Description of Articles of Association
Our Articles of Association are registered in accordance with the Limited Liability Company Law No. 1 year 1995, and approved by Ministerial Decree No.C2-7468.HT.01.04.TH.97 year 1997. Pursuant to the issuance of the Limited Liability Companies Law (the Company Law) No. 40 year 2007 which revoked Limited Liability Companies Law No. 1 year 1995, we have amended our Articles of Association and they have been approved by the Minister of Law and Human Rights of the Republic of Indonesia pursuant to Decree of the Minister of Justice and Human Rights No. AHU.46312.AH.01.02 year 2008 dated July 31, 2008 and registered in State Gazette of the Republic of Indonesia No. 84 dated October 17, 2008, Supplement to State Gazette No. 20155.
The Articles of Association were most recently amended to align with Bapepam-LK Rule IX.J.1 regarding the Main Provision of the Articles of Association of Companies that Make an Equity Public Offering and Public Company and Bapepam-LK Rule IX.E.2 regarding Material Transactions and Changes of the Core Business Activities, and to add the Company purposes and objectives, pursuant to AGMS Resolution Deed No.37 dated June 24, 2010 drawn up by Notary Dr. A. Partomuan Pohan S.H., LLM. The amendment of the Articles was accepted by the Minister of Law and Human Rights through letter No.AHU-AH.01.10-18476 dated July 22, 2010 regarding the Receipt of Notification of Amendment of the Company’s Articles of Association and decree of the Minister of Law and Human Rights No.AHU-35876.AH.01.02.Year 2010 dated July 19, 2010 regarding the Approval Amendment of the Company’s Articles of Association and was published in the State Gazette of the Republic of Indonesia No.63 dated August 9, 2011 Supplement of the Republic of Indonesia No.23552.
Under Article 3 of the Articles of Association, our business is to provide telecommunications networks and telecommunications and information services, and to optimize the Company’s resources, with due attention to the prevailing laws and regulations. To attain the aforementioned objectives, the Company may undertake business activities that incorporate the following:
- To plan, build, deliver, develop, operate, market/sell/lease, and maintain telecommunications and information networks in the broadest sense with respect to provisions of laws and regulations;
- To plan, develop, deliver, market/sell, and improve telecommunications and information services in the broadest sense with respect to provisions of the laws and regulations.
- To provide payment transaction and remittance services via telecommunications and information networks.
- To carry out activities and other undertakings in respect of optimizing the Company’s resources, among others the utilization of the Company’s property, plant and equipment and movable assets, information system facilities, education and training facilities, and maintenance and repair facilities.
In accordance with the Company Law, we have a Board of Commissioners and a Board of Directors. The two Boards are separate and no individual may be a member of both Boards. Each Director receives a bonus if we surpass certain financial and operating targets, the amounts of which are determined by the shareholders at the AGMS. See “Item 6. Directors, Senior Management and Employees”.
The Articles state that any transaction involving a conflict of interest between the Company and its Directors, Commissioners and shareholders should be approved by a shareholders meeting, in which approval is required from more than half of the votes of the independent shareholders.
The Board of Directors is responsible for leading and managing the Company in accordance with its objectives and purposes and to control, preserve and manage the assets of the Company.
The Articles do not contain any requirement for the Directors to: (i) retire by a specified age, or (ii) to own any or a specified number of shares of the Company. The rights, preferences and restrictions attaching to each class of the shares of the Company in respect of specified matters are set forth below:
- Dividend rights. Dividends are to be paid based upon our financial condition and in accordance with the resolution of the shareholders in a general meeting, which will also determine the form of and time for payment of the dividend;
- Voting rights. The holder of each voting share is entitled to one vote at a GMS;
- Rights to share in the Company’s profits. See dividend rights;
- Rights to share in any surplus in the event of liquidation. Stockholders are entitled to surplus in the event of liquidation in accordance with their proportion of shareholding, provided the nominal value of the common stock that they hold is fully paid-up;
- Redemption provisions. There are no stock redemption provisions in the Articles. However, based on Article 37 of the Indonesian Company Law, we may buy back up to 10% of our issued and outstanding shares;
- Reserved fund provisions. Retained earnings up to a minimum of 20% of the issued capital of the Company are to be set aside to cover potential losses suffered by the Company. If the amount in the reserved fund exceeds 20% of the issued capital of the Company, a GMS may authorize the Company to utilize such excess funds for the purposes of the Company;
- Liability for further capital calls. Our shareholders may be asked to subscribe for new shares in the Company from time to time. Such rights are to be offered to shareholders prior to being offered to third parties and may be transferred at the option of the shareholder. The Board of Directors is authorized to offer the new shares to third parties in the event that an existing shareholder is unable or unwilling to subscribe for such new shares; and
- Provisions discriminating against any existing or prospective holder of such securities because of such shareholder owning a substantial number of shares. The Articles do not contain any such provision.
In order to change the rights of shareholders, an amendment to the relevant provisions of the Articles would be required. Any amendment to the Articles requires the holder of the Series A Dwiwarna Share and the other shareholders or their authorized proxies jointly representing at least two thirds (2/3) of the total number of votes cast in the meeting.
A GMS may only be convened upon the issuance of the requisite notice by the Company. The notice is to be published in at least two newspapers in Indonesian and one newspaper in English having general circulation within Indonesia. The notice period for convening an AGMS or and EGMS is 14 days (not including the date of the notice and the date of summons). The quorum for an AGMS or EGMS is shareholders representing more than half of the total shares with voting rights issued by the Company, unless otherwise provided in the Articles of Association. If a quorum is not reached, then the call for a second meeting can be made without prior notice that a call to a meeting will be made.. The second meeting is legitimate and entitled to take decisions if attended by shareholders representing at least 1/3 (one-third) of the total shares with legal voting rights. In case the quorum is not reached at the second meeting, A third meeting may be held, with the quorum of attendance to be determined by the Chairman of Bapepam-LK in accordance with the provisions of the laws.
Stockholders may vote by proxy. All resolutions are to be passed by consensus. If consensus cannot be reached, resolutions are passed by simple majority, unless a larger majority is required by the Articles. The Articles do not contain any limitations on the right of any person, to own shares of the Company. Indonesian capital market regulations do not contain any limitation on the right of any person, whether local or foreign, to own shares in a company listed on the Indonesia Stock Exchange.
Any takeover of the Company is required to be approved by the holder of the Series A Dwiwarna Share and a majority constituting at least three fourths of the total number of shares at a GMS that must be attended by the holder of the Series A Dwiwarna Share. There are no other provisions in the Articles that would have the effect of delaying, deferring or preventing a change in control of the Company.
Each Director and Commissioner has an obligation to report to Bapepam-LK with regard to their ownership and any changes in their ownership of the Company, and this obligation also applies to shareholders who have an ownership stake of 5% or more in the paid up capital of the Company. We believe that the Articles are not significantly different from those generally prevailing in Indonesia in respect of public companies listed on the Indonesian Stock Exchange. We also believe that the provisions in the Articles relating to changes in our capital are not more stringent than that required by Indonesian law.
Description of Corporate Business Prospects
Telkom is Indonesia’s leading telecommunications provider. Following the decline of our legacy fixed wireline business in previous years and the plateau in the growth of our cellular business, we have sought since 2009 to transform our Company from a traditional telecommunications provider into a TIME (telecommunications, information, media and edutainment) provider.