The execution of a merger, consolidation, or acquisition of a Commercial Bank requires obtaining a permit from the OJK. This should be in accordance with the requirements and procedures regulated under OJK Reg. No. 41/2019. The procedure for the merger, consolidation, and acquisition of a Commercial Bank will be further elaborated below. 

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Procedure of Merger and Consolidation

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The procedure of merger or consolidation of Commercial Banks under OJK Reg. No. 41/2019 is as follows:

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• The BoD of each Commercial Bank that will conduct a merger or consolidation is required to jointly formulate a merger or consolidation plan to be approved by the BoC of the respective Commercial Bank, which should at least contain the following information: 

  1. information regarding each Commercial Bank that will conduct the merger or consolidation;

  2. information on the merger or consolidation plan; and

  3. information on Commercial Bank resulting from the merger or consolidation.​

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• The BoD of the Commercial Banks who will conduct a merger or consolidation must announce the summary of the merger or consolidation plan to the public within (i) 2 (two) business days at the latest after the BoC’s approval for the merger or consolidation plan is received; and (ii) 30 (thirty) days before the summon for GMS.  The content of this announcement must at least consist of the summary of the merger or consolidation plan and information stating that the merger or consolidation plan has not yet obtained approval from the GMS.   Simultaneously with the announcement above, the Commercial Banks is required to:

  1. submit documents to OJK, which consist of: (i) document of merger or consolidation plan which approved by the BoC; (ii) draft of the deed of merger or consolidation; and (iii) administrative requirements documents;  and

  2. announce to the employees regarding the merger or consolidation in writing. ​

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• The Commercial Banks who will conduct a merger or consolidation request approval from the GMS on: (i) the merger or consolidation action; (ii) the merger or consolidation plan; and (iii) a draft of the deed of merger or consolidation.  The GMS approval shall be included in the deed of merger or consolidation which is drawn up by a notary in Indonesian language. 

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• The BoD of the Commercial Banks who will conduct a merger or consolidation submit an application for a merger or consolidation permit to the OJK by enclosing: 

  1. the GMS minutes prepared with a notarial deed that contains approval for the merger or consolidation;

  2. the merger or consolidation plan which has been approved by the GMS;

  3. the deed of merger or consolidation;

  4. deed of amendment to articles of association of the commercial bank resulting from the merger or deed of establishment of the Commercial Bank resulting from the consolidation; and

  5. financial statement and most recent financial performance information of the Commercial Banks who will conduct a merger or consolidation.

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• Following the submission above, the OJK will provide approval or rejection for the application of the merger or consolidation permit.  The merger or consolidation permit will be effective since: 

  1. if the merger is accompanied by an amendment to articles of association, since the date of the MoLHR approval or later date which is determined in the MoLHR’s approval or the date when the notification of the amendment to articles of association is received by the MoLHR or the later date which is determined in the deed of merger;

  2. if the merger is not accompanied by an amendment to articles of association, since the date when the notification is received by the MoLHR to be registered in the limited liability company register;

  3. since the date of the decree of the MoLHR on the legalization of the legal entity status of the bank resulting from the consolidation.

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• After obtaining the permit from OJK, the Commercial Bank must: 

  1. formulate the closing balance sheet of the respective Commercial Banks that conduct the merger or consolidation;

  2. formulate the opening balance sheet of the Commercial Bank resulting from the merger or consolidation;

  3. announce the merger or consolidation result within 30 (thirty) days at the latest since the merger or consolidation comes into force;

  4. submit merger or consolidation implementation report to the OJK within 5 (five) business days at the latest after the date of merger or consolidation comes into force; and

  5. in the event that the announcement of merger or consolidation is conducted after the submission of the merger or consolidation implementation report, the proof of announcement must be submitted within 2 (two) business days at the latest after the announcement.
      

Procedures of Acquisition

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The procedure of acquisition of Commercial Bank under OJK Reg. No. 41/2019 is as follows:

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• The BoD of the Commercial Bank that will be acquired and the acquiring party are required to prepare an acquisition plan to be approved by their respective BoC.  The acquisition plan shall at least contain the following information: 

  1. information of the parties;

  2. information on the acquisition plan; and

  3. information regarding the bank after the acquisition.

 

• The BoD of the Commercial Bank that will be acquired and the acquiring party are required to convey preparation documents for the acquisition’s implementation to the OJK, which consist of:  (i) the acquisition plan documents as approved by the BoC; (ii) draft of the deed of acquisition; and (iii) administrative requirements documents. OJK will study the preparation documents for the acquisition’s implementation within 20 (twenty) business days at the latest since the documents are duly received. 

 

• The BoD of the Commercial Bank that will be acquired and the acquiring party must announce the summary of the acquisition plan to the public within (i) 2 (two) business days after the notification from the OJK is received; and (ii) 30 (thirty) days before the GMS summon.  The content of such announcement must at least consist of (i) the summary of the acquisition plan; (ii) information that the acquisition plan has not obtained approval from the GMS.  Simultaneously with such an announcement, the BoD of the acquiring Commercial Bank and Commercial Bank that will be acquired must announce in writing to the employees. 

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• The Commercial Bank that will be acquired and the acquiring party must request approval regarding (i) the acquisition action; (ii) the acquisition plan; and (iii) a draft of the deed of acquisition from:

  1.  the GMS, if the party who conducts the acquisition is in the form of a limited liability company; or

  2.  an authorized organ, if the party who conducts the acquisition is in the other form of legal entity.  

       Shareholders who disagree with the GMS’ decision may only utilize the right to ask for their shares to be bought at a fair

       price by the commercial bank.  However, it does not the stop process of the acquisition. 

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• The BoD of the Commercial Bank that will be acquired and the acquiring party shall jointly submit an application for an acquisition permit to the OJK by enclosing: ​

  1. the GMS minutes which were drawn up with a notarial deed containing approval for the acquisition;

  2. the acquisition plan which has been approved by GMS;

  3. draft of the deed of acquisition which has been approved by GMS;

  4. draft of the amendment to articles of association of the Commercial Bank concerning the acquisition, if there is an amendment to articles of association; and

  5. the most recent financial statement and financial performance information.

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       Subsequently, OJK will either approve or reject the acquisition permit application.  If OJK grants approval for the

       acquisition permit, it will come into force since:

1. if the acquisition is accompanied by an amendment to the articles of association, since the date of the MoLHR’s approval or the later date which is determined in the MoLHR’s approval or the date when the notification of the amendment to articles of association is received by the MoLHR or the later date which is determined in the deed of acquisition; or

2. if the acquisition is not accompanied by an amendment to articles of association, since the date when the  notification is received by the MoLHR to be registered in the company register. 

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Merger, Consolidation, and Acquisition of Institutional PMV/PMVS

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PMV or PMVS can carry out mergers, consolidations, and acquisitions.  Specifically, merger or consolidation shall only be conducted (i) by PMV or PMVS in the same form of legal entity;  and (ii) between PMV and other PMV or between PMVS and other PMVS.  When conducting a merger, consolidation, or acquisition, the PMV or PMVS is required to submit the plan for such a merger, consolidation, or acquisition to the OJK for approval, accompanied by certain documents as required by OJK Reg. No. 34/2015: 

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In determining whether to issue approval or rejection as referred above, the OJK will examine the documents submitted for the request of approval and analyze the feasibility of the proposed merger, consolidation, or acquisition, as well as the compliance with regulatory provisions in PMV or PMVS business field.  OJK shall issue its approval or rejection no later than 30 (thirty) business days after receipt of the complete application documents. 

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PMV or PMVS that has received merger, consolidation, or acquisition approval from OJK must execute the merger, consolidation, or acquisition within 60 (sixty) business days from the date of OJK’s approval letter.  If the realization of the proposed merger, consolidation, or acquisition does not occur within this time frame, the approval letter issued by OJK will become invalid.   Subsequently, the PMV or PMVS must report to OJK:

 

• regarding the merger or consolidation in writing within 10 (ten) business days from the receipt date of approval or notification of amendments to the AoA from the MoLHR;  

• regarding the acquisition in writing within 10 (ten) business days from the date of the acquisition deed executed before a public notary. 

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A report on the merger or consolidation must be submitted by the directors of PMV or PMVS along with the documents below:

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• For merger

  1. deed of amendment to the AoA of the surviving PMV or PMVS that has been approved or recorded by the competent authority;

  2. deed of merger that has been approved or recorded by the competent authority;

  3. detailed list of Branch Offices along with their complete address; and

  4. document stating that the merged PMV or PMVS does not have tax debt from the competent authority.

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​ Based on the report for the merger, the OJK will (i) conduct a study on the completeness and correctness of the

 attachment documents of the report for the merger; and (ii) revoke the business license of the merging PMV or PMVS.

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• For consolidation​

  1. deed of minutes of GMS;

  2. deed of consolidation that has been approved or recorded by the competent authority;

  3. deed of incorporation of PMV or PMVS resulting from consolidation that has been approved or recorded by the competent authority;

  4.  list of ownership;

  5. detailed list of branch offices along with complete addresses; and

  6. document stating that the merging PMV or PMVS does not have tax debt from the competent authority.

 

Based on the report for consolidation, the OJK will (i) conduct a study on the completeness and correctness of the attachment documents of the report for consolidation; (ii) revoke the business license of the non-surviving PMV or PMVS    caused by the consolidation; (iii) granting approval or refusal of business license to surviving PMV or PMVS resulting from consolidation. Prior to the approval of a business license, PMV or PMVS are prohibited from carrying out venture capital business activities. ​

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• For acquisition

  1. deed of amendment to AoA that has been approved or recorded by the competent authority;

  2. deed of acquisition.
      

​If PMV or PMVS does not report the merger, consolidation, or acquisition to OJK within a predetermined period, PMV or PMVS will be subjected to administrative sanctions in the form of warnings, freezing of business activities or revocation of business licenses. 

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Notification of Merger, Consolidation, and Acquisition to KPPU

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In accordance with Article 29 Law No. 5/1999 jo. Article 5 GR No. 57/2010, the merger, consolidation, or acquisition with certain asset value and/or sales value is required to be notified to KPPU no later than 30 (thirty) business days from the effective enforcement of such merger, consolidation, or acquisition. The detailed provisions regarding notification of merger, consolidation, and acquisition to KPPU will be further elaborated in Section 17.1.3. below. 

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Legal Protection for Minority Shareholders, Employees, and Third Parties in the event of Merger, Consolidation, and Acquisition

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Merger, consolidation, and acquisition of a limited liability company may lead to legal consequences that may affect the shareholders, employees, and third parties such as creditors. Consequently, prevailing laws offer legal protection to these parties during the merger, consolidation, and acquisition process, including the protection post the merger, consolidation, and acquisition process in certain cases.

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Protection for Shareholders

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Shareholders who do not agree with the resolution of the GMS regarding the merger, consolidation, or acquisition may only use their rights as referred to in Article 62 Law No. 40/2007, in which the shareholders can request the company to purchase their shares at a fair price.  In principle, the company is obliged to buy it. If the shares requested to be purchased by the company exceed the limits of the provisions for share buy back by the company, the company is obliged to ensure that the remaining shares are purchased by a third party. 

 

Protection for the Company’s Employees

 

According to Article 154A (1) Law No. 13/2003, the termination of employment may occur due to the reason the company is merging, consolidating or in the process of being acquired, and the company or the employee is not willing to continue the employment relationship, or the employer is not willing to accept the employee. Upon the termination of employment, the employee is entitled to severance pay and/or service pay and compensation pay that should have been received, which is further stipulated under GR No. 35/2021. 

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In some circumstances, industrial relations disputes can occur between employers and workers because of the termination resulting from the merger, consolidation, or acquisition. Nevertheless, during the settlement of such disputes, employers and workers must carry out their daily obligations.  Employers can also take action to suspend workers who are in the process of terminating employment relationship, by continuing to pay wages along with other rights commonly received by workers.  The implementation of the obligations is carried out until the completion of the process settlement at such appropriate levels.

 

According to the Elucidation of Article 157A Law No. 13/2003, the term of “appropriate level” can be defined as dispute resolution at several levels as follows: 

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• bipartite level;

• mediation or conciliation or arbitration level; or

• industrial relations level.

 

Protection for Creditors

 

Under Article 126 (1) (b) Law No. 40/2007, the legal action of merger, consolidation, and acquisition must take into account the interests of creditors and other business partners in the company. This provision is then affirmed in its elucidation, that merger, consolidation, and acquisition cannot be carried out if it is detrimental to certain parties, including creditors. 

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Prior to the merger, consolidation, and acquisition, the BoD of the company is obliged to announce the merger, consolidation, and acquisition plan in 1 (one) newspaper and notify the employees in writing no later than 30 (thirty) days before the GMS summon.  This announcement and notification ensure that all parties relevant to the company, including all creditors, are informed about the impending merger, consolidation, and acquisition.

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To provide legal protection to the creditors, they are afforded the opportunity to raise objections before the GMS makes a decision on the legal action. Creditors may submit the objections to the company at the latest 14 (fourteen) days after the announcement regarding merger, consolidation, or acquisition according to the draft made by the BoD.   A creditor who does not file an objection within the specified period is deemed to have approved the merger, consolidation, or acquisition.  If the BoD is unable to resolve a creditor's objection by the date of the GMS, the objection must be presented at the GMS for settlement.  Should a settlement not be reached, the merger, consolidation, or acquisition cannot be proceeded. 

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The procedures outlined above generally apply to limited liability companies. However, the processes for mergers, consolidations, and acquisitions may vary for limited liability companies operating in specific sectors or for those structured as public companies.
 

Abolition of NPWP due to Merger

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The head of the tax service office can conduct the NPWP abolition on taxpayers who have not met the subjective and/or objective requirements in accordance with the provisions of laws and regulations in the field of tax.  This includes cases where a corporate taxpayer is liquidated or dissolved due to termination or involved in a business merger.  Below is the procedure of NPWP abolition:

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• Submission to the Tax Office

 

The submission for NPWP abolition is made electronically or in writing and is attached with supporting documents that indicate the circumstances in which the corporate taxpayer is liquidated or dissolved due to termination or involved in a business merger.   It should be noted that the submission for NPWP abolition may be submitted simultaneously or after the application for revocation of PKP.  In the context where the corporate taxpayer is liquidated or dissolved due to termination or involved in a business merger, the supporting documents that must be attached is the copy of the deed of dissolution of the entity or similar documents that have been authorized by the competent authority in accordance with laws and regulations.  

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Furthermore, the submission for NPWP abolition electronically is carried out by:  

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1.  filling out and submitting the NPWP abolition form; and

2.  uploading digital copies (softcopies) of supporting documents, on the registration application available on the DGT website,

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​which the NPWP abolition form that has been filled in and submitted through the registration application is deemed to have been signed electronically or digitally and has legal force.  Based on the application, BPE is given to the taxpayer, in the event that the application fulfills the provisions.  On the other hand, written application for NPWP abolition is carried out by:  

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1.  filling out and signing the NPWP abolition form; and

2. attaching supporting documents,

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which can be submitted directly to the KPP where the taxpayer is registered or KP2KP or through (i) post or (ii) an expedition service company or courier service, with proof of mailing, to the KPP where the taxpayer is registered.  Based on the application, the head of the KPP or KP2KP will issue and convey BPS to the taxpayer in the event that the application fulfills the provisions. 
 

• Issuance of Tax Office’s Decision

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​Based on the submission for NPWP abolition that has been granted by BPE or BPS as referred to above, the head of the KPP examines the fulfillment of the subjective and/or objective requirements of the taxpayer.  Furthermore, for the NPWP abolition conducted due to a business merger, the following provisions apply: 

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1. the exercise of rights and fulfillment of tax obligations on each business entity up to the time of the merger, using the NPWP of the business merger result; and

2. the exercise of rights and fulfillment of tax obligations after the business merger, using the NPWP of the merger result.

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Based on the relevant examination, the head of the KPP gives a decision in the form of: 

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1. acceptance of the taxpayer's application by issuing the NPWP abolition decision letter, in the event that the taxpayer fulfills the provisions; or

2. rejection of the taxpayer's application by issuing the NPWP abolition rejection letter, in the event that the taxpayer does not fulfill the provisions.

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Furthermore, the head of KPP shall issue the decision at the latest 12 (twelve) months after the issuance of BPE or BPS, in the case of the application submitted by a corporate taxpayer.  In addition, the head of KPP submits the decision to the taxpayer: 

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1. electronically through the e-mail address that has been registered at the DGT;

2. in person;

3. by post with proof of mailing; and/or

4. through an expedition service company or courier service with proof of mailing.

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