In May 2020, Indonesian news platforms broke the news that foreign investors would now be able to attend the General Meeting of Shareholders for Indonesian companies without having to travel to Indonesia. But how?
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A General Meeting of Shareholders (‘RUPS’) is a company organ possessing authority not afforded to the Board of Directors or Board of Commissioners in a company. Generally, an RUPS is held by a direct convention of shareholders to the location wherein an RUPS is held. According to Article 76 of the Law No. 40 of 2007 concerning Limited Liability Companies (‘UUPT’), an RUPS must be convened in Indonesia. Specifically, the UUPT stipulates that the RUPS be convened in the domicile of that Company, or where that Company conducts its primary business activities, in accordance with its Articles of Association. An RUPS may also be convened in the domicile of the stock exchange where the company’s shares are listed. Unfortunately, a physical convention of an RUPS as stipulated by Article 76 of the UUPT proves to be a challenging undertaking in the midst of the COVID-19 pandemic.
In a pandemic where physical meetings ought to be avoided, company affairs must still proceed. Fortunately, an RUPS may be convened online. Article 77 paragraph (1) of the UUPT provides that an RUPS may be held through teleconference, video conference, or other electronic media. Certain provisos must be satisfied, namely that all RUPS participants must be able to see, hear, and participate in the RUPS proceedings. Though the UUPT has long provided for an electronic RUPS, it remained uncommon prior to the COVID-19 pandemic. Because of that, prior to the COVID-19 pandemic, the Government had not specified further on the details of electronic RUPS.
In light of the COVID-19 pandemic, the Government has issued a variety of legislation. Among those is Law No. 2 of 2020 concerning Stipulation of Government Regulation in Lieu of Law No. 1 of 2020 (‘Law No. 2 of 2020’). On Article 23 Law No. 2 of 2020, the Financial Services Authority (‘OJK’) is afforded the authority to stipulate provisions on the use of information technology in the convention of RUPS in public companies.
On 18 March 2020, the OJK issued OJK Letter Number S-92/d.04/2020 of 2020 concerning the Relaxation of Reporting Obligations and the Convention of General Meetings of Shareholders. Through that letter, the OJK decided, among others:
- To adjust the deadline for the convention of annual RUPS by public companies, and to extend it for two months since the deadline for the convention of annual RUPS as stipulated in OJK Regulation No. 32/POJK.04/2014 concerning the Planning and Convention of Public Company General Meeting of Shareholders. As a result, the convention of an annual RUPS which was due for 30 June, can now be convened before August 2020.
- The convention of an RUPS by a Public Company can be done by an electronic power of attorney mechanism using the e-RUPS system provided by the depository institution and the settlement and convention of the RUPS is carried out as efficiently as possible without reducing the validity of the RUPS in accordance with POJK Number 32 of 2014 and Law Number 40 of 2007 concerning Limited Liability Companies.
Provisions regarding electronic RUPS are further elaborated through OJK Regulation No. 15 of 2020 concerning Planning and Convention of Public Company General Meeting of Shareholders (‘POJK No. 15 of 2020’). In POJK No. 15 of 2020, it was elaborated that RUPS may be convened electronically by teleconferencing, video conferencing, or other media. This definition is exactly the same as the definition of electronic RUPS in Article 77 of the UUPT. While electronic RUPS is defined as the event and commencement of the RUPS itself, e-RUPS is defined as the electronic medium used to support the specific provision of information, convention and reporting of RUPS in public companies.
Aside from POJK No. 15 of 2020, OJK also issued OJK Regulation No. 16 of 2020 concerning the Convention of a Public Company Electronic General Meeting of Shareholders (‘POJK No. 16 of 2020’).
In the two relatively new legal instruments, there exist several matters which had not previously been regulated by the UUPT. These matters are, among others:
- Minutes of RUPS are made electronically in the form of a notarial deed by a notary registered with OJK, without requiring the signature of the RUPS participants;
- The presence of shareholders through electronic devices at the RUPS can replace the physical presence of shareholders and is counted as meeting the attendance quorum;
- In carrying out the RUPS electronically, the company is still required to hold a physical RUPS. It requires the physical attendance of, at the very minimum, a member of the Board of Directors and/or one member of the Board of Commissioners, as well as the capital market professional who assists in the implementation of the RUPS. Shareholders (or their proxy) may choose to be physically or electronically present. In this scenario, the place where the RUPS is deemed to be held is the place where physical RUPS is held;
- Under certain conditions set by the Government or through the approval from OJK, a company is allowed not to carry out a RUPS physically, or limit the physical presence of shareholders either partially or wholly. In the event that the physical RUPS does not take place, the place where the RUPS is deemed to be held is the domicile of the e-RUPS Provider. If a company were to utilize its own e-RUPS system, then the place of the RUPS is the domicile of the said company;
- Public companies are required to accommodate the delegation of Power of Attorneys by shareholders. The granting of the Power of Attorney is done electronically through the e-RUPS platform used by the company; and
- Voting in the RUPS can be done electronically after the summons of the RUPS until the opening of each agenda that requires voting in the RUPS.
Specifically for electronic RUPS which were held through platforms provided by an e-RUPS Provider, the Provider carries an obligation to keep the votes confidential until the time for the vote count arrives.
Unlike the provisions contained in the UUPT, POJK No. 15 of 2020 and POJK No. 16 of 2020 does not include requirements that the participants of the RUPS must be able to be seen and heard, nor the provisions that the minutes of the RUPS must be approved and signed by all participants of the RUPS.
Electronic RUPS Mechanisms and Requirement
As mentioned in POJK No. 15 of 2020 and POJK No. 16 of 2020, electronic RUPS should be conducted through a platform referred to as e-RUPS. A company may choose to use the e-RUPS provided by the e-RUPS Provider or provide its own e-RUPS system to be used. What constitutes as an e-RUPS Provider is a Depository and Settlement Institution (‘LPP’) designated by the OJK, or other parties approved by OJK. If a company opts to use the e-RUPS system provided by a Provider, the company must follow the rules and guidelines provided by the Provider.
E-RUPS Providers themselves have to fulfill the following requirements:
- Registered as an electronic system administrator;
- Implements Standard Operational Procedures for the implementation of the electronic RUPS through e-RUPS;
- Provides back-up data centers in a safe place located in Indonesia, separated from the main data center;
- Accords to the minimum standards of information technology systems and security, system descriptions and failures, and the transfer of management of applicable information technology systems; and
The e-RUPS Provider also possesses other tasks. For example, it must provide access for the e-RUPS users to the e-RUPS platform, and store all the e-RUPS data electronically. In addition, there are also obligations that are situational, such as providing an audit track record of all data management activities at the e-RUPS system for the purposes of supervision, law enforcement, dispute resolution, verification, and testing. The e-RUPS provider is also responsible for losses incurred due to errors or negligence in the provision and management of e-RUPS.
If a company prefers to provide its own e-RUPS system, such system, at the very minimum, be able to:
- Display the rules, materials, and the agenda of the RUPS which are needed by shareholders in making decisions for each agenda item of the RUPS;
- Enables all the participants to participate and interact during the RUPS;
- Calculate the attendance and the quorum fulfillment;
- Be used to gather and count the votes, including if there exist more than one class of shares;
- Can be used to record all interactions in the RUPS; dan
- Accommodate the authorization of proxy (often known as e-Proxy).
Electronic RUPS: Minutes (Risalah)
According to Article 12 POJK No. 16 of 2020, Electronic RUPS Minutes shall be made in the form of a notarial deed by a notary registered with the OJK without requiring the signature of the RUPS Participants. If a company chooses to utilize a Provider’s e-RUPS, the Provider is obliged to hand over print copies of the RUPS Minutes to a Notary Public, which includes, at the very minimum:
- List of shareholders who attended electronically;
- List of shareholders who gave POA electronically;
- Recapitulation of attendance and decision quorum; and
- Transcript of all interactions during electronic RUPS is attached to the RUPS Minutes.
If a company chooses to utilize its own e-RUPS system, the obligation to hand over the RUPS Minutes to a Notary Public is owned by the company.
Implementation of Electronic RUPS: KSEI’s eASY.KSEI
PT Kustodian Sentral Efek Indonesia (‘KSEI’) is an institution appointed by OJK to become an e-RUPS Provider. KSEI has offered an e-RUPS system in the form of an application, named eASY.KSEI. As of now, the application can be used for four stages of RUPS: Announcement, Invitation, Commencement of the RUPS itself, and RUPS Report.
Further details regarding the mechanism provided by eASY.KSEI are as follows:
- Announcement Phase
At the RUPS announcement stage, Directors are able to input RUPS Agenda Information and other supporting documents to the application. On the date of the announcement, the Directors have the option to send the announcement via automatic email for everyone enlisted in the Shareholders Register.
- Invitation Phase
Directors can send out RUPS Invitation through the eaSY.KSEI application. The application enables emails to be sent to the list of shareholders whose email address is registered with KSEI.
- Electronic Proxy Feature
Shareholders may delegate their Power of Attorney to other parties, such as individual receivers. These individuals are obliged to log into the KSEI’s system and follow the guidelines provided by KSEI. Shareholders may also choose to delegate their Power of Attorney outside the application. In that particular scenario, the RUPS Participant may input information related to the delegation of the Power of Attorney into the eaSY.KSEI application. In the event where the Power of Attorney Receiver is unable to attend the RUPS, the Receiver could provide Substitution of Authority through the application.
- Attendance and Commencement
Prior to the RUPS, the physical attendance registration process was also carried out using the application. Based on this attendance data, the Directors, assisted by the Securities Administration Bureau (Biro Administrasi Efek), can calculate the attendance quorum for the attendees of the RUPS. During the RUPS itself, the Directors could update all the activities through eASY.KSEI, allowing it to be monitored by the OJK.
It must be noted that the e-RUPS system provided by KSEI is still undergoing further developments. For example, KSEI is currently developing a voting feature that would enable votes gathering and counting to be done electronically (not manually). Of course, other developments and innovations related to the electronic RUPS can be expected to continue emerging, even after electronic RUPS has become an option, and no longer a necessity..
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