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Some time ago, Indonesia’s Central Securities Depository (Kustodian Sentral Efek Indonesia or KSEI) started work on an integrated platform for Indonesian public companies to hold “electronic” general meetings of shareholders (e-GMOS). With the urgent need for the new system during the COVID-19 outbreak, KSEI has expedited the system’s launch.
On 3 April 2020, KSEI officially launched the new e-platform – much faster than initially expected – by issuing Board of Directors of KSEI Decision No. KEP-0016/DIR/KSEI/0420 (KSEI Decree).
On the same day, the know-how on using the new platform was rolled out by KSEI to stakeholders, along with technical guidelines.
REQUIREMENTS TO USE eASY.KSEI
Through the new platform, KSEI will be able to help Indonesian public companies to convene their GMOS electronically (given the acronym “eASY.KSEI” by KSEI). Only a public company that has deposited its shares in collective custody at KSEI can use this facility.
Under the KSEI Decree, public companies wishing to use eASY.KSEI are required to enter into an updated equity securities registration agreement with KSEI, using the prescribed form attached to the KSEI Decree. The new agreement replaces the original agreement that the public company entered into with KSEI.
The public company is also required to deliver a power of attorney, informing KSEI of:
- the group of representatives of the company authorised to enter into the equity securities registration agreement with KSEI (referred to as group A); and
- another group of representatives authorised to sign documents, issue instructions and conduct other necessary actions to implement the equity securities registration agreement and corporate actions (eg, GMOS), and responsible for accessing the KSEI systems, including eASY.KSEI (referred to as group B).
Depending on the articles of association of the public company and applicable regulations, a separate power of attorney from the board of directors to group A may also be required and submitted to KSEI.
For completeness, KSEI also requires copies of the corporate documents setting out the current composition of directors and commissioners, the current articles of association, as well as approval from and receipt of notification to the Indonesian Ministry of Laws and Human Rights.
E-PROXY AND E-VOTING SYSTEMS
Embedded in the eASY.KSEI system is an integrated platform that includes e-proxy and e-voting so that shareholders do not need to be physically present at GMOS.
The e-proxy system facilitates and integrates the granting of power of attorney from a shareholder to a proxy by electronic means. The e-voting system allows virtual attendance and voting at a GMOS. The new platform is discussed in greater detail below.
It is hoped that eASY.KSEI will support current government efforts to mitigate the impact of the COVID-19 outbreak by avoiding mass gatherings such as GMOS. Accordingly, all GMOS called after 20 April 2020 are required to use the e-proxy platform. In this way, public companies can use just a few proxies to represent the relevant shareholders at the meeting.
Interestingly, despite having its e-GMOS facilitated by KSEI through the eASY.KSEI system, the company still needs to convene a physical meeting. This meeting must be attended by at least the board of directors, board of commissioners and relevant supporting professionals (eg, public notary, share registrar, consultants), just as with physical GMOS.
However, the shareholders are no longer required to physically attend the meeting, as they can be represented by a proxy using the eASY.KSEI e-proxy platform. This permits certain designated proxies previously registered with the eASY.KSEI system (eg, share registrar, independent individuals (without a conflict of interest and who are not directors, commissioners or employees of the company), custodian bank or securities company to act as representatives or intermediaries (as relevant), or the public company itself as intermediary).
A traditional proxy power can, however, still be granted by a shareholder to a designated proxy to be physically present at the meeting.
A public company wishing to use eASY.KSEI must input the necessary details of the meeting agenda into eASY.KSEI, which is just another way for the shareholders to study the GMOS. However, this does not remove the public company’s obligation to make the appropriate announcements in newspapers, its corporate website and the IDX website, as is common practice.
The shareholders may grant their proxy either general or special authority:
- General authority in this context means the power and authority to vote at the e-GMOS via the eASY.KSEI e-voting platform.
- In contrast, special authority allows the shareholder to vote themselves, using one of three voting options (approving, disapproving or abstaining) via the eASY.KSEI e-voting platform.
A proxy granted special authority would be expected to attend the e-GMOS in order to meet the attendance quorum, with voting being decided by the shareholders beforehand. This approach will likely be more popular for those with a special interest in the meeting agenda, as it helps them ensure the decision goes in their favour.
The last step of the e-GMOS process is for the results of the meeting – including the total number of physical and electronic attendees, the results of voting, and the minutes of meeting – to be reported through the eASY.KSEI system.
In case of technical difficulties in using the new system, we would expect immediate technical assistance to be provided by KSEI, as the meeting is real-time. This could become challenging if many parties are using the system at the same time, and the technical support available from KSEI is limited (which may also be influenced by, for instance, the large-scale social restrictions currently in place in some areas of Indonesia).
Since this may affect the outcome of the meeting from the company’s perspective, it is reasonable to ask whether the practical application will operate in line with expectations.
In view of the practical concerns about holding e-GMOS, where important agenda items need to be discussed or approved at the GMOS – such as material transactions, conflict-of-interest transactions, material contracts, and M&A transactions – and where the timing of the approval is a concern, companies may prefer to retain the physical GMOS to ensure attendance and voting quorums are fully met.
Companies may therefore need to conduct risk assessments on a case-by-case basis on how best to organise GMOS, irrespective of the current challenges in holding a physical meeting.
Indonesia’s Stock Exchange and Financial Services Authority have implemented several new policies and revised existing ones to support the markets and capital raisings. For details of the steps they have taken, please see our previous article in this COVID-19: Governance series: Regulatory Changes for Markets, Listings and Listed Companies.