Capital markets serve a dual purpose: they channel funding to companies and provide investment opportunities to the public. In recent years, a distinct corporate model has gained significant traction globally, the Special Purpose Acquisition Company (SPAC), offering an alternative route for companies to go public without undergoing the conventional Initial Public Offering (IPO) process.
SPACs have grown rapidly across multiple jurisdictions, most notably in the United States, where they are valued for providing a faster pathway to public listing. In this article, SIP Law Firm examines the key characteristics of SPACs, how they operate, and the legal protections available to investors who oppose an acquisition.
Characteristics of a Special Purpose Acquisition Company (SPAC)
A SPAC holds no products, services, or business operations of its own. Its only asset is the cash raised through its IPO. In the business world, SPACs are commonly referred to as blank check companies or shell companies, entities formed for the sole purpose of conducting an IPO in order to acquire an existing private operating company.
In Indonesia, the SPAC concept has not yet been explicitly regulated under positive law. However, a SPAC structure may become unlawful where it is used as a vehicle for legal violations. Any SPAC operating in Indonesia must therefore comply with the disclosure principle set out in Article 1(25) of Law No. 8 of 1995 on Capital Markets (“Capital Markets Law“).
The broader legal framework for the formation and management of corporate entities is established under Law No. 40 of 2007 on Limited Liability Companies (“Company Law”). Article 1(1) of the Company Law defines a limited liability company (Perseroan Terbatas/PT) as:
“A legal entity that is a capital association, established based on an agreement, conducting business activities with authorized capital entirely divided into shares, and fulfilling the requirements stipulated in this Law and its implementing regulations.”
This provision establishes that every PT incorporated in Indonesia must have a capital structure divided into shares and must be founded on the agreement of its incorporators. Given that a SPAC is itself a legal entity that raises capital from shareholders through the public issuance of shares, it remains subject to all requirements applicable to a valid PT under Indonesian law.
Within the context of Indonesian capital market practice, a company that has not yet commenced operations but proceeds to offer shares to the public can be linked to regulatory frameworks governing public offerings with specific purposes. One relevant regulation is Financial Services Authority Regulation No. 22/POJK.04/2021 on the Implementation of Multiple Voting Share Classification by Issuers with High Innovation and Growth (“POJK 22/2021”). This regulation provides flexibility for companies with certain business models to conduct public offerings using a more adaptive share structure.
While POJK 22/2021 does not explicitly address SPACs, the principles it embodies reflect the regulator’s effort to align the capital market legal framework with the dynamics of modern business models. Harmonizing SPAC characteristics with Indonesian capital market regulations can therefore be pursued through consistent application of disclosure principles, good corporate governance (GCG), and rigorous oversight by the capital market authority.
How a SPAC Works
In practice, a SPAC operates through three principal stages that together form its business cycle:
Stage 1: Formation and IPO
The process begins with the establishment of the SPAC by its sponsor, typically an individual or group with substantial experience in investment, finance, or corporate management. Once formed, the SPAC proceeds to conduct an IPO, offering units of shares to public investors.
The IPO price per unit is generally set at USD 10, which has become standard practice in SPAC financing structures. The proceeds raised are not deployed for operational activities; instead, they are held in a dedicated trust account, a segregated fund designed to protect investor capital until it is applied toward an acquisition.
The trust account serves as a key investor protection mechanism, as the sponsor cannot freely access the funds. Until an acquisition is approved by shareholders, the funds remain in the account and are typically invested in relatively safe instruments such as short-term government bonds.
At this stage, investors are effectively committing capital to a company with no existing operations, but with a defined purpose: to acquire another company in the future.
Stage 2: Identifying the Target Company
Following a successful IPO, the SPAC enters its second stage: identifying a suitable private company to acquire. The sponsor bears primary responsibility for finding a target with strong business potential and the readiness to become a public company.
In international practice, sponsors are generally given a defined window of 18 to 24 months from the IPO date to identify and secure a target. During this period, the sponsor conducts market analysis, explores strategic opportunities, and performs due diligence on prospective targets.
Throughout this search phase, investor funds remain held in the trust account and may not be deployed for any purpose other than the intended acquisition, though the account may generate interest income in the interim.
If the sponsor fails to identify a suitable target within the prescribed timeframe, the SPAC is dissolved and all trust account funds are returned to investors in proportion to their respective holdings. This mechanism ensures that investor capital is not exposed to undefined or speculative use in the event the sponsor cannot identify a viable acquisition target.
Stage 3: De-SPAC (Merger)
The third and final stage is the de-SPAC process, the merger between the SPAC and its identified target company. This stage is initiated once the sponsor has secured agreement from a private company to combine with the SPAC.
At this point, the SPAC publicly announces the proposed acquisition or merger, disclosing the target company’s identity, its valuation, and the post-merger business plan. Following the announcement, SPAC shareholders are given the opportunity to vote on whether to approve or reject the proposed acquisition.
If the majority approves, the merger proceeds. Upon completion, the target company automatically becomes a publicly listed entity, having merged with a SPAC that was already listed on the stock exchange. This raises an important follow-on question: what legal protections are available to investors who vote against the acquisition?
Also read: Why Are Stocks Suspended? Understanding the Impact and Investor Strategies in Response
Legal Protections for Investors Who Oppose the Acquisition
Investor protection is one of the central concerns in any SPAC structure. Where an investor who holds SPAC shares does not consent to the proposed merger, that investor is entitled to have their shares repurchased at a fair price, a right recognized under Article 62(1) of the Company Law. This right is known as the redemption right.
The redemption right provides an additional layer of protection: even where a majority of shareholders approves the merger, dissenting investors retain the ability to recover their invested capital. This mechanism reflects a foundational principle that the capital market regulator is obliged to uphold, as established in Article 4 of the Capital Markets Law, which grants the Capital Market Supervisory Agency (Badan Pengawas Pasar Modal/Bapepam) the authority to supervise, regulate, and develop capital market activities in order to create an orderly, fair, and efficient market while safeguarding the interests of investors and the public.
SPACs therefore offer more than just a flexible pathway to public listing, they embed investor protection mechanisms at each stage of their lifecycle. Developing a viable SPAC framework in Indonesia requires striking the right balance between capital market innovation and adequate legal certainty. Adaptive regulation and effective oversight by the capital market authority will be essential to ensuring that SPACs can grow responsibly and contribute meaningfully to Indonesia’s investment ecosystem.***
Also read: Abuse of Authority by Company Directors under Indonesian Company Law and Its Legal Consequences
Regulations:
- Undang-Undang Nomor 8 Tahun 1995 tentang Pasar Modal (“UU PM”).
- Undang-Undang Nomor 40 Tahun 2007 tentang Perseroan Terbatas (“UU PT”).
- Peraturan Otoritas Jasa Keuangan Nomor 22/POJK.04/2021 tentang Penerapan Klasifikasi Saham dengan Hak Suara Multipel oleh Emiten dengan Inovasi dan Tingkat Pertumbuhan Tinggi (“POJK 22/2021”).
References:
- Special Purpose Acquisition Company (SPAC): Apa Itu & Cara Kerjanya. GoTrade. (Diakses pada 6 Maret 2026 Pukul 09.45 WIB).
- Sugama, N. M. R. (2023). Analisis Hukum terkait Penerapan Special Purpose Acquisition Company (SPAC) di Indonesia. UNES Law Review, Vol. 6, No. 1, Hal 1961. (Diakses pada 6 Maret 2026 Pukul 09.57 WIB).
- Mengenal Redemption dalam Dunia Investasi. Hukum Online. (Diakses pada 6 Maret 2026 Pukul 11.35 WIB).