The Financial Services Authority has issued new regulations (the New Regulations) regarding share buybacks.* The New Regulations address the mechanism for share buybacks by public companies and the transfer of shares resulting from buybacks introducing significant new changes to the current regime.

The New Regulations require public companies to disclose the source of funds used for share buybacks, setting out stringent requirements, including that:

• the use of the funds will not significantly affect the capacity of the company to fulfil its impending obligations;
• the funds are the internal funds of the company;
• the funds are not derived from public offerings; and
• the funds do not originate from loans and/or debts.

The New Regulations provide that a share buyback must be completed within twelve (12) months of its approval by a general shareholders meeting. In addition, the New Regulations allow companies to terminate a buyback before completion, if, within 2 days of the decision to terminate, the company:

1. provides information, including reasons, regarding the termination to the OJK; and
2. announces the termination to the public.

The New Regulations introduce rigorous reporting obligations, as well as a new timeframe for the transfer of bought back shares. In addition, the New Regulations allow for a wider range of methods for transferring shares resulting from buybacks. The New Regulations are a significant change to the current regime and each institution will need to carry out thorough internal analysis to ensure compliance.

*Financial Services Authority Regulation No. 29 of 2023 on Buybacks of Shares Issued by Public Companies