Tuesday, April 16, 2024

How-to understand legal aspect, procedure for initial public offering in Indonesia

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One of the challenges for every business to grow rapidly and be able to compete in a long period is a funding problem. Capital market is one of the solutions for the companies to get financing through initial public offering (IPO). Through IPO all companies have opportunities to become a public company and list their shares in Indonesia Stock Exchange (IDX). This article will explain the true information about the process of going public, the necessary preparation, the requirements and all related legal things about IPO.

Governing laws and regulation 

  • Law No. 8/1995 concerning Capital Market
  • Law No. 40/2007 concerning Limited Liability as amended by Law No. 11/2020 concerning Job Creation


Initial Public offering is a securities offering activities to sell securities to the public carried out by issuers for the first time based on the procedures regulated in the law concerning the Capital Market and its implementing regulations. Public offering is an effective alternative source of funding through increasing company equity by offering shares to the public without having to think about a return on capital accompanied by interest. Shares are in the form of securities, namely debt acknowledgments, commercial securities, shares, bonds, proof of debt, participation units in collective investment contracts, futures contracts on securities, and any derivatives of securities. The party that can conduct a public offering is an issuer that has submitted a Registration Statement to the Financial Services Authority (OJK) to offer or sell Securities to the public and the Registration Statement has been effective. Securities Offerings by Issuers are made within the territory of the Republic of Indonesia or to Indonesian citizens by using mass media or offered to more than 100 (one hundred) Parties or have been sold to more than 50 (fifty) Parties.

Public Company (Perseroan Publik) vs Public Company Tbk (Perseroan Terbuka)

Perseroan publik and perseroan terbuka are two different forms of company. Perseroan publik is a company whose shares are owned by at least 300 shareholders and has a paid-up capital of at least IDR 3,000,000,000 or a number of shareholders and paid-up capital as stipulated by a Government Regulation, while perseroan terbuka Tbk is a perseroan publik or a company that conduct a public offering of shares, in accordance with the provisions of the laws and regulations in the capital market sector. A perseroan publik is definitely a perseroan terbuka, but perseroan terbuka can be wider than a perseroan publik. Perseroan publik is a perseroan terbuka Tbk that meets certain requirements in accordance with the provisions of the capital market so that a public company does not necessarily offer shares on the Stock Exchange.

Obligations of listing shares on the Exchange

In the past, there have been several public companies (PT Tbk) that have not listed their shares on the IDX. However, since 2021, OJK has issued a regulation namely POJK No. 3/POJK.04/2021 concerning Implementation of Activities in the Capital Market Sector, which requires parties conducting Public Offerings of Equity Securities to list their equity Securities on the Stock Exchange and register their equity Securities in collective custody at the Depository and Settlement Institution. OJK provides a transition period of two years for parties who make public offerings of securities but have not listed their securities on the Exchange, before OJK regulation takes effect. After 2023, there will be no public company that does not list its shares on the IDX. 

Legal consequences of public offering

Law No. 8/1995 explicitly requires every company that offers its securities through the Capital Market to disclose all information regarding the state of its business including financial conditions, legal aspects, management and company assets (full disclosure) to the public. Issuers, public companies or other related parties are also required to submit important information related to the actions or securities of the company in a timely manner to the public in the form of periodic reports and reports of important events. Companies also have to fulfill the obligations of Good Corporate Governance as a public company. Public offering requires issuers to have communication with external parties such as the Capital Market and Financial Institution Supervisory Board (BAPEPAM-LK), public accountants and stakeholders. Companies are also required to pay dividends to issuers and investors. Moreover, the company should have the corporate secretary in their company structure and add the abbreviation “Tbk” after their company name. Last, companies are required to comply with OJK and IDX regulations, and potential sanctions if obligations are not fulfilled, such as regarding Material Transactions, Conflict of Interest Transactions and Affiliates, material disclosure of information, etc.


For companies wishing to conduct an IPO, they must understand the applicable terms and conditions such as: 

  1. Limited liability company which has been operating for at least 12 months;
  2. Domiciled in Indonesia;
  3. Have a fully paid up capital of IDR 200,000,000
  4. Have tangible net assets of at least IDR 5 billion with an audited financial report for the last financial year obtaining an “unqualified/unqualified” opinion from a public accountant registered with OJK
  5. Have at least one independent director, and at least 30% of its board of commissioners must also be independent.
  6. Have an audit committee that meets the provisions as stipulated in the BAPEPAM-LK Regulation No. IX.I.5. regarding the Establishment and Guidelines for the Work Implementation of the Audit Committee;
  7. Have an internal audit unit that meets the provisions as stipulated in the BAPEPAM-LK Regulation No. IX.I.7. Regarding the Establishment and Guidelines for the Preparation of the Internal Audit Unit Charter;
  8. Have a corporate secretary provided that he fulfills the provisions as stipulated in the BAPEPAM-LK Regulation No. IX.I.4. concerning the Establishment of the Corporate Secretary;
  9. Have a board of directors and a board of commissioners that meet the provisions as stipulated in the BAPEPAM-LK Regulation No. IX.I.6. regarding Directors and Commissioners of Issuers and Public Companies
  10. Two years of profit;
  11. The financial statements of the last two years must be audited by a public accountant with an unqualified opinion;
  12. Selling at least 50 million shares or 35% of the number of shares issued (whichever is smaller) and the number of public shareholders of at least 500 parties, can become a public company that should be traded on the IDX,
  13. The prospective listed company is not in a legal dispute which is expected to affect the continuity of the company,
  14. The line of business, either directly or indirectly, is not prohibited by the applicable law in Indonesia.
  15. Specifically for banks, for the last three years, they must comply with the provisions; and the first year must be classified as quite healthy and the last year classified as healthy.
  16. Especially for prospective listed companies that are engaged in the manufacturing industry, they must have an Environmental Impact Analysis (Amdal) certificate and are not in the problem of environmental pollution and
  17. Especially for prospective listed companies engaged in the forestry industry, they must have an ecolabelling certificate (environmentally friendly).

Steps to go public

1. Self preparation

At the preparation stage, the company must hold a General Meeting of Shareholders (RUPS) to obtain approval from all shareholders to go public and determine how many shares will be offered to the public. The company also needs to make changes to the Articles of Association from a closed PT to an open PT. The company must ensure that legal documents, financial documents, proof of ownership of company assets, and permits are complete, still valid, and have been made in accordance with the applicable laws and regulations. The Company must ensure the Company’s readiness to consistently implement Good Corporate Governance. To assist in the smooth preparation of various documents required, the company also needs to establish an underwriter, corporate secretary, internal audit and an audit committee, appraisal, legal consultant, notary if none existed before. After the appointment, based on discussions with the implementing underwriters and/or IPO advisors (if any), the company can start designing the IPO structure.

2. Obtaining a registration permit from BAPEPAM-LK

Next, the company needs to obtain approval from the exchange by submitting a listing application to the exchange by attaching the necessary documents such as company profile, legal audit report from a legal consultant, financial statements audited by public accountants, financial projections and others. The company also needs to submit an application for registration of shares to be deposited collectively (scripless) at the Indonesian Central Securities Depository (KSEI). If the IDX declares that the company has complied with the specified requirements, the IDX will give the company approval in principle in the form of a Preliminary Share Listing Agreement within a maximum of 10 Exchange Days after the documents are complete.

3. Submitting Registration Statement to OJK to Conduct a Public Offering

After obtaining the Preliminary Share Listing Agreement from the Indonesia Stock Exchange, the company must submit a Registration Statement to the OJK to conduct a public offering of shares. Supporting documents required include:

  • Cover letter for registration statement using the format listed in the Appendix to the OJK Regulation No. 76/POJK.04/2017 concerning Public Offering by Shareholders
  • Prospectus containing various information contained in Article 2 (b) OJK Regulation No. 76/2017; and
  • A statement made by the shareholders of the issuer or public company stating that the shareholders are responsible for bearing all costs related to the public offering process.

Before publishing a summary prospectus in a newspaper or making an initial offer (bookbuilding), companies must wait for permission from the OJK. Companies can also conduct public exposes if the publication permit has been issued by the OJK. The company must submit information regarding the price of the public offering of shares and other information disclosures. After that OJK will provide an effective statement. If the company’s Registration Statement has been declared effective by the OJK, the prospective Issuer can carry out the Public Offering process.

The public offering period begins two working days after the effective statement is obtained and is carried out for a minimum of one working day and a maximum of five working days. The next step is the distribution of the IPO shares to the subscribers and the refund of the subscription money to investors who do not receive the IPO shares, which is carried out no later than two working days after the allotment date. The final step is the stage of the issuer’s shares being listed on the IDX. At this stage, the issuer’s stock trading on the IDX will also begin.

After the IPO process has been finished, the shares will be registered at IDX. The share registration will be divided into two registration board, namely the Main Board, for those who has Net Tangible Assets minimum value IDR 100,000,000,000 (one hundred billion Rupiah) and the Development Board for those who has Net Tangible Asset minimum value IDR 5,000,000,000 (five billion Rupiah).

  1. After emission process

After the Public Offering period ends, the company officially becomes a public company whose shares are listed and traded on the Exchange. After the emission process, the issuer is obliged to submit information, namely:

  • Periodic reports, such as annual reports and semi-annual reports (continuous disclosure).
  • Reports of important and relevant events, such as acquisitions, changes of directors (timely disclosure).
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