governance. The content closely followed global standards and the 1999 OECD Principles on corporate governance. In March 2001, NCCG published the final version of the Code.
This is a model code deliberately designed as a "guide to excellence in corporate governance" for Indonesian companies. It is intended to apply eventually to all companies, but in the initial stage only to public companies, state-owned enterprises and companies "utilising" or "managing" public funds.
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