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Issuers: Definition, Functions, Purpose, Products, and Terms

If there is no issuer, then investment activities will not run. What is issuer?

The term issuer may have been very often encountered by investors, be it investors saham, bonds, mutual funds, and so forth. Even so, said this issuer may not be well known to someone who is less familiar with investment activities. Issuer is one of the most important terms in the investment world.

This happens because if there is no issuer, then investment activities will not run. For that, for those of you who want to learn more about the investment world, it's a must nih to know what an issuer is! The following is a discussion of what an issuer is, the role or function of an issuer, the company's goals to become an issuer, products, and the requirements to become an issuer.

What is an Issuer?

Building illustration from issuer | Pexels

Menurut Big Indonesian Dictionary (KBBI), issuer is a business entity that issues valuable paper to be later traded. If you look at the official website of the Financial Services Authority (OJK), issuers are parties who offer securities which will then be sold to the public based on the applicable laws and regulations. From these two definitions, issuers can be defined as parties (whether individuals, companies, joint ventures, associations or groups) that offer securities (securities) to be traded to the public.

Issuers can offer securities in the form of stocks, bonds, sukuk, derivative assets, and so on. An issuer can also issue Islamic assets such as Islamic bonds or sukuk. In general, issuers will offer securities through the capital market. Issuers are often confused with public companies. In fact, both issuers and public companies have quite basic differences. According to Law Number 40 of 2007 concerning Limited Liability Companies, a public company is defined as a company with shares owned by at least 300 shareholders and a paid-up capital of at least Rp3.000.000.000 (three billion rupiah).

The main difference between issuers and public companies is that issuers are parties that make public offerings (issuance of securities) in the form of stocks, bonds, mutual funds, and other assets. An issuer can only sell shares, there are also those who only sell bonds, all parties who make public offerings of securities are included as issuers. Meanwhile, a public company must be a public company whose shares are traded to the general public. Issuers also have an obligation to submit registration to make a public offering. Meanwhile, public companies are required to submit a registration statement as a public company.

Issuer Roles and Functions 

Illustration of the meaning, function, purpose, and requirements of issuers | Unsplash

Issuers as issuers of securities have an important role in the capital market as well as in people's lives. The following is the role of issuers in the capital market and for people's lives.

For Issuers or Own Companies

The function of emission activities or the process of issuing securities for issuers is that companies can have the opportunity to increase capital, especially in terms of external funding. External funds that companies get can come from offering shares, bonds, and other securities instruments to the public.

For Society

The role of issuers that is most visible to the public is that issuers can organize and provide opportunities for the community to develop their financial aspects through investment. 

For Capital Market

In the capital market, issuers have an important role as the party that issues securities. Although usually securities buying and selling transactions are facilitated by the Indonesia Stock Exchange (IDX), it does not mean that issuers will only sit idly by watching the road. trading. Issuers need to manage funds from the public as well as possible. In addition, issuers have a responsibility to provide information to investors and the public through financial reports that are released quarterly.

The Company's Goal to become an Issuer

Illustration of the meaning, function, purpose, and requirements of issuers | Pexels

Issuers – securities issuing companies – must have certain goals why they decide to carry out emission activities (offering securities), usually the company will state its purpose to conduct external funding at the General Meeting of Shareholders (GMS). The following are some of the company's goals to become an issuer.

Enhancing Company Value and Image

Companies that are issuers and offer securities to the public usually have a good image. This happens because the requirements to become an issuer are not easy. Companies must report their activities and financial condition in full with an audit by a public accountant which cannot be taken lightly. 

Expanding Business

The capital obtained by the issuer through the offering of shares, bonds, and other securities can be used by the company to carry out a greater expansion of its business. The public funds can be used to expand business fields, expand target markets, increase production capacity, and so on.

Improve Capital Structure

To expand the business, internal funding alone will not be enough to finance all the company's needs. For this reason, the company decides to conduct external funding, one of which is by issuing securities or by becoming an issuer. The company can also make improvements to the capital structure so that the company obtains a minimal average cost of capital and optimal profitability.

More Ensuring the Continuity of the Company's Business

The company's goal to become the next issuer is to better ensure the sustainability of the company's business. The capital and funds obtained by the company can be used to finance all the needs needed by the company, so that later the company will be able to earn income and be able to provide returns to investors.

Get Tax Incentives

One of the advantages of the company by becoming an issuer is that the company can get a tax discount or what can be called a tax incentive. The tax incentives are regulated in Government Regulation Number 30 of 2020 concerning Reduction of Income Tax Rates for Domestic Entity Taxpayers in the Form of Public Companies.

Perform shareholder transfer

The purpose of the company being another issuer is that the company can transfer shareholders from the old to the new shareholders.

Products Published by Issuers

Illustration of the meaning, role, purpose, and requirements of issuers | Unsplash

Issuers can issue or issue securities with various types of products. The types of products that issuers offer to the public can be in the form of stocks, bonds, mutual funds, and other investment instruments. The following are the types of investment products that can be traded by issuers.

Stock

One of the stock products is an investment product which is proof of investor ownership of a company. The income obtained by investors through this investment is in the form of dividends and dividends capital gain. Dividends are a portion of the company's profits that are distributed to shareholders. Meanwhile, capital gain is income that can be obtained by stock investors through the difference between the selling and buying prices of the shares purchased by investors.

Bond

Bond is a form of investment instrument in the form of debt securities. People who invest in this asset will earn income, namely interest that is distributed regularly. The principal amount owed on the bonds will be paid when the bonds mature. Bonds have many types, one of which is Islamic bonds or often referred to as sukuk.

Mutual Fund

Mutual Funds is an investment forum organized by investment managers where investments are made by depositing funds into various kinds of securities, such as stocks, bonds, and other securities instruments. This securities instrument is often an investment choice for investors, especially for investors who have small funds and do not have much time and expertise to calculate investment risk. 

Derivative Assets

In addition to the investment products mentioned earlier. Issuers can also offer a wide variety of derivative assets such as options, futures contracts, and other assets. Derivative instrument is defined as a securities asset which contains a sale/purchase agreement of a commodity or asset with a predetermined price, amount and date depending on the type of derivative asset.

Exchange Traded Funds (ETFs)

ETFs are mutual funds in the form of Collective Investment Contracts (KIK) which are traded on the stock exchange. This ETF has a product form that is similar to a mutual fund, but the management and mechanism of buying and selling this product is similar to that of a mutual fund trading share. 

Terms of the Company to Become an Issuer

Issuer building illustration | Pexels

To be able to issue securities assets, it turns out that the company needs to meet certain conditions. The following are the requirements that must be met by the company so that the company can become an issuer.

  • Have calculated and prepared what securities you want to offer to investors
  • Have ensured that the securities to be issued are in accordance and legally valid
  • The company is willing to provide complete and accountable information

In addition to the requirements of the company's readiness to issue securities, the company also needs to prepare important documents to become an issuer. The following are the required documents that must be prepared by the issuer.

  • Records of the company's financial statements that have been audited by a public accountant
  • Records related to curriculum vitae of the board of commissioners, directors, and other equivalent management positions
  • Agreement with the Underwriter
  • Statement letter containing commitment from issuer
  • Statement from the capital market supporting profession
  • Opinion from the point of view of the current law
  • Documents with other information requested by the Financial Services Authority (OJK)

Issuers are companies that carry out emission activities where the company issues securities or securities to the public in accordance with the provisions of the applicable laws and regulations. This issuer company is very important in its presence in the community, especially to stimulate the spirit of public investment. That was a discussion about issuers. Hopefully this article can help you in learning the topic about issuers!

Image source header:Pexels

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