When discussing the capital markets, the topic of IPO is certainly one that cannot be overlooked. Initial Public Offering (IPO), which refers to the process of transforming a company’s funding structure from privately held to publicly owned. An IPO is one of the key methods for a company to raise capital from the public by selling a portion of its shares in the stock market.
When a company initiates an IPO, it means that the shareholders are willing to offer their shares to the public at a predetermined price. A company that offers its shares to the public through an IPO is referred to as a public company or one that has “gone public”. This means the shares are no longer privately held but are available to the public. The reasons companies undertake an IPO vary, including raising capital, enabling early investors to divest, increasing company valuation, or expanding into new markets.
An IPO is not merely an economic activity—it is also a legal event involving various regulatory aspects, obligations, and oversight by capital market authorities. In Indonesia, IPO activities are tightly regulated under several laws and regulations, primarily supervised by the Financial Services Authority (OJK) and must comply with the rules set forth by the Indonesia Stock Exchange (IDX).
According to the IPO (Go Public) Guidebook published by the Indonesia Stock Exchange, there are numerous benefits for companies undertaking an IPO. These include access to funding through the capital markets, increased credibility for securing loans, enhanced professionalism, improved corporate image, share liquidity and profitable exit opportunities for founding shareholders, increased employee loyalty, enhanced company value, greater potential for business sustainability, and tax incentives.
On the other hand, going public also comes with consequences. One such consequence is shared ownership with the entry of public investors, the founding shareholders no longer own 100% of the company and must share voting rights at general meetings of shareholders. There is also the obligation to comply with prevailing capital market regulations.
The Indonesia Stock Exchange outlines several steps in the initial preparation for going public, including establishing an internal IPO team, conducting preliminary assessments, appointing external professionals (legal advisors, underwriters, etc), holding a general meeting of shareholders and amending the articles of association, preparing the necessary documents. The go public process includes initial preparation and document compilation, submission of a preliminary listing agreement application to the IDX, submission of a registration statement to the OJK, and public offering, listing, and commencement of stock trading on the IDX.
Furthermore, the IDX explains that the keys to a successful IPO include attractive and transparent company information, an effective marketing strategy, proper structuring of the public offering, and choosing the right timing for going public. An IPO is not only a strategic move in a company’s growth journey but also carries significant legal consequences. Therefore, any company planning to go public must thoroughly understand and comply with all applicable legal provisions and engage qualified legal counsel at every stage of the process. Legal compliance not only protects the company from regulatory sanctions but also builds public and investor trust in the company.
If you, a prospective client, have further inquiries about the topic discussed above, Schinder Law Firm is one of the leading corporate law firms in Indonesia, with extensive experience handling similar matters. Our team of professional corporate and civil lawyers makes us one of the top consulting firms in Indonesia. Feel free to contact us at info@schinderlawfirm.com for further consultation.
Author:
Dewi Susanti