The Practice of Spin-Off of Sharia Business Units from Guarantee Companies Reviewed from Corporate Regulations in Indonesia
From: A.M Oktarina Counsellors at Law
Contributors: Pramudya Yudhatama, S.H., Raysha Alfira, S.H.,
Khaifa Muna Noer Uh’Dina, S.H., Putri Shaquila, S.H.
Reviewer: Noverizky Tri Putra Pasaribu, S.H., L.L.M (Adv), Aflah Abdurrahim, S.H.,
⦁ Background
The Financial Services Authority (“OJK”) has issued a policy to the Sharia Business Unit (“UUS”) to separate from the Guarantee Company. This is intended so that UUS can be carried out properly so that it can realize the creation of a sharia guarantee industry that grows sustainably and does not harm the interests of the Guaranteed and Guarantee Recipients. So, how is the practice of spin-off UUS from the Guarantor Company viewed from corporate regulations in Indonesia?
⦁ Legal Basis
⦁ Law Number 40 of 2007 concerning Limited Liability Companies. (“Law 40/2007”)
⦁ Law Number 1 of 2016 concerning Guarantees. (“Law 1/2016”)
⦁ Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector. (“Law 4/2023”)
⦁ Law Number 6 of 2023 concerning the Stipulation of Government Regulations in Lieu of Law Number 2 of 2022 concerning Job Creation into Law. (“Law 6/2023”)
⦁ Financial Services Authority Regulation Number 10 of 2023 concerning the Separation of Sharia Business Units of Guarantee Companies. (“POJK 10/2023”)
Before diving further into the spin-off mechanism, by definition spin-off itself refers to Article 1 number 12 of Law 6/2023 jo. Law 40/2007 which reads:
“Separation is a legal act carried out by the Company to separate a business that results in all assets and liabilities of the Company switching due to law to 2 (two) or more Companies or part of the Company’s assets and liabilities transferring due to law to 1 (one) or more Companies.”
The spin-off provisions are also regulated in Article 135 of Law 40/2007 which reads:
“(1) Separation may be made by:
a. Pure separation; or
b. Impure separation.
(2) The pure separation as referred to in paragraph (1) point a results in all assets and liabilities of the Company being transferred by law to 2 (two) other or more companies that receive the transfer and the Company that carries out the separation ends because of the law.
(3) The impure separation as referred to in paragraph (1) point b results in part of the Company’s assets and liabilities being transferred by law to 1 (one) other or more companies that receive the transfer, and the Company that carries out the separation still exists.”
OJK has issued POJK 10/2023 and appealed to UUS to spin-off from Guarantee Companies and to establish new Sharia Guarantee Companies in order to refine and strengthen regulations related to UUS in Guarantee Companies which were previously still regulated in Law 1/2016. POJK 10/2023 is a follow-up to the mandate in Law 4/2023 which regulates the obligation for Guarantee Companies that have UUS to spin-off UUS after meeting certain requirements set by OJK.
The UUS is regulated in Article 1 number 5 POJK 10/2023 which reads:
“Sharia Business Unit, hereinafter referred to as UUS, is a work unit of a Guarantee Company that functions as the parent office of the office or unit that carries out Guarantee business activities based on sharia principles.”
and related to the spin-off of UUS is regulated in Article 1 number 6 POJK 10/2023 which reads:
“Separation of UUS is a legal action carried out by a Guarantee Company to separate the UUS which results in the assets, liabilities, and equity of the Guarantee Company being transferred due to law to a Sharia Guarantee Company.”
The purpose of the UUS spin-off is regulated in Article 2 of POJK 10/2023, among others, to strengthen the resilience structure and competitiveness of the guarantee industry, create more effective and efficient business operations, strengthen investment in technology and human resources, and protect the interests of the Guaranteed and Guarantee Recipients.
In Article 3 paragraph (1) of POJK 10/2023, it is explained that the spin-off of UUS is carried out with several provisions, namely that UUS meets certain requirements set by OJK, which reads as follows:
“(1) The separation of the Law shall be carried out provided that:
a. UUS meets certain requirements set by the Financial Services Authority;
b. there is its own request from the Guarantee Company; or
c. implementation of the authority of the Financial Services Authority in the context of consolidation.
(2) The separation of UUS as referred to in paragraph (1) shall be carried out by:
a. establish a new Sharia Guarantee Company resulting from the UUS Separation followed by the transfer of the guarantee portfolio to a new Sharia Guarantee Company resulting from the UUS Separation; or
b. transfer the entire guarantee portfolio in UUS to a Sharia Guarantee Company that has obtained a business license.
(3) The separation of the law as referred to in paragraph (2), shall be carried out by transferring the entire guarantee portfolio, accompanied by the transfer of all rights and obligations of the law, at least:
a. for UUS of the Guarantee Company that chooses the method as referred to in paragraph (2) letter a, the transfer of the guarantee portfolio includes all assets, liabilities, and equity owned and managed by UUS;
b. for UUS of the Guarantee Company that chooses the method referred to in paragraph (2) point b, the transfer of the guarantee portfolio includes all assets of the guarantee portfolio.
(4) The transfer of the portfolio as referred to in paragraph (3) shall be carried out no later than 6 (six) months from the date of approval of the Separation of UUS from the Financial Services Authority.
(5) The separation of UUS from the Guarantee Company as referred to in paragraph (2) shall be carried out in compliance with the provisions of laws and regulations.”
The spin-off is carried out by establishing a new Sharia Guarantee Company resulting from the UUS Separation followed by transferring the guarantee portfolio to a new Sharia Guarantee Company resulting from the UUS Separation or transferring the entire guarantee portfolio at the UUS to a Sharia Guarantee Company that has obtained a business license.
The UUS that is obliged to spin-off is a UUS that has had the requirements stipulated in Article 4 paragraph (2) POJK 10/2023, including the value of UUS assets has reached at least 50% (fifty percent) of the total asset value of its parent Guarantee Company, and the minimum equity of UUS has reached at least as much as:
1. Rp25,000,000,000.00 (twenty-five billion rupiah) for the scope of districts or cities;
2. Rp50,000,000,000.00 (fifty billion rupiah) for provincial scope; and
3. Rp100,000,000,000.00 (one hundred billion rupiah) for national scope, based on the latest annual financial statements audited by public accountants.
The provisions related to minimum equity are explained in Article 7 paragraph (2) of POJK 10/2023 as follows:
“(2) A Guarantee Company that has a UUS that conducts UUS Separation by establishing a new Sharia Guarantee Company as referred to in Article 3 paragraph (2) point a and has not met the minimum equity requirements as referred to in Article 4 paragraph (2) point b must do:
a. additional UUS equity derived from shareholders of the Guarantee Company;
b. additional UUS equity from new investors; and/or
c. transfer of the entire guarantee portfolio in UUS to Sharia Guarantee Companies that have obtained business licenses as referred to in Article 3 paragraph (2) point b.”
The deadline for this UUS spin-off is no later than December 31st, 2031 and Guarantee Companies that want to spin-off the UUS must submit a work plan to OJK for approval no later than December 31st, 2028.
In conducting a spin-off of the UUS, the Guarantor Company may be given incentives for those who apply for the Separation of UUS are not required to meet the minimum paid-up capital requirements for the establishment of a Sharia Guarantee Company resulting from the Separation of UUS as stipulated in OJK Regulations regarding business licensing and institutions of guarantor institutions as stipulated in Article 14 POJK 10/2023.
⦁ Conclusion
Based on the discussion previously explained, OJK currently issues a policy to Guarantee Companies that have UUS to spin-off in order to create a new and separate Sharia Guarantee Company. The spin-off is carried out with the aim of strengthening the resilience structure and competitiveness of the guarantee industry, creating more effective and efficient business operations, strengthening technology and human resource investment, and protecting the interests of the Guaranteed and Guarantee Recipients.
References:
https://ojk.go.id/id/berita-dan-kegiatan/siaran-pers/Pages/OJK-Terbitkan-Aturan-Pemisahan-Unit-Usaha-Syariah-Perusahaan-Penjaminan.aspx#:~:text=POJK%2010%20Tahun%202023%20mengatur,aset%20Perusahaan%20Penjaminan%20induknya%3B%20dan
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