Law Number 8 of 1995 on the Capital Market (“UUPM”), Article 1, Point 15, states that an IPO is the activity of offering securities by an issuer to sell securities to the public based on procedures regulated in UUPM and its implementing regulations.
Compliance with legal and regulatory requirements is a mandatory prerequisite for an IPO. The legal aspects of an IPO involve the roles of two professions: Legal Counsel and Notary Public.
Legal Counsel and Notary Public are among the capital market supporting professions that facilitate IPO transactions from a legal perspective, as mentioned in Article 64, Paragraph (1), Points b and d of UUPM. Therefore, in the journey towards an IPO, the legal aspect plays a crucial role in ensuring regulatory compliance and protecting the interests of all parties involved.
Legal and Compliance Audit
Before proceeding with an IPO, a company must undertake internal preparations to ensure that all legal documents, financial documents, proof of asset ownership, and permits are complete, valid, and comply with the applicable laws and regulations.
The scope of this support covers six main legal issues:
- Company Details (Articles of Association, Bylaws, Capital Structure History and Shareholder Composition, Board of Directors and Board of Commissioners Composition);
- Business Permits (General Permits, Special Permits, and Operational Permits);
- Ownership of Company Assets (Shares in subsidiaries, land and buildings, vehicles, financial assets, and intellectual property);
- Employment (Minimum Wage, BPJS Employment and Health, Mandatory Employment Reporting (WLKP));
- Material Agreements (Cooperation Agreements, Guarantee and Loan Agreements, Facility Agreements);
- Litigation (Court Clearances) from District Court, Industrial Relations Court, Commercial Court, Tax Court, and BANI (if necessary).
Legal Counsel is responsible for ensuring that all legal aspects are met by conducting a legal audit, which includes:
- Document Review: Legal Counsel ensures that all company documents mentioned above comply with the prevailing laws.
- Regulatory Compliance: Legal Counsel ensures that the company complies with all relevant regulations, including tax, labor, environmental, and others.
- Legal Dispute Resolution: Legal Counsel ensures that the company has resolved all ongoing or potential legal disputes that could affect the IPO process.
Legal Counsel also plays a role in structuring the company to meet capital market requirements. This includes:
- Share Reorganization: Restructuring the company’s share structure, including issuing new shares or converting old shares.
- Implementation of Good Corporate Governance (GCG): Adopting good governance practices to attract investors and meet capital market standards.
IPO Document Preparation
The prospectus is the primary document in the IPO process, providing detailed information about the company to potential investors. Legal Counsel plays a role in reviewing the prospectus, ensuring accurate disclosure of information related to the company’s finances, operations, risks, and prospects, and ensuring that the prospectus complies with all legal and regulatory requirements in the relevant jurisdiction.
In addition to the prospectus, Legal Counsel must review and examine various agreements and contracts prepared during the IPO process, such as the Underwriting Agreement and Contracts with Third Parties. The goal is to regulate the relationship between the company and the underwriters assisting in the share sale and ensure that all contracts with third parties (such as vendors and major customers) are updated and aligned with the company’s status as a public entity.
Submitting all necessary documents to the capital market authorities, such as the Financial Services Authority (OJK) in Indonesia, is a crucial step. In this regard, Legal Counsel is responsible for:
- Preparation and Submission of Documents: Preparing and submitting all necessary documents in accordance with authority requirements.
- Follow-up and Coordination: Coordinating with authorities to follow up on any requests for additional information or clarifications.
After a successful IPO, the company must continue to comply with various regulations applicable to public companies, including periodic financial reporting by preparing and submitting periodic financial statements in accordance with applicable accounting standards. The company must also disclose material information to the public in accordance with capital market regulations.
Legal Counsel’s support is essential at every stage of the IPO process. From initial preparation, document preparation, to post-IPO compliance, the role and support of legal professionals cannot be overlooked. Compliance with regulations and good corporate governance not only helps the company successfully complete the IPO process but also enhances investor confidence and maximizes the company’s value in the capital market.
