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South Africa: The JSE’s Annual Improvement Project

8 June 2022
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In 2021, the JSE had proposed amendments to the JSE Listings Requirements (Requirements) as part of its Annual Improvement Project. These amendments (other than some proposed amendments which were withdrawn) are coming into effect on 1 July 2022.

This project aimed to introduce necessary but limited changes to the Requirements for clarity and to remedy ambiguity. The key effective changes relate to the following:

  • 75% of the votes of all shareholders will be required for a request of removal of a listing by an issuer (as opposed to the previously applicable ‘more than 50%’ requirement);
  • sponsors must act in conformity with the provisions of their written procedures manuals as mandated by the Requirements;
  • sponsors and designated advisers have the right to object to decisions made by the JSE (in a similar manner to the issuer, auditors and reporting accountants);
  • designated advisers for AltX issuers also have the disciplinary action rights afforded to sponsors, including the right to appeal;
  • with regard to trading statements, specific percentages to describe the difference between the comparative numbers in relation to the previous published period only needed to be provided if the applicable percentage was less than 100%. It has now been clarified that this is also true for the trading statement provisions setting out ranges and minimum percentage differences and number differences, considered together with other relevant information, as the inclusion of a difference of more than 100% in those instances could be misleading and/or confusing;
  • any changes to director integrity details pursuant to Schedule 13 must be announced through SENS, as a continuing obligation (to bring this in line with the Debt Listings Requirements);
  • removal of the discretion of the JSE in respect of an announcement regarding changes in auditors, in that a SENS announcement is in fact required;
  • more clarity on the wording used in the CEO and the financial director’s responsibility statement;
  • SENS announcements pursuant to annual/general meetings must detail any resolutions added or amended at such meeting;
  • associates of the applicant issuer or its major subsidiaries do not qualify as public shareholders;
  • pro rata repurchases do not require shareholders’ approval, not only where undertaken by the issuer but also through its subsidiary;
  • in addition to repurchases not being permitted during closed periods, shareholders’ meetings may not be convened to obtain shareholders’ approval for general or specific repurchases during a prohibited period (unless a repurchase programme is in place, as was already set out in the Requirements, but also unless the execution of an existing shareholders’ authority is involved). Further details on the requirements relating to the independent agent of the repurchase programme have been set out (which are also applicable to share incentive schemes);
  • expansion of viewing ability for documents for inspection to a secure electronic manner at the election of the person requesting inspection;
  • issuers must always publish their own annual financial statements (i.e. not only if they contain ‘significant additional information’);
  • clarification of the role of the Financial Reporting Investigations Panel (FRIP). The JSE does not have to wait for FRIP’s advice before taking enforcement actions;
  • aggregation of transactions for categorisation must be applied by considering the categorisation percentages at the time of the previous transaction with the categorisation of the current transaction;
  • beneficial ownership of vendors and owners must be disclosed in terms of the category 2 requirements;
  • the definition of related parties must be interpreted widely to apply the family cross holdings test to directors of the issuer;
  • the exemption contained in paragraph 9.1(c)(ii) of the Requirements (a transaction to raise finance that, in either case, does not involve the acquisition or disposal of any asset of the listed company or of its subsidiaries), will not apply where related parties are involved to raise finance;
  • circulars (as opposed to only announcements) must indicate whether distributions to shareholders will be made from capital or income reserves;
  • where a listed company intends to change its name, it must submit a circular (as opposed to a draft circular) to the JSE for approval;
  • a comparative regulatory analysis disclosure in relation to the differing frameworks involved in fast-track listings is required to be made in the pre-listing statement, as already contemplated by the JSE letter dated 28 May 2020;
  • secondary listed issuers of exchanges not approved by the JSE have four months from the financial year end to submit details of volume and value of securities traded over the previous 24 months to the JSE;
  • secondary listed issuers only need to set out memorandum of incorporation/constitution details in the pre-listing statement in limited circumstances;
  • a related party agreement exemption is being provided which recognises that valuing related party agreements, other than acquisitions and disposals, may not always be practical and may be dispensed with by the JSE; and
  • the wording of the directors declaration in Schedule 13 is being improved to remove reference to dishonest activities, and rather refer to a judgement.

Certain amendments which were proposed in 2021 have been withdrawn, (or in some instances, placed on hold,) such as the proposals to:

  • disallow shareholders approving a removal of a listing during a prohibited period;
  • disallow a sponsor or designated adviser to be appointed as the company secretary of an issuer; and
  • clarify short-form announcements on key audit matters (which has been placed on hold).