1. Startups

OJK Issues Multiple Voting Shares Rules, More Friendly for Technology Companies

The regulation regulates the conditions for issuers who can perform MVS, the ratio of voting rights, and protection for ordinary voting rights

OJK finally issued a regulation regarding multiple voting shares (MVS). This is stated in POJK No. 22 of 2021 concerning the Application of Stock Classification with Multiple Voting Rights by Issuers with Innovation and High Growth Rates conducting Public Offerings of Equity Securities in the Form of Shares.

The issuance of this policy is an effort to encourage the deepening of financial markets, especially the capital market sector, by accommodating companies that create new innovations with high levels of productivity and growth.new economy) in listing on the Indonesia Stock Exchange.

This POJK regulates the application of shares with multiple voting rights, i.e. one share grants more than one voting right to shareholders who meet certain requirements. The goal is to protect the company's vision and mission in accordance with the goals of the founders in developing business activities run by the company.

OJK stipulates that issuers who can apply shares with MVS are:

  1. Using technology to create product innovations and there are shareholders who contribute significantly to its use;
  2. The company's assets are at least Rp2 trillion and have been operating for at least three years;
  3. Annual growth (compounded) for the last three years at least 20% for assets and 30% for income;
  4. Never made a public offering of equity securities.

Furthermore, OJK is still trying to protect voting rights for public shareholders. There are four points set:

  1. The application period for MVS shares is a maximum of 10 years and can be extended once for a maximum period of 10 years with the approval of the Independent Shareholders at the GMS;
  2. Each MVS shareholder is prohibited from transferring part or all of the MVS shares he/she owns for two years after the Registration Statement becomes effective;
  3. MVS shares have voting rights equivalent to ordinary shares in certain agendas at the GMS; and
  4. In each GMS, the number of ordinary shares present at the GMS is at least 1/20 of the total voting rights of the common shares owned by shareholders, other than MVS shareholders.

In addition, OJK also regulates the ratio of MVS voting rights to ordinary voting rights:

  1. In the event that MVS shareholders either individually or jointly own MVS shares of at least 10% to 47,36% of the issued and fully paid capital, the ratio of MVS voting rights to ordinary shares voting rights is 10:1
  2. For the lowest MVS between 5%-10% of the total capital, the ratio is 20:1
  3. For the lowest MVS between 3,5%-5% of the total capital, the ratio is 30:1
  4. For the lowest MVS between 2,44%-3,5% of the total capital, the ratio is 40:1
  5. If the voting rights of MVS shares are not more than 50% of the total voting rights, the issuer can increase the ratio, so that the ratio of the voting rights of MVS to ordinary shares becomes a maximum of 60:1

MVS Fenomena phenomenon

Application dual class shares (DCS) with structure multiple voting shares (MVS) is commonplace for implementation of IPO on the United States stock exchange. Many countries regulate the average ratio between the voting rights of MVS shares and ordinary shares of 10:1. This practice is different from common stock which has only one voting right, often called ordinary shares.

In the United States, there are 26 of the 134 companies go public in 2018, 25 of the 112 newly listed companies in 2019, and 32 of the 165 newly listed companies in 2020 adopted DCS.

This fact has motivated exchanges in other countries such as Hong Kong, Singapore, and Shanghai to be motivated to relax regulations to make their exchanges more attractive, especially technology companies. Moreover, Hong Kong had previously lost when Alibaba and other large companies turned and chose to go public in New York.

When becoming a public company, DSC serves to convince investors that under its control the company can achieve certain visions and missions in the long term. Although the founder technically has fewer shares, the voting rights are larger than ordinary shares.

"If the stock exchange can implement this, it will be a positive thing because on average the technology companies aredrive by the founder," said Ideosource Managing Partner Edward Chamdani in joint interview DailySocial.

In general, when go publicThe company's benchmarks are usually seen from the financial statements and good corporate governance (GCG). Technology companies that are disruptive and innovative are strongly influenced by the founder figure to strengthen the company's vision and mission which is still abstract.

Even so, the implementation of MVS always has a negative side to worry about because this capitalist system eliminates democratic elements. One share is no longer valued as one voting right. Google even owns three types of shares, Class A, B, and C. Each Class B share holds 10 voting rights filled by people within Google. While Class A common stock sold to the public only has one voting right and Class C has no voting rights.

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