Further changes expected for JSE Listing Requirements

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In addition to the JSE proposed “Cutting the Red Tape” amendments…

In addition to the JSE proposed “Cutting the Red Tape” amendments (see Tamela’s article in the August 2021 edition of the IR Alert), the JSE has issued an Explanatory Memorandum and Amendment Schedule as part of its Annual Improvement Project. We summarise these proposed amendments to the JSE Listings Requirements (“JSE LR”) below:

1. Introduction – General Principles

Intention to amend the JSE LR to align the General Principles with Section 81 of the Financial Markets Act No. 19 of 2012, dealing with false, misleading or deceptive statements, promises and forecasts.

2. Section 1: Authority of the JSE – Removal at the Request of the Issuer (Paragraph 1.16)

Intention to increase the required voting percentage from more than 50% to more than 75% of the votes of all shareholders where approval is required for the removal of a listing at the request of the issuer pursuant to JSE LR 1.15(a). Based on this, the JSE’s discretion to exclude any shareholders from voting will be removed i.e. the exclusions will be limited to controlling shareholders, their associates and any party acting in concert.

3. Section 1: Authority of the JSE – Shareholders’ Meetings and Offers Relating to Removal of Listing (New Paragraph 1.16)

Intention to make it clear that (i) convening a shareholders’ meeting for a removal of a listing initiated by the issuer pursuant to JSE LR 1.14 – 1.16 cannot be held during a prohobited period; and (ii) the notice of meeting can only be distributed to shareholders once the prohibited period has ceased.

4. Section 2: Sponsors – Responsibilities of the Sponsors (Paragraph 2.8)

Intention to clarify that sponsors must act in conformity with the provisions of their written procedures manuals pursuant to paragraph 16.23 of Schedule 16 of the JSE LR.

5. Section 2: Sponsors – Disciplinary Action (Paragraph 1.4, 2.17 and 2.18)

Intention to make it clear that (i) designated advisers for AltX issuers also have the rights afforded to sponsors under the procedures for disciplinary action, including the right to appeal; and (ii) sponsors and designated advisers will have the right to object to decisions made by the JSE pursuant to JSE LR 1.4.

6. Section 2: Sponsors – Appointment (New Paragraph 2.7)
Intention to separate and clarify that the sponsor and designated adviser may not act as the company secretary of the issuer.

7. Section 3: Continuing Obligations – General Obligation of Disclosure – Trading Statements

Part A: New Listings (Paragraph 3.(b)(iii))
Intention to clarify the application of the provisions dealing with trading statements as they apply to new listings i.e. require new issuers to apply the provisions of trading statements during their first financial year from listing date, on their previous financial results notwithstanding that these results have not been published.

Part B: Percentage Range (Paragraph 3.4(b)(iii)(1))
Intention to clarify the position where the inclusion of the percentage to describe the difference (when more than 100%) could be misleading and/or confusing i.e. when a number only is acceptable. This was addressed in Guidance Letter 19 dated April 2016 which will now be removed.

8. Section 3: Continuing Obligations – Short-Form Announcement – Key Audit Matters (“KAMS”)

Intention to clarify the following provisions with respect to short-form announcement dealing with KAMS:
 KAMS disclosure also applies to preliminary/provisional reports;
 KAMS can only be included in the audit report; and
 elevate the importance of KAMS and provide access to KAMS information in advance of the detailed annual financial statements (“AFS”) as potentially price sensitive.

9. Section 3: Continuing Obligation – Directors (Paragraph 3.60)

Intention to align to the Debt Listings Requirements by making any changes to director integrity, pursuant to Schedule 13, a continuing obligation to be announced through SENS. Further changes expected for JSE Listing Requirements

10. Section 3: Continuing Obligation – Notification of Change in Auditor (Paragraph 3.78)

Intention to require issuers to publish a SENS announcement from the outset informing the market of the termination/resignation of an audit firm and the reasons therefore, i.e. remove the JSE’s discretion i.r.o. an announcement.

11. Section 3: Continuing Obligation – Corporate Governance (Paragraph 3.84 New Sub-Paragraph (l))

Intention to amend the corporate governance section to mirror paragraph 10.16(b) of Schedule 10 (Requirements for the MOI), that the appointment of all directors must be subject to shareholders’ approval at GM/AGM.

12. Section 3: Continuing Obligation – Corporate Governance: CEO and FD Responsibility Statement (Paragraph 3.84(k))

Intention to clarify certain provisions of the CEO/FD responsibility statement:
 Insertion of “To the best of our knowledge” at the outset;
 Reference to principle 15 of the King Code replaced with general responsibility;
 in relation to deficiencies, either (i) they have been remediated; or (ii) necessary suitable actions to remediate have been put in place.

13. Section 3: Continuing Obligation – Disclosure of Voting Results of GM/AGM (New Paragraph 3.91(b))

Intention to include details of any resolutions added/amended at the GM/AGM in the required announcement.

14. Section 4: Public Shareholders (Paragraph 4.25)

Intention to add a further exclusion to public shareholders for spread requirements, being associates of the applicant issuer or its major subsidaries.

15. Section 5: Methods and Procedures of bringing securities to Listing – Repurchase of Securities (Paragraph 5.67(B))

Intention to clarify the position that pro rata repurchases do not require shareholders’ approval, whether undertaken by the issuer or through its subsidiary.

16. Section 5: Methods and Procedures of Bringing Securities to Listing – Specific and General Authority to Repurchase
Securities

Part A: Shareholder’s Meetings (Paragraph 5.69(h))
Intention to make it clear that the prohibition of repurchasing securities during a prohobited period, unless a repurchase programme is in place, includes the convening of the shareholders’ meeting during a closed period for purposes of the specific authority to repurchase securities given potential price sensitive and other information.

Part B: Independent Agent (Paragraph 5.69(h) and 5.72(h))
Intention to require the name of the agent, date of appointment and commencement of the mandate to be disclosed in the notification to the JSE regarding the appointment of only one independent agent for the execution of the repurchase programme.

17. Section 7: Listing Particulars – Borrowings (Paragraph 7.A.17)

Intention to amend the JSE LR to mirror the level of discloure similar to that required for loans receivable per JSE LR 7.A.20.

18. Section 7: Listings Particulars – Documents Available for Inspection (Paragraph 7.G.1)

Intention to expand the manner in which documents for inspection may be viewed i.e. electronically.

19. Section 8: Financial Information – Minimum Contents of AFS (Paragraph 8.62(d))

Intention to remove the discretion that listed company’s own financial statements must be published only if they contain significant additional information.

20. Section 8: Financial Information – The Financial Reporting Investigations Panel (Paragraph 8.65-8.66)

Intention to clarify the role of the Financial Reporting Investigations Panel (“FRIP”) and remove the provision that the JSE may only
take the necessary enforcement actions only after receiving advice from the FRIP.

21. Section 9: Transactions – Aggregation of Transaction (Paragraph 9.11)

Intention to clarify existing approach relating to the aggregation of transactions i.e. that the categorisation percentages at the time
of each transaction be aggregated.

22. Section 9: Transaction – Category 2 Requirements (Paragraph 9.15(a)(ii) and (iii))

Intention to clarify the level of disclosure required i.r.t. vendors/purchasers by requiring beneficial ownership of vendors/purchasers
of transaction to be disclosed.

23. Section 10: Transactions with Related Parties – Definitions (Paragraph 10.1)

Intention to expand on the definition of related parties to apply the family cross holding test to directors of the issuer.

24. Section 10: Transactions with Related Parties – Items Not Regarded as Related Party Transactions (Paragraph 10.6 read
with Paragraph 10.1 and 9.1(c)(ii))

Intention to amend the requirements to make it clear that the exemption in paragraph 9.1(c)(ii) (a transaction to raise finance that, in either case, does not involve the acquisition or disposal of an asset of the listed company or of its subsidiaries), will not apply where related parties are involved in the raising of finance.

25. Section 11: Circulars, Pre-Listings Statements/Prospectuses and Announcements – Capitalisation issues, cash
disbursements and dividends (Paragraph 11.17(b) and (c))

Intention to ensure disclosure in circulars (already required in announcements), when prepared, also indicate whether the distributions to shareholders will be made from capital or income reserves.

26. Section 16: Documents to be Submitted to the JSE – Change of Name of Listed Company (Paragraph 16.29)

Intention to remove the reference to draft circular to be submitted to the JSE.

27. Section 18: Dual Listings and Listings by External Companies – Pre-Listing Statements (new Paragraph 18.20 and Appendix
1 to Section 18)

Intention to require regulatory analysis disclosure for approved exchanges and accredited exchanges (Fast-Track Listing Process) in the Pre-Listing Statements (“PLS”) as already contemplated by the JSE letter dated 28 May 2020.

28. Section 18: Dual Listings and Listings by External Companies – Continuing Obligations (Paragraph 18.21 to be renumbered)

Intention to provide clarity on the timing of the submission of the details dealing with the volume and value of securities on all exchanges where it has a listing i.e. no later than four months from the financial year-end of the applicant issuer. This provision only applies to applicant issuers with a primary listing on an exchange not approved by the JSE.

29. Section 18: Dual Listings and Listings by External Companies – MOI Secondary Listings (Schedule 10)

Intention to make it clear that the applicable Schedule 10 provisions applied to secondary listed companies are not mandatory for inclusion in the constitution of the secondary listed issuer. The JSE must obtain a firm understanding of the items in paragraph 22 of Schedule 10 as applied to the constitution of the foreign applicant issuer. Additional disclosure will be required in the PLS or announcement to the extent that (i) there are material differences; or (ii) any of the items are dealt with outside of the scope of the constitution of the applicant issuer (e.g. local legislation).

30. Schedule 5: Independent Fairness Opinion

Intention to recognise and clarify that a valuation of the issuer and/or subject matter of the transaction by an Independent Professional Expert (“IPE”) is not always practical where related party agreements are measured against market related rates/ objectively discernable benchmarks.

31. Schedule 13: Directors Declaration (Paragraph 19)

Intention to (i) extend the director integrity disclosure provision to remove the limitation to “dishonest activities”; and (ii) include a guilty verdict from “a court of law” as well, not only employer or regulatory body as currently the case.

32. Practice Note 1/2003: Circulars and Notices of AGM

Intention to move the portion of this Practice Note which deals with incorporation by reference to Section 11. * The full paper is available at: https://www.jse.co.za (Route: Regulation – Issuer Regulation – Announcements regarding Listings
Requirements – September 2021)
Tamela has provided its comments on the above proposals and raised additional proposals arising out of its experience with listed companies.

How can we help?

Tamela is able to provide its ongoing sponsor and transaction sponsor clients with guidance on the Listings Requirements particularly amendments thereto, as and when they become effective. For more information, please contact Amanda Markman, 082 499 2911 / amanda@tamela.co.za