When learning about finance, capital markets, and everything related to both, the “issuer” term will often appear. However, many still do not understand what the definition of an issuer is.
According to the Financial Services Authority (OJK), an issuer is a party that conducts a public offering, that is, an offer of securities carried out by an issuer to sell securities to the public based on the procedures stipulated in the applicable laws. Issuers can take the form of individuals, companies, joint ventures, associations or organized groups.
Meanwhile in the Big Indonesian Dictionary (KBBI), issuers are defined as business entities that issue valuable paper for trading. Thus, not all companies can be referred to as issuers. Issuers are companies whose shares are traded on the capital market.
Another definition of an issuer is a private or state-owned company that seeks capital from the stock exchange by issuing securities. Securities offered can be in the form of debt instruments, commercial papers, bonds, shares, debt proofs, and many more.
The issuance of securities by issuers is the forerunner to the emergence of securities that are traded on the capital market.
The Indonesia Stock Exchange (IDX) currently has 547 share issuers and 82 listed bond issuers. Securities that are sold can be bought by anyone, including the general public.
Why Do Companies Become Issuers?
Every company or individual can become an issuer, but not all companies are issuers. This means that every company or individual has a choice whether they want to be an issuer or not. Here are some common reasons that cause a company or issuer to become an issuer.
- Debt Financing
Debt financing is funding a company with debt. Strengthening capital through debt is one of the reasons a company issues securities. Debt or debt is a foreign capital company will obtain by selling bonds. In layman’s language, the company borrows capital from the community for operational activities with securities as collateral.
- Equity Financing
Equity financing can be interpreted as offering a portion of the company’s ownership rights to the investor. In this transaction the issuer is the beneficiary because they receive fresh funds without the need to return the borrowed money or pay the interest.
The Purpose of Selling Securities
The decision of a company to sell securities has a specific purpose, in general is as follows.
- Business Expansion. Capital obtained from selling bonds or securities is used to expand the business sector, develop markets, production capacity, to pay other debts that are due.
- Improvement of Capital Structure. With funds obtained from the sale of securities, companies can stabilize their capital, which is to balance the amount of foreign capital (debt) with their own capital.
- Transfer of Shareholders. In addition to improving capital structure, the sale of securities by a company can also aim to improve the structure of shareholders. Yaiyu by transferring shares from old shareholders to new shareholders.
Difference between Issuers and Public Companies
Issuers and public companies are often considered the same, but both have different definitions and roles. According to Law No. 8 of 1995 concerning the Capital Market, Issuers are parties who conduct a Public Offering. Meanwhile according to Law No. 40 of 2007 concerning Limited Liability Companies, Public Companies are companies whose shares have been owned by at least 300 shareholders and have a paid up capital of at least Rp 3 billion or a number of shareholders and paid up capital determined by Government Regulation.
As such, companies are structured organizations that list their shares on a stock exchange. Companies cannot take the form of individuals, groups, or associations such as issuers. A company that sells shares to the public may not necessarily sell bonds, and also companies that act as issuers may not necessarily sell their shares to the public.
Many private or private or privately owned companies sell their bonds, but do not sell their shares to the public. Private companies can only be called public companies if they decide to sell to the general public.
Requirements to be an Issuer
When a company or individual decides to become an issuer, they cannot simply sell securities on the capital market. There are several conditions that must be met, including:
- Issuance of securities to sell to investors in the capital market and then get an injection of funds.
- Companies that issue securities must not be legally flawed and have good achievements.
- Issuer is obliged to guarantee securities that are issued according to law.
- Issuers as the main source of information on traded securities, thus any information issued is the responsibility of the issuer.
Issuer’s Public Openness
According to the Law, an issuer is a party that makes a Public Offering, thus it is obliged to make a Registration Statement for a Public Offering. The same thing must be done by a Public Company, but with a Registration Statement as a Public Company.
After all the documents and procedures have been approved by the OJK, then the issuer is declared effective. Issuers whose Registration Statement has been approved by the OJK are required to conduct disclosure to the public through the following matters.
- Submit reports regularly and open the report to the public.
- Information conveyed to the public can be in the form of material events that can affect the price of Securities, at the latest at the end of the second working day after the event occurs.
Things to Look For Before Buying Issuer Securities
Buying an issuer’s securities is the same as investing or investing. Here are some things to consider before buying securities.
- Examine the financial statements and reputation of the issuer.
- Examine companies and sectors related to the issuer.
- View and check the securities of the issuer’s underwriters.
Issuer Registration and Information Disclosure
Issuers are required to submit Registration Statements to make a Public Offering while Public Companies are also required to submit Registration Statements as Public Companies.
With regard to the Registration Statement, OJK has provided an effective statement indicating the completeness or fulfillment of all procedures and requirements for the Registration Statement required by the applicable laws and regulations.
Issuers whose Registration Statements have become effective or Public Companies must:
- Submitting reports periodically and announcing these reports to the public.
- Submit reports and announce to the public about material events that can affect the price of Securities no later than the end of the second working day after the event occurs.
In addition, the provisions of Law of the Republic of Indonesia No. 8 of 1995 concerning capital markets, directors or commissioners of publicly listed companies, as well as any party who owns at least 5% (five percent) of shares of a publicly listed company, is also required to report ownership and any change in ownership of the company shares no later than 10 days since the ownership change occurred.