The JSE has issued a consultation paper* aimed at achieving a level of effective and…
The JSE has issued a consultation paper* aimed at achieving a level of effective and appropriate regulation for existing listings. This is in addition to the JSE’s normal regulatory process whereby it annually proposes amendments to the JSE Listings Requirements in areas where (1) practices may have changed, (2) weaknesses have been identified, or (3) the requirements have resulted in unintended consequences.
Tamela applauds this more inclusive and transparent approach, as well as the intention of cutting red tape and ensuring that the requirements are not overly onerous. This is a much-needed development given the competition that the JSE is now facing from the other South African exchanges, ZARX, A2X, 4AX and EESE.
Comments were due from interested parties on 9 April 2021 and it remains to be seen which, if any, of these proposals (and any additional proposals put forward by stakeholders) will result in actual amendments to the JSE Listings Requirements. The proposals put forward are summarised as follows:
Transactions – ordinary course of business
Either (1) removing the 10% limitation when categorising a transaction that falls within the ordinary course of business of an issuer in terms of Section 9 (Transaction) and Section 10 (Related Party Transactions) of the JSE Listings Requirements; or (2) increasing the existing 10% level to 30% in line with the Category 1 threshold.
In addition, proposing that related party ordinary course of business transactions be announced through SENS disclosing the pertinent details. The transaction must be discussed with the JSE early to determine the classification i.e. the issuer’s directors will not be entitled to make the assessment.
Intragroup repurchase of securities
Removing the application of the JSE Listings Requirements and the related shareholder approval on intragroup repurchases in terms of Section 5 of the JSE Listings Requirements provided they are (1) between the issuer and its wholly-owned subsidiaries, or (2) between the issuer and its Schedule 14 share incentive schemes. This is due to the fact that there is (1) no money leakage, (2) no impact on earnings per share, headline earnings per share, and net asset value per share, and (3) no creation of a benefit for one shareholder over another.
General authority to issue shares for cash – bookbuilds
Allowing related parties to participate in the general issue of shares for cash in terms of Section 5 of the JSE Listings Requirements, provided that they may only participate in a bookbuild capital raising process by putting in a bid “at best” where the related parties are excluded from a price formation bidding process but they may only take up shares once the final issue price has been determined i.e. they are price takers (at best) only and not price makers.
The bookbuild process will need to be clearly disclosed, particularly the fact that it is only open to participants that are related parties if they bid without specifying a bid price. This will be subject to shareholder approval via the general authority resolution.
Pro forma financial information – disposals
Removing the provision requiring an assurance report (prepared by a reporting accountant on unpublished management accounts) in terms of Section 8 of the JSE Listings Requirements on the adjustment column in the pro forma financial effects in the case of a disposal by an issuer. This is due to the fact that the source information is part of the historical financial information of the issuer and the assurance report provides no further regulatory value.
Removing the obligation to produce an abridged report in terms of paragraph 3.21(b) of the JSE Listings Requirements (which are required to be produced in compliance with IAS 34) when the issuer has published its audited annual financial statements via its website. This is due to the fact that such report no longer provides a regulatory benefit but is both time consuming and costly to produce.
JSE proposal to cut “red tape” for listed companies welcomed
Revised listing particulars and reverse take-overs
Removing the obligation to prepare revised listing particulars in terms of paragraph 9.5(c) of the JSE Listings Requirements in the event of an acquisition where the categorisation percentage ratio is greater than 100%, but where the acquisition does not result in fundamental change to the business or change in the board of directors or voting control (35% or more) of the issuer. The transaction remains a Category 1 transaction in terms of Section 9 of the JSE Listings Requirements, i.e. it will require shareholder approval. The transaction must be discussed with the JSE at an early to determine whether the acquisition results in fundamental change to the business or change in the board of directors or voting control of the issuer, i.e. the issuer directors will not be entitled to make the assessment.
Rights offers, directors and closed periods
Removing the limitation on the excluded parties (being directors, prescribed officers and /or company secretaries in terms of paragraph 3.67 of the JSE Listings Requirements) from following their entitlements pursuant to a rights offer during a closed period, i.e. excluded parties have the ability to participate in a rights offer during a closed (being a financial closed period or any other period during which an issuer is trading under cautionary) period by:
• exercising undertakings or elections to take up entitlements under a rights offer, including excess applications; and
• taking up entitlements under a rights offer.
This will only be allowed where the same entitlements are afforded to all shareholders. The elections must be disclosed via SENS or in the rights offer circular.
Category 1 disposal and working capital statement
Removing the need for the board of the issuer to provide confirmation of a working capital statement (in terms of Section 7 and Schedule 12 of the JSE Listings Requirements) for a Category 1 disposal where the consideration to be received is cash. This type of transaction can only be enhancing from a working capital perspective. Therefore, the need for a working capital statement is unnecessary and serves no regulatory purpose.
* The full paper is available at:
Tamela has provided its comments on the above proposals and raised additional proposals arising out of its experience with listed companies and the fact that certain of the existing JSE Listings Requirements appear to be overly onerous or create complexities.
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 / firstname.lastname@example.org