Share Buyback Agreement Template for Indonesia

A Share Buyback Agreement is a legally binding document that governs the process when your Indonesian company repurchases its own shares from existing shareholders. Under Indonesian corporate law, this transaction requires careful compliance with Law No. 40 of 2007 on Limited Liability Companies and additional regulations for publicly listed entities. The agreement establishes clear terms for the transaction while protecting both your company's interests and shareholder rights throughout the buyback process.

When do you need this document?

You need a Share Buyback Agreement when your company plans to reduce its outstanding share capital, whether for strategic restructuring, market stabilization, or shareholder exit arrangements. This document is essential if you're implementing an employee stock ownership program where the company repurchases shares from departing employees. Listed companies require this agreement when conducting buybacks during volatile market conditions under OJK Regulation No. 30/POJK.04/2017. You also need this agreement when major shareholders wish to exit their investment while maintaining corporate control within existing management structures.

Key legal considerations

Your Share Buyback Agreement must address several critical legal requirements to ensure validity under Indonesian law. The agreement must specify that buyback funds come exclusively from net profits, as using other sources violates company law provisions. You need to include detailed share valuation mechanisms, often requiring independent valuation reports to ensure fair pricing for all parties. The document should incorporate board resolution references and shareholder approval documentation to demonstrate proper corporate authorization. For listed companies, you must include provisions addressing market disclosure requirements, insider trading restrictions, and compliance with capital market regulations. The agreement should also specify the treatment of treasury shares post-buyback, including whether they will be cancelled or held for future reissuance.

Legal requirements in Indonesia

Indonesian law imposes strict requirements on share buyback transactions that your agreement must address. Law No. 40 of 2007 mandates that buybacks cannot cause your company's net assets to fall below the sum of issued and paid-up capital plus mandatory reserves. You must obtain proper board of directors' resolution and, depending on the buyback size, shareholders' meeting approval as required by your company's articles of association. Listed companies face additional obligations under Law No. 8 of 1995 on Capital Markets, including mandatory disclosure to the Indonesia Stock Exchange and compliance with trading halt provisions during buyback periods. Your agreement must incorporate notarial requirements for certain corporate actions and ensure compliance with foreign investment regulations if foreign shareholders are involved. The document should also address tax implications under Indonesian tax law, including potential withholding tax obligations on the transaction proceeds.