The JSE has approved amendments to its Listings Requirements to regulate the listing of companies with weighted voting share structures, reduce the free float threshold, alter the current free float assessment, and enhance the JSE's SPAC offering.
On 19 June 2023, the JSE Limited (JSE) announced that the Financial Sector Conduct Authority (FSCA) published approval of amendments to the JSE's Listings Requirements (Listings Requirements). These approved amendments relate to the JSE's (i) Consultation Paper Proposals and (ii) Financial Reporting Disclosures.
The consultation documents containing the proposed amendments were initially published by the JSE in October 2022 and revised proposed amendments were published by the FSCA in March 2023. Following the public comment process, the amendments have been approved.
The approved amendments take effect from
17 July 2023.
Consultation Paper Proposals: approved amendments
These amendments:
- introduce and regulate the listing of companies with weighted voting share structures;
- lower the current free float requirements and amend the assessment of free float; and
- strengthen the JSE's current Special Purpose Acquisition Company (SPAC) offering.
The proposed amendments to the Consultation Paper Proposals were considered in detail in
the JSE moves forward with its Consultation Paper proposals to amend the Listings Requirements.
Financial Reporting Disclosures: approved amendments
These amendments relate to reworking the financial reporting disclosure provisions in the Listings Requirements to simplify the provisions in general and remove previous obligations such as the requirement to publish an abridged report in all instances. To address transitional arrangements, the JSE has published a
letter to sponsors and designated advisers concerning the issuer company's financial reporting disclosures. A copy of these approved amendments is available
here.
This communique focuses on the approved amendments relating to the
Consultation Paper Proposals.
Weighted voting share structures
The approved amendments are substantially the same as those initially proposed in October 2022, with a few clarifications or additions (highlighted in
bold below).
Key amendments include the following:
- an applicant with a weighted voting share structure seeking a listing must meet the Main Board listing entry criteria
- the weighted voting shares will not be listed or traded on the JSE;
- each weighted voting share must not carry more than 20 votes and the ratio cannot be increased;
- the applicant must adopt the specified governance arrangements, which include, among others, that:
- each weighted voting share must have automatic conversion provisions providing for its conversion into an ordinary voting share if it is sold or transferred to any person;
- each weighted voting share must have a sunset provision providing for its automatic conversion into an ordinary voting share once 10 years have elapsed from the listing date of the applicant issuer, which period can be extended if holders of ordinary voting shares agree to do so at a general meeting;
- holders of weighted voting shares must undertake not to dispose of or transfer their entire shareholding for a period of 12 months from the listing date;
- the following matters must be voted on through the enhanced voting process (i.e. on the basis that one weighted voting share is limited to one vote): (i) variation of rights attaching to securities; (ii) the appointment and removal of auditors; (iii) the appointment,
re-election and removal of independent non-executive directors; (iv) the remuneration policy and implementation report tabled at the annual general meeting of the applicant for separate non-binding advisory votes by shareholders; (v) reverse takeover; and (vi) removal of listing;
- the memorandum of incorporation (MOI) or constitutional documents of the applicant must limit the weighted voting shares to a maximum of 20 votes per share and must incorporate the specified governance arrangements;
-
the following events must be announced on SENS immediately:
-
where a weighted voting share is converted to an ordinary voting share as a result of the sale or transfer to any person;
-
where a weighted voting share is converted to an ordinary voting share on expiry of the 10-year period from the listing date; and
-
where the expiry period is extended by agreement by holders of ordinary voting shares at a general meeting;
- further issue of weighted voting shares is prohibited, except in the case of a rights issue, bonus issue, capitalisation issue, scrip dividend, consolidation or sub-division of securities, which in each instance must be offered in the same ratios in conjunction with ordinary voting shares;
-
subject to the above-exempted instances, the JSE will not allow a listed company to issue high or low voting securities; and
-
where a company has currently listed low or high voting securities prior to the incorporation of weighted voting shares in the Listings Requirements, the JSE will grant a listing of additional securities of that class.
For more detail on the now-approved amendments, read
the JSE moves forward with its Consultation Paper proposals to amend the Listings Requirements, bearing in mind the clarifications highlighted above.
Free float: new listings and free float assessment
The approved amendments relating to the free float threshold and the free float assessment are essentially the same as those initially proposed in October 2023. Key amendments include the following:
- an applicant seeking to list on the Main Board must have 10% of each class of securities held by the public, representing at least 100 shareholders;
- the securities held by controlling shareholder/s will not be regarded as being held by the public (i.e. controlling shareholder/s are excluded from the free float);
- the 10% exclusion, in terms of which holdings of 10% or more of the securities in the issuer were not regarded as being held by the public, has been deleted; and
- the carve-outs relating to when institutional investors holding 10% or more of the securities in the issuer qualify to form part of free float have been deleted, given the proposed removal of the 10% exclusion entirely.
For more detail on the now-approved amendments, read
the JSE moves forward with its Consultation Paper proposals to amend the Listings Requirements.
SPACs
The approved amendments relating to the SPAC provisions are essentially the same as those initially proposed in October 2022.
Key amendments include:
- allowing a longer time period (36 months) to acquire viable assets;
- expanding the concept of escrow;
- more bespoke disclosure; and
- expanding the SPAC admission criteria, including a requirement that a redemption right (to be included in the SPAC's MOI and clearly explained in the acquisition circular), subject to specified conditions, be afforded to those shareholders who vote against the acquisition of viable assets.
For more detail on the now-approved amendments, read
the JSE moves forward with its Consultation Paper proposals to amend the Listings Requirements.
A copy of the approved amendments relating to the Consultation Paper Proposals is available
here.
Additional reforms in the pipeline
The JSE has also moved ahead with other proposed reforms to the Listings Requirements. In May 2023, it published proposed amendments relating to the removal of its auditor accreditation model. The deadline for public comment was 5 June 2023. On 15 June 2023, the JSE published proposed amendments relating to specialist securities (proposed to be moved from Section 19 to a reworked Debt Listings Requirements), depository receipts (proposed to be moved to Section 18 with additional provisions) and the BEE segment (proposed to be moved to a new section with additional provisions). The deadline for public comment on these proposed amendments is 17 June 2023.
We expect that the second half of 2023 will be a busy time for the Issuer Regulation of the JSE as it progresses the works-in-progress and proposals identified in its Consultation Paper in May 2022, in an attempt to reform the listings framework.
This summary is not intended to, and does not, constitute legal advice, and may not be relied upon. For further information or tailored advice, please contact your usual Webber Wentzel contact.
