Following the recent hype surrounding equity crowdfunding activities, particularly for startup companies, the Indonesian Financial Service Authority (Otoritas Jasa Keuangan or OJK) issued OJK Regulation No.37/POJK.04/2018 regarding equity crowdfunding (POJK 37/2018) on 31 December 2018.
POJK 37/2018 aims to support startup companies in getting access to alternative sources of funds by selling shares to the public without triggering the requirements of the initial public offering (IPO) rules.
We set out below some highlights of POJK 37/2018 for your information.
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A. |
What is equity crowdfunding? |
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POJK 37/2018 defines "equity crowdfunding" as an offering of shares by an issuer directly to investors using a publicly accessible electronic system. Issuers are companies which qualify as described below (Issuer).
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B. |
Who qualifies? |
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To qualify for equity crowdfunding, a company must:
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be in the form of a limited liability company;
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not be part of a conglomerate group;
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not be a public company or a subsidiary of a public company; and
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not have assets of more than IDR 10 billion (not including land and buildings).
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C. |
What are the requirements for equity crowdfunding to be not considered an IPO? |
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The equity crowdfunding must be conducted through an equity crowdfunding service provider which has been licensed by OJK (equity crowdfunding service provider).
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The equity crowdfunding may only be conducted for a maximum of IDR 10 billion (approximately equivalent to US$ 708,560) within a 12 month period or such other amount which may be stipulated by OJK from time to time.
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What are the requirements to become an equity crowdfunding service provider? |
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You must:
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be an Indonesian limited liability company or a cooperative;
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have paid-up capital of at least IDR 2.5 billion;
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have staff with experience in the IT, legal and finance sectors (who are able to conduct a review of the company seeking equity crowdfunding);
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be a platform registered with the Ministry of Communications and Informatics; and
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comply with other administrative requirements (such as the requirements to have a data centre located in Indonesia and an Indonesian domain name).
Note that all parties who were "equity crowdfunding service providers" in any equity crowdfunding transactions prior to the promulgation of POJK 37/2018 (existing equity crowdfunding service providers) are required to apply to OJK for the relevant business licence by the end of June 2019. Until an existing equity crowdfunding service provider has obtained the necessary business licence from OJK, it is prohibited from entering into any new contracts with Issuers.
All applications for a business licence as an equity crowdfunding service provider must be made in accordance with POJK 37/2018.
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E. |
What are the requirements for investors purchasing shares in an Issuer? |
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If the investor has an annual income of IDR 500 million or less, he/she can purchase shares in an Issuer with an equivalent value of 5 percent (or less) of his/her annual income.
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If the investor has an annual income of more than IDR 500 million, he/she can purchase shares in an Issuer with an equivalent value of 10 percent (or less) of his/her annual income.
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The above limitation does not apply to (a) legal entities or (b) a person who has experience investing in capital markets and who has held a securities account for at least two years before the equity crowdfunding.
We hope you find the above highlights useful for your business activities.
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