JSE Listings Requirements
Quick reference guide
kpmg.co.za
Whilst every effort has been made to ensure this quick
reference guide is accurate, it is only a summary of key
JSE Listings Requirements and applicable legislation.
Readers are encouraged to consult with their sponsor
and/or professional advisor before taking action.
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Foreword
While many new applicants applying for a listing mistakenly believe that
the path to a successful listing commences with the preparation of a
prospectus and ends the day that the securities list on the exchange,
nothing could be further from the truth.
Subsequent to the listing, many executives find themselves struggling
to adjust to the demands resulting from the new institutional
environment which the company operates in subsequent to the listing.
Executives are faced with familiarising themselves with the regulations
pertaining to the King Code on Corporate Governance for South Africa,
the Listings Requirements of the JSE Limited (“JSE”), the Companies
Act, 2008 (Act No. 71 of 2008) including the Takeover Regulations, the
Financial Markets Bill (“FMB”) as well as specific legislation applicable
to their particular company and industry.
This publication is intended to aid executives of listed entities with
aspects of the JSE Listings Requirements and the FMB that are
particularly relevant to directors and company secretaries.
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Key definitions/terms
“Act” means: the Companies Act, No 71 of 2008, as amended;
“AFS” means: annual financial statements of the Listco;
“Associate” of an individual is:
• immediate family; and/or
• trustees of any trust of which the individual or their immediate family
is a beneficiary or discretionary subject; and/or
• any trust in which the individual or their immediate family, individually
or taken together, has the ability to:
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– control 35% of the votes of the trustees; or
– appoint 35% of the trustees; or
– appoint or change 35% of the beneficiaries of the trust; and/or
• any company in which the individual, their immediate family or a
controlled trust has the ability to:
– control 35% of the votes at general meetings; or
– appoint or remove 35% of the directors; or
– control 35% of the votes at board of directors meeting;
“Associate” of a company is:
• its subsidiary or holding company; and/or
• another company in which directors act in accordance with the
company’s instructions; and/or
• another company in the capital of which, even on the fulfillment of a
condition or the occurrence of a contingency, the company (and the
entities listed above) would have a controlling interest (35%); and/or
• a trust where the company has the ability to:
– control 35% of the votes of the trustees; or
– appoint 35% of the trustees; or
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– appoint or change 35% of the beneficiaries of the trust;
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“JSE” means: JSE Limited;
“Material” means: information that, if omitted or misstated, could
influence the economic decisions of users and includes a change
in, or constituent of, a particular factor that may be regarded in the
circumstances as being material (equal or exceed 10%);
“Major subsidiary” means: a subsidiary that represents 25% or more
of the total assets or revenue of the consolidated group based on the
latest published interim or year-end financial results;
“Percentage ratio” is: the consideration to market capitalisation or dilution;
“Pre-listing statement” or “listing particulars” means: the statement
required to be issued by companies in terms of Section 6 of the JSE
Listings Requirements;
“Price-sensitive information” means: unpublished information that, if
it were made public, would be reasonably likely to have an effect on the
price of the Listco’s securities;
“Regulations” means: the Takeover Regulations as defined in section
1 of the Act; and
“SENS” means: the Stock Exchange News Service. 4|
Dealing in securities
Who does this section apply to?
• Directors and the company secretary of the Listco;
• Directors and company secretary of a major subsidiary; and
• Any associate of the above.
What transactions are included?
• Any sale, purchase or subscription of the Listco securities;
• Any agreement to sell, purchase or subscribe for the Listco securities;
• Any donations of the Listco securities;
• Any dealing in warrants, single stock future, the contracts for difference
or any other derivatives issued in respect of Listco securities;
• The acceptance, acquisition, disposal or exercise of any option to
acquire or dispose of the Listco securities;
• Any purchase or sale of nil or fully paid letters;
• The acceptance, acquisition or disposal of any right or obligation,
present or future, conditional or unconditional, to acquire or dispose
of Listco securities; and
• Any other transaction that will provide direct or indirect exposure to
the price of Listco securities.
What is the procedure to trade?
•Board
– the Board must appoint the Chairman or a designated director to
clear all directors’ dealings beforehand;
– a director may not be given clearance to trade during a
“prohibited period”, namely:
- when Listco is in a “closed period”; or
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- during any period when there exists any matter which
constitutes unpublished price sensitive information (regardless
of whether the relevant director has knowledge of such
information or not); and
– written records of clearances given must be maintained.
•Directors
– a director must secure clearance from the Chairman or
designated director before dealing;
– a director must advise their associates and any investment manager
dealing on his/her behalf or on behalf of any of his/her associates of
the name/s of the Listcos of which he/she is a director;
– a director must advise all of his associates in writing that they
must notify him immediately after they have dealt in securities
relating to the Listco;
– a director must advise his investment manager in writing
that they may not deal in the Listco’s securities without such
directors consent in writing;
– directors must still comply with the provisions of the Securities
Services Act (to be replaced by the Financial Markets Bill); and
– subsequent to trading, a director must disclose all of the
relevant information relating to the trade to the Listco within 24
hours of the trade.
What is a “closed period”?
• From the date of the financial year end until the date of earliest
publication of the results announcement;
• From the date of the expiration of the interim period until the date of
publication of the interim results announcement;
• Where applicable, from the date of expiration of the second
interim period until the date of publication of the interim results
announcement;
• Where applicable, from the date of expiry of the quarter period until
the date of publication of the quarterly results; and
• Any period when Listco is trading under a cautionary announcement.
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Cautionary Announcements
When should a cautionary be published (excluding a
trading statement)?
Listcos are only required to issue a cautionary announcement in the
following circumstances:
• the Listco acquires knowledge of material price-sensitive
information; and
• the confidentiality of such information cannot be maintained or the
Listco suspects that the confidentiality has or may have been breached.
There is a general obligation for a Listco to publish information relating
to any developments which are not public knowledge and which may
lead to material movements in the Listco’s share price e.g. strike on a
mine, etc., unless kept confidential for a limited period of time.
Ask yourself the following questions:
Is it material?
If = Yes
If = No
Can it be kept confidential?
If = Yes
do nothing
If = No
do nothing
Non-material
price sensitive
announcement
on SENS
Cautionary announcement in press and on SENS
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How should confidentiality be approached?
Material price-sensitive information may not be released (even under
time embargo) until it is on SENS or (if after hours) arrangements made
to release on SENS before market opens the next day.
Listcos that deem it necessary to provide information prior to releasing
such information on SENS must ensure that in doing so, they do not
commit an offence in terms of the Security Services Act and, in particular,
Section 73(3) which states:
• insider knows that he/she has inside information; and
• discloses the inside information to another person.
Who can talk to the media?
• suggest always two people; and
• suggest briefing and Q&A beforehand.
Planned release to shareholders must go on SENS at the same time.
Unplanned releases must go on SENS immediately.
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Trading Statements
When is a trading statement required?
All Listcos must publish a trading statement (on SENS only) as soon as
they are satisfied that a reasonable degree of certainty exists that the
financial results for the period to be reported on next, i.e. annual results
or interim results, will differ by at least 20% (property entities – 15%)
from the most recent of either:
• financial results for the previous corresponding period; or
• a profit forecast, provided to the market, in relation to such period.
The directors of Listcos have to exercise judgment in deciding on a
reasonable degree of certainty.
What are the disclosure requirements of a trading
statement?
A trading statement must give specific guidance by the inclusion of the
period to which it relates and:
• a specific number or percentage to describe the differences; or
• a range to describe the differences (range may not exceed 20%); or
• a minimum percentage difference, together with any other
available information (in circumstances where the Listco
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has reasonable certainty but is not yet able to provide
specific guidance as per the points above – once the Listco has
reasonable certainty it must provide the specific guidance as per the
points above).
If, after the trading statement has been announced but before the actual
results are announced, the Listco is reasonably certain that the previously
published number, percentage or range has changed, a further trading
update must be published.
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Financial results measurement for trading statement purposes are:
•Firstly:
– Earnings per share; and
– Headline earnings per share;
•Secondly:
– Net asset value per share (“NAVPS”) but only if more relevant
(because of the nature of the Listco’s business).
• The following conditions exist if NAVPS is used:
– upon first adoption, announce NAVPS basis on SENS in advance
of period end; and
– confirm NAVPS basis annually in the AFS.
The following words cannot be used in trading statements due to the
fact that these words have specific meanings as defined in the JSE
Listings Requirements and, therefore, imply a range differing from 20%:
• significant (less than 10%);
• material (equal to or exceeding 10%); and
• substantial (equal to or exceeding 30%).
Listcos must either:
– include a statement in the trading statement that the forecast has
not been reviewed or reported on by the auditors; or
– produce and submit to the JSE a profit forecast or estimate and a
Reporting Accountants’ Report thereon.
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Transactions
What is a “Transaction”?
A Transaction includes:
• an acquisition or disposal by the Listco or any subsidiary
• the grant or acquisition of an option to acquire or dispose of assets
(if exercise of option is at the Listco’s discretion, the transaction is
categorised on exercise only and only the premium/consideration for
the grant will be used for categorisation purposes); and
• excludes the following:
– an issue of securities (other than an issue of shares for cash or
an offer for subscription by way of a rights offer by a subsidiary
or an offer of securities in a subsidiary company by the Listco in
connection with the listing of the subsidiary);
– an issue of securities or a transaction to raise finance that does
not involve the acquisition or disposal of any asset of the issuer or
its subsidiaries; and
– a transaction between the following:
- the Listco and a wholly-owned subsidiary;
- two or more wholly-owned subsidiaries of the Listco; or
- a wholly-owned subsidiary on the one hand and the Listco and
one or more wholly-owned subsidiaries on the other hand;
•also excludes:
– transactions in the ordinary course of business (need explicit
ruling from the JSE that transaction is in the ordinary course of
business) where either:
- the categorisation percentage ratios are equal to or less than
10%; or
- the Listco or its subsidiary concluding the transaction is a
financial institution (as defined in the Financial Services Act
No 97 of 1990) dealing in funds which are not primarily for
the benefit of its shareholders and the counter party to the
transaction is not a related party of the Listco.
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How is a transaction categorised?
For JSE purposes, a transaction is categorised by assessing its size
relative to that of the Listco proposing to make it or its holding company,
if applicable.
The comparison of size is made by the use of percentage ratios
resulting from each of the following calculations:
• Consideration to market capitalisation, i.e. the consideration divided
by the aggregate market value of all the Listco’s listed equity
securities;
• Dilution, i.e. the number of listed equity securities issued by Listco
as compensation for the acquisition, compared to those in issue,
excluding treasury shares; and
• Transactions to be settled partly in cash and partly in shares i.e.
the categorisation size for such a transaction is calculated by first
assessing the cash to market capitalisation percentage and then
adding this percentage to the dilution percentage.
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Categorisation and what is required?
Category 2
transaction
Categorisation
% ratio
Announcement
Circular
Revised listing
particulars
Shareholder
approval
Pro forma
financial effects
Reporting
accountant’s
report
•Main board:
5% or more
and less than
25%
•Altx: 5% or
more and less
than 50%.
Category 1
transaction
•Main board:
25% or more
•Altx: 50% or
more
Reverse
take-over
•% ratio is
100% or more,
or
•Would result in
a fundamental
change in the
business, or
Yes
No
Yes
Yes
•Would result
in a change in
the Board of
Directors or
voting control.
Yes
Yes
No
No
Yes
No
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
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Related Party Transactions
What is a related party transaction?
A transaction or a variation of an agreement between a Listco (or its
subsidiaries) and a related party and any transaction which results in
unusual vested or other interests or rights for a related party.
What is a related party?
• material shareholder (10% or more) in listed entity or in its
subsidiaries or holding company;
• director – of listed company or any subsidiary (current or in last
12 months);
• adviser – with beneficial interest in listed company or its
subsidiaries (current or in last 12 months);
• a principal executive officer of the issuer (current or in last 12
months);
• asset manager or management company of property entity,
including anyone whose assets they manage or administer; and
• an associate of any of the above.
What is required for a related party transaction?
When entering into a related party transaction, the issuer must:
• make an announcement;
• issue a circular to shareholders;
• obtain shareholder approval; and
• obtain a fairness opinion.
What is a small related party transaction?
For a related party transaction where the percentage ratio is more than
0.25% but less than 5%, Listco must obtain a fairness opinion and make
an announcement (opinion must be fair). If the opinion is not fair, Listco
(in addition to above) must issue a circular and obtain shareholder approval.
If the percentage ratio is less than 0.25%, there are no requirements
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Listing particulars
When are listing particulars required?
• new listings (including reverse take-overs); and
• existing listed companies which issue more than 25% of securities
currently in issue either as a single issue or in tranches over a period
of three months (unless the issue of shares is only for cash).
What is required?
Compliance with the requirements of Sections 7 and 11 of the JSE
Listings Requirements, including, inter alia:
• confirmation that the directors have established proper financial
procedures;
• confirmation that the directors understand their responsibilities
under the Listings Requirements and what is required of them to
avoid the creation of a false market;
• submission to the JSE by each director of a directors declaration
(Schedule 21);
• confirmation that the financial information contained within the JSE
circular has been considered by the audit committee;
• confirmation that the sponsor has made proper enquiry of the
directors in connection with the preparation of any profit forecast
and that the directors have disclosed all information required for the
sponsor to conclude that it has been properly prepared; and
• confirmation that the Board and the sponsor have discharged their
responsibilities with regards to the working capital statement.
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Financial Results
What are the various financial results
announcements?
Abridged results
• An abridged report is a summary of the complete AFS and is
published once the annual report is issued (i.e. sent to shareholders
and the JSE).
• The abridged report contains details of the annual general meeting,
i.e. date, time and venue.
• The abridged report is published on SENS only and is not sent to
shareholders.
• As the SENS announcement itself has not been audited, where
reference is made to the audited financial statements, it should be
clear that “audited” refers to the complete set of AFS included in
the annual report.
Provisional results
• A provisional report is a compulsory financial results announcement
and is published where the AFS of a company have not been issued
within three months of its financial year end.
• A provisional report is published on SENS, in the press and is
distributed to each shareholder.
• A provisional report must be reviewed at a minimum.
Preliminary results
• A preliminary report is a voluntary financial results announcement
published prior to the issue of AFS or a provisional report.
• A preliminary report is only published on SENS and is not
distributed to shareholders.
• A preliminary report must be reviewed at a minimum.
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Interim reports
• Interim reports are published on SENS and in the press and distributed
to shareholders after the expiration of the first 6-month period of a
financial year, by no later than three months after that date.
• Interim reports are not usually required to be reviewed by a
Listco’s auditors.
• Where the financial period covers more than 12 months (due to a
change in year-end), an interim report must be published in respect of
the 12-month period and the financial information must be reviewed.
• A signed copy of the auditors’ review opinion must be submitted to
the JSE within 24 hours of the publication of the 12-month results.
Diagrammatic overview of financial
reporting requirements
Year end
(12 months)
3 months after
year end
Option 1: Publish an Abridged Report on SENS and post AFS
on same day.
Option 2: Issue a Preliminary Report on SENS and later, issue
AFS (no changes from the Preliminary Report) and announce a
No Change Report plus details of the AGM on SENS.
Option 3: Issue a Preliminary Report on SENS and later, issue
AFS (changes from the Preliminary Report) and announce an
Abridged Report on SENS.
Year end
(12 months)
Option 4: Issue
a Preliminary
Report on
SENS but
AFS not issued
OR
AFS not issued
3 months after
year end
6 months after
year end
Option 4 (a): Issue AFS (no changes
from Provisional Report) and announce
a No Change Report and details of AGM
on SENS.
OR
Option 4(b): Issue AFS (changes from
Provisional Report) and announce an
Abridged Report on SENS.
Publish mandatory Provisional Report
on SENS and in the Press.
AGM
7 Calendar
days and 15
Business Days
AGM
7 Calendar
days and 15
Business Days
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What are the minimum contents of a
financial results announcement?
Interim, preliminary, provisional and abridged reports must be prepared
in accordance with, and containing the information required by
International Financial Reporting Standards (“IFRS”) on the Financial
Reporting (i.e. IAS 34).
The minimum information that must be disclosed in financial results
announcements is as follows:
• consolidated statements of comprehensive income;
• consolidated statements of financial position;
• consolidated statements of changes in equity;
• consolidated cash flow statements;
• segmental analysis; including:
– revenues from external customers;
– inter-segment revenues; and
– segment profit or loss;
• disclosure of an itemised reconciliation between earnings and
headline earnings per share;
• diluted earnings per share data must include the effects of all dilutive
potential ordinary shares. Contingently issuable shares (including
share issues which are subject to the fulfilment of conditions which
have not yet been fulfilled at the reporting date) should be included in
the calculation of diluted earnings per share if their issue would have
a negative impact on earnings per share;
• disclosure regarding the basis of preparation including a statement
that the information has been prepared in accordance with IAS 34;
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• information relating to business combinations; including:
– effective changes in the composition of the group during the
period, including business combinations, acquisitions or disposals
of subsidiaries and long-term investments, restructurings and
discontinuing operations;
– acquisition date of business combinations;
– percentage of voting instruments acquired;
– cost of acquisitions;
– if equity is issued or to be issued in payment for an acquisition,
disclose the number of equity instruments issued or to
be issued and the fair value of those instruments/basis for
determining the fair value;
– the amount of the acquiree’s profit or loss since acquisition date
included in the group profit for the period;
– the revenue and results of the group for the period, as if the acquisition
dates had been at the beginning of the period (pro forma); and
– any gain/loss recognised in the reporting period relating to the
business combinations effected during the period.
JSE guidance on audit report matters
The JSE notes that companies often publish additional voluntary
information with their financial results which is not covered by the
auditor’s report. The JSE therefore recommends the inclusion of the
following wording in audited or reviewed results announcements:
“The auditor’s report does not necessarily cover all of the
information contained in this announcement/financial report.
Shareholders are therefore advised that in order to obtain a full
understanding of the nature of the auditor’s work they should obtain
a copy of that report together with the accompanying financial
information from the registered office of the company.”
If the abovementioned wording is not included, it will be assumed that
all of the information is covered by the auditor’s report.
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Corporate Governance
The JSE requires compliance with the following corporate governance
requirements:
• There must be a policy detailing the procedures for appointments to
the Board. Such appointments must be formal and transparent and
a matter for the Board as a whole, assisted where appropriate by a
Nomination Committee;
• The Nomination Committee:
– must constitute only non-executive directors – majority must be
independent; and
– should be chaired by the Board chairman.
• There must be a policy evidencing a clear balance of power
and authority at board level, to ensure that no one director has
unfettered powers of decision-making;
• The issuer must have an appointed CEO and a chairman and these
positions must not be held by the same person. The chairman
must be an independent director or the issuer must appoint a lead
independent director, in accordance with the King Code (Alternative
exchange exempt);
• All issuers must appoint an Audit Committee and Remuneration
Committee and, if required, a Risk Committee and Nomination
Committee. The Annual Report must disclose:
– the composition of such committees;
– a brief description of their mandates;
– the number of meetings held; and
– other relevant information;
• The Annual Report must contain a brief CV of each director standing
for election or re-election at the annual general meeting;
• The capacity of each director must be categorised as executive,
non-executive or independent (see the Listing Requirements for
guidelines);
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• The Audit Committee must set a policy with regard to non-audit
services provided by the external auditor;
• All issuers must have an executive financial director (cannot hold two
jobs e.g. Financial Director and Managing Director);
• The Audit Committee must consider, on an annual basis, and satisfy
itself of the appropriateness of the expertise and experience of the
financial director. The fact that the Audit Committee has executed
this responsibility must be stated in the Annual Report; and
• The Board must consider and satisfy itself, on an annual basis, on the
competence, qualifications and experience of the company secretary.
The fact that the Board has executed this responsibility and the steps
taken by the Board to make this annual assessment must be included
in the Annual Report as well as an explanation as to why the Board
believes there is an arms-length relationship between itself and the
company secretary.
JSE guidance on audit committees
• The audit committee must comprise at least three independent nonexecutive directors.
• If an issuer has an independent non-executive chairman of the Board,
he/she may be a member of the audit committee, subject to the
following provisions:
– all the other members of the audit committee (at least two) are
independent non-executive directors;
– he/she may not be the chairman of the audit committee;
– the dual role (chairman of the Board and member of the audit
committee) must be specifically disclosed to shareholdings at the
annual general meeting (include in the relevant resolution); and
– shareholders must approve the appointment of the chairman to
the audit committee at the annual general meeting.
KPMG team
Nick Matthews
Director: Corporate Finance
M: +27 (0)83 452 8351
E: nick.matthews@kpmg.co.za
Mickey Bove
Director: Corporate Finance
M: +27 (0)83 703 2684
E: mickey.bove@kpmg.co.za
Robbie Cheadle
Associate Director: Corporate Finance
M: +27 (0)82 718 4592
E: robbie.cheadle@kpmg.co.za
Aamena Nagdee
Associate Director: Corporate Finance
M: +27 (0)82 718 5507
E: aamena.nagdee@kpmg.co.za
Taryn McAllister
Advisor: Corporate Finance
M: +27 (0)82 719 2652
E: taryn.mcallister@kpmg.co.za
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