JSE looking to cut red tape burden on listed companies

The Johannesburg Stock Exchange’S (JSE) latest discussion document proposes a reduction in some of its regulations, as it aims to reduce the burden of red tape on listed companies.

Areas of focus in the discussion document released earlier this month include approval for transactions “in the normal course of business”; share repurchases; raising capital by bookbuilds and allowing directors to follow a rights’ offer during a closed period.

In its introduction to the “cutting red tape” discussion document, the JSE’s director of issuer regulations, Andre Visser, notes that “the JSE has been very active since 2014 in reviewing the listings requirements on a regular basis to allow for a more effective applications” thereof.

However, the JSE recognises that because capital markets regulation and legislation have evolved significantly over the last few years, there may still be provisions of those requirements that “appear to be redundant and/or not fit for purpose”.

The JSE is now considering removing the obligation to get shareholder approval for a transaction that falls within the definition of the “ordinary course of business” that is valued at more than 10% of the company’s market capitalisation.

Alternatively, it is considering increasing the 10% cap to 30%.

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The change, says the JSE, will provide companies with more flexibility when conducting their business. It also brings the JSE into line with London Stock Exchange Requirements.

However, companies will have to discuss “ordinary course of business” transactions with the JSE and it will be down to the JSE to assess whether or not the transaction does fall into the definition of the “ordinary course of business”.

The JSE is also proposing to remove the requirement for shareholder approval when shares are being repurchased from wholly-owned subsidiaries or from share incentive schemes controlled by the company.

In support of this proposal, the JSE notes that such share repurchases involve “no money leakage” and have no impact on earnings per share, headline earnings per share or net asset value per share.

Shareholders will still be protected by requirements of the Companies Act and the JSE’s own disclosure requirements.

Still lagging

Unfortunately, while much of its latest proposals are influenced by a desire to bring the JSE into line with leading international stock exchanges, the JSE does not take this opportunity to upgrade its current exceptionally poor disclosure requirements to bring them into line with such stock exchanges.

At present the required disclosure has only to be made in an annual report, which is published frequently several months after the repurchase and, in which, is generally difficult to identify.

The Australian and UK markets employ best practice, which requires disclosure daily.

The proposal “to allow related parties to participate in the issue of shares for cash” is expected to generate considerable response from South African investors.

Interested parties are invited to submit their comments to the JSE by 9 April.

This article first appeared on Moneyweb and was republished with permission.

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