Written by Valdo Auzan Putra M. on 25/10/2022
The author’s views are entirely their own and may not always reflect the views of Putranto Alliance.
Capital market provides various alternatives for investors in addition to other investment alternatives, such as: saving in a bank, buying gold, insurance, land, buildings, etc. It acts as a connector or liaison between investors and companies or government institutions through long-term trading of instruments such as bonds, stocks, and others. The function of the capital market is to efficiently increase and link long-term fund flows with its “market criteria” that support the real growth of the whole economy.
Legal service on capital market is extremely essential. With this service, we will assist you in every step of the capital market actions to achieve a successful public offering. As capital market legal consultants, we perform legal due diligence, review or draft prospectus for a public offering, render legal opinions, and advise you with the required legal procedure.
For publishers, the capital market has some benefits, such as:
For investors, the capital market has some benefits, such as:
Below are some advantages of the capital market:
Below are some disadvantages of the capital market:
Capital market law is a law that regulates the legal relationship between the investor (who own funds) and issuers or public companies (which require funds) through the stock exchange as a medium where they meet. The capital market in Indonesia is regulated by capital market law No.8 the year 1995, which consist of 18 chapter and 116 articles.
Capital market law defines public offering as an activity carried out by the issuer to sell securities to the public which follows existing regulations. With the above provisions, the main focus in the capital market is to sell and buy securities in the form of debt recognition letters, commercial securities, stocks, bonds, proof of debt, units of participation in collective investment contracts, securities futures contracts, and any derivatives of securities.
In addition to the capital market having its laws, it also has a supervisory body that aims to supervise, organize and protect investors, the Otoritas Jasa Keuangan/Financial Services Authority (OJK). OJK is led by a chairman appointed by the president and has the task and function to carry out integrity regulation and supervision of all financial services activities in the banking sector, capital market, and non-bank financial industry sector.
Aside from OJK, there are self-regulatory organizations (SRO) that exercise the authority to apply rules in the Capital Market industry. In Indonesia’s capital market, there are four SRO institutions, namely:
Initial Public Offering or IPO is the process by which a company can go public by selling its shares to the general public. IPO is usually done by companies that have been established for quite a time and decides to be listed on the stock exchange so that they can go public. The company can increase its capital by issuing new shares to the public or existing shareholders by holding an IPO. In addition, the company can sell its shares to the public without spending capital.
By issuing securities, the company offers and sells them to the public in the form of shares. After IPO, the company’s shares are traded on the open market. Stakeholders can further sell the shares through secondary market trading. IPOs are generally carried out for the first time by a company so it can go public. In other words, a previously privately owned company will become a public company through an IPO.
The purpose of the company holding an IPO:
With its apparent benefits, it is not surprising that many companies want to apply for an IPO to issue their shares to the public. However, companies must fulfill the following conditions before they can apply for an IPO:
As a consultant on the IPO transaction, the consultant must know the basic information of the transaction. The information includes the purpose of raising funds, the range of funds needed, the percentage of public share ownership they want to release, the agreement that needs to be amended before the IPO, and the legal issues of prospective issuers.
In addition, legal consultants must also ensure the availability of documents that must be completed in the IPO application, such as a cover letter for registration statements, prospectuses, shareholder statements, and company financial statements.
As part of the IPO process, private companies must perform due diligence to ensure they meet all the requirements for going public. When conducting due diligence, legal consultants must ensure at least five important aspects: corporations, material and liabilities permits, assets, agreements with third parties, and legal cases. Legal consultants also sign legal opinions regarding securities issuance that must meet the provisions of the code of ethics, professional standards, and OJK regulations. Legal Consultants also coordinate with other professions and supporting institutions following OJK provisions.
For companies that want to go public, legal consultants are responsible for issuing two documents, a legal audit and a legal opinion. Capital market legal consultants must prepare material facts, the structure of companies that will go public, examinations in terms of legal or legal audits, making prospectuses for public offerings, registration statements, and providing opinions from a legal point of view.
Based on Law Number 8 the year 1995 regarding the capital market (capital market law), KHPM (Konsultan Hukum Pasar Modal) is obliged to apply the principle of disclosure, which is a general guideline to inform the public on time. The general guideline includes information about the business and other information that can affect the decision of financiers as well as the price of the securities.
The process of an IPO takes time. The average time a company needs to prepare to conduct an IPO is 3-6 months. Below are the steps to go public:
Nowadays, many investors are emerging to find the right and strategic company for them to be able to invest their money, creating an opportunity for companies to find financiers for their business. One option is for companies to conduct an IPO. However, companies need to know a few things before conducting an IPO. The company must be able to choose the right and trustworthy legal consultant.
Putranto Alliance is here to help you as your company’s capital market consultant. By relying on our consultants, who have been experienced and trusted by many companies, we can help you to determine the steps that the company wants to take, and we can maintain your trust.
Indonesian Clearing and Guarantee Corporation (KPEI) is an institution that provides clearing services and guarantees for the settlement of stock exchange transactions. Clearing stock exchange transactions is a process of determining the rights and obligations that arise from securities trading activities on the Indonesia Stock exchange.
Based on Law No. 21 the year 2011, OJK was established to ensure that all activities in financial services can be carried out regularly, fairly, transparently, and accountably.
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