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Deputy Commissioner 1 of Capital Market Supervisory of the Financial Services Authority (OJK) Sardjito as Government’s Expert after sworn at judicial review session on Act of the Deposit Insurance Corporation (Undang-Undang Lembaga Penjamin Simpanan –UU LPS), on Wednesday (8/7) at Plenary Room, the Constitutional Court Building. Photo PR/Ganie

 

 

Deputy Commissioner 1 of Capital Market Supervisory of the Financial Services Authority (Deputi Komisioner Pengawasan Pasar Modal 1 Otoritas Jasa Keuangan) Sardjito was presented by the Government as expert at judicial review session on Act Number 7 Year 2009 of Government Regulation in lieu of Law Stipulation Number 3 Year 2008 of Act Amendment Number 24 Year 2004 of the Deposit Insurance Corporation (Undang-Undang Lembaga Penjamin Simpanan –UU LPS) which held on Wednesday (8/7). Sardjito argued, if the Deposit Insurance Corporation (Lembaga Penjamin Simpanan –LPS) sold entire failed banks share including sold shares purchased in capital markets, it meant that the State conducted forcible takeover through the LPS without regard the principle of humanity, justice and legal certainty which mandated in Article 28H (4) the 1945 Constitution.

“If the LPS intended to sell the remaining share of 0.0035 percent basically owned by public due to the interpretation of Article 30 (1), Article 38 (1), and Article 42 (1) Act of the LPS which stated the LPS obliged to sell entire rescued banks share, thus in our opinion, it means forcible takeover committed by the State through the LPS without regard the principle of humanity, justice, beneficial, certainty, transparency, agreement, participation, prosperity, sustainability, and harmony, and it is contrary to Article 28H (4) the 1945 Constitution,” said Sardjito by exemplified the remaining share owned by Mutiara Bank which purchased in capital market. As known, Mutiara Bank is one of the failed bank which rescued by the LPS. 

In front of Justice Panel led by Deputy Chief Anwar Usman, Sardjito delivered the unconstitutionality reason of LPS argument. As known, the LPS was the Applicant of this case who willing to be authorized to sell entire rescued banks share. According to, Applicant intention was contrary to the Constitution because share ownership by company shareholders was actually a part of the equity participation of investors on companies. The equity participation was made during the establishment, during purchasing company shares or through capital market. The purchase conducted by public offering or by secondary market on capital markets or outside capital markets.

Company founders and both shareholders who purchase shares directly and purchase through capital market have equal rights. The equality regulates in Article 53 Act Number 40 Year 2007 of Limited Liability Companies (Undang-Undang Perseroan Terbatas –UU PT). The rights referred are right to attend and speech at shareholders general meeting (Rapat Umum Pemegang Saham –RUPS) as well as right to receive dividend payment and receive remaining liquidation result.   

Moreover, Article 60 (1) and (2) Act of Limited Liability Companies also explained that shares entitled its ownership to its owners to be used as collateral. The ownership could be defended against any person and could be protected. The protection was a real implementation of property protection as guaranteed by Article 28G (1) the 1945 Constitution.

“The protection (as mandated by, ed) Article 28G (1) the 1945 Constitution for shareholders doesn’t distinguish between founder and non-founder. Moreover, Article 28H (4) the 1945 Constitution is explicitly mandated that every person entitled to property right which cannot arbitrarily revoked by anyone. It means that the removal or the transfer of shareholders’ rights regarding their owned shares shall meet the aspect of protection to its owners and cannot be done arbitrarily,” Sardjito asserted.  

Regarding on Applicant arguments, Sardjito argued the transfer of failed banks share should be returned in its entirely, thus justifying the Applicant to sell entire failed banks share, including the share purchased in capital market.

Sardjito explained the transfer of property for public interest purpose was indeed could be done. However, the transfer should guarantee the principle of justice, usefulness, certainty, transparency, agreement, participation, prosperity, sustainability, and harmony for the owners whose property taken for public interest.

 

Transfer of Right

In the context of bank handling in the Act of the Deposit Insurance Corporation, Sardjito believed the provision of bank handling was based on legal principle which regulated the transfer of entire rights entitled to the shareholders. Therefore, the provision cannot be done without the transfer of shareholder rights as the owner of rights in civil matter.

“The provision explicitly shows the State doesn’t arbitrarily transfer the property right of a person without voluntary submission from its owners. Waiver of Controlling Shareholders (Pemegang Saham Pengendali –PSP) which release ownership if the bank failed and then decided to be rescued, means the ownership right of Controlling Shareholders is authorized to the LPS immediately after the LPS handles failed banks. Therefore, after the LPS conducts Temporary Equity Participation (Penyertaan Modal Sementara –PMS), the shareholder of failed banks is the LPS and public shareholders. However, the percentage of public shareholders suffers reduction in ownership percentage, known as dilution,” explained Sardjito.

Therefore, Sardjito concluded the ownership of public shareholders in Article 30 (1), Article 38 (1), Article 42 (1) Act a quo were not included on the meaning of phrase ‘entire bank share’. Public shareholders didn’t include on the party which should expressed willingness to release or submit their shareholder ownership to the LPS if the banks declared failed and decided to be rescued or liquidated. (Yusti Nurul Agustin/Prasetyo Adi N) 

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