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South Africa: JSE Listings Requirements – Further changes pursuant to the JSE Simplification Project

16 April 2024
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Overview

  • The Johannesburg Stock Exchange (JSE) is working on the fourth phase of the JSE Simplification Project.
  • Changes to sections 1, 2, 4, 5, 9 and 10 have been outlined in a previous article.
  • This article highlights a new section 6 that has been released dealing with Corporate Actions and the amendments to a further three sections (5, 11 and 16).

The JSE has announced the fourth phase of the JSE Simplification Project, which aims to shuffle and simplify the existing Sections of the JSE Requirements (Requirements). A new Section 6 has been released dealing with Corporate Action and a further three sections have been amended (which have largely been consolidated into Section 6):

  • Section 5: Methods and Procedures to Bringing Securities to Listing
  • Section 6: Corporate Actions (entirely new section)
  • Section 11: Circulars, Pre-Listing Statements/ Prospectus and Announcements
  • Section 16: Documents to be submitted to the JSE

The JSE invites comments by Tuesday, 30 April 2024.

Section 6 (Corporate Actions)

Section 6 has been proposed as an entirely new Section consolidating corporate actions. The corporate actions listed below are set out with the following subsections applicable in each case: ‘Specific requirements’, ‘Announcements’, ‘Contents of circular’ and ‘Submissions to the JSE’.

  • Acquisition issues and vendor consideration placings
  • Alteration of share capital
  • Dividends, capitalisation issues and scrip dividend
  • Change of name
  • Issues for cash
  • Listed options
  • Odd lot offers
  • Payments to securities holders
  • Redemption of listed redeemable securities
  • Repurchase
  • Rights offer and claw back offers
  • Transfer of sector
  • Voluntary liquidation

Issue of shares for cash

Four reforms are being proposed to the issue of shares for cash regime in paragraphs 6.34 to 6.42 which include:

  • the reduction in the level of shareholders’ approval. It is proposed that an issuer should obtain approval in a general meeting through an ordinary resolution for both a specific authority and a general authority to issue shares for cash. The currently imposed 75% ordinary resolution has been reconsidered as it is not in line with the market standard of various international exchanges;
  • the removal of the fairness opinion for related party issuances. The independent members of the board will however be required to express an opinion on whether the issue price is fair to shareholders. Furthermore, participants and their associates will be excluded from voting;
  • the removal of pro forma financial information. The JSE will require a detailed narrative on the impact of the issue for cash on the financial statements. Furthermore, the number of shares issued, the issue price and the subscriber will be disclosed; and
  • the repositioning in respect of the issue of options/ convertible securities under a general authority, read with paragraph 6.37(i). The resolution must expressly allow for the issue of options/ convertible securities, and the strike price may not exceed a 10% discount to the weighted average traded price of such equity securities measured over the 30 business days at the date of issue of the options/ convertible securities.

The JSE proposes aligning the discount offered to a once-office issue with the discount offered to rights offers and general issue for cash.

Repurchases

Four reforms are being proposed to the repurchase regime, largely as set out above under issues for cash, which include:

  • the reduction in the level of shareholders’ approval (to an ordinary resolution);
  • the removal of the fairness opinion for related party issuances;
  • the removal of pro forma financial information; and
  • the removal of the prohibition to repurchase shares in a closed period, under a specific authority. (The JSE proposes to maintain the prohibition for closed period repurchases under a general authority as more discretion is vested with the board and shareholders’ approval is not afforded at the specific time that the repurchase is undertaken.)

The JSE proposes requiring the details of the beneficial owner of the following for transparency to shareholders:

  • the subscriber, under both the general and specific authority for issues of cash;
  • the securities holder under the specific repurchase authority; and
  • the details of the underwriter for rights offers.

Provisions dealing with liquidation and redemption of listed redeemable securities and the need for pro forma financial information in circulars, is proposed to be removed. It is highly unlikely that an issuer in liquidation will be able to prepare pro forma financial information and doing so may cause unnecessary delays. Detailed pro forma information for the redemption of listed redeemable securities will be replaced with a detailed narrative on the impact of the redemption on the financial statements.

The Guidance Letter on fairness opinion relating to an issue of shares for cash in terms of JSE Listing Requirements (11 November 2010) is to be removed.

Section 16 (Documents to be submitted to the JSE)

The scope of section 16 has been reduced significantly to deal with core listings requirements.

The provisions dealing with the procedure for approval in paragraphs 16.3 to 16.4 will be removed from this section and moved to a newly-created JSE Procedures Portal. The JSE processes for the approval of documents are important but should not be listings requirements. These are internal processes of the JSE that should be available to issuers and sponsors on the JSE Procedures Portal.

The following are to be moved out of Section 16:

  • Offers for sale and subscription;
  • Procedure for approval;
  • Documents to be submitted for new applicants; and
  • Share incentive schemes.

Documents to be submitted by new applicants dealt with under paragraphs 16.9 to 16.13 will be moved to Section 4 (Conditions of Listings). The JSE is of the view that it is more appropriate to deal with these provisions under new listings.

The provisions of Section 16 that remain after the relevant provisions have been moved to the new Section 6: Corporate Actions have been amended.

The events requiring SARB approval are being reviewed with SARB and may be subject to change, which will be circulated for comments.

Documents to be approved by sponsors has been moved to Section 2: Sponsors. This affords clarity to sponsors on which documents they can approve without the JSE involvement.