The JSE has announced the eighth and ninth phases of the JSE Simplification Project which aims to simplify the JSE Listings Requirements (Requirements), now entailing the proposed amendments to Section 6 (Pre-Listings Statements), Section 7 (Listing Particulars), Section 4 (Conditions of Listing), Section 14 (Pyramid Companies), Section 15 (Investment Entities), Section 18 (Dual Listings and External Companies), Section 20 (Hybrid Securities) and Section 21 (AltX). This also includes a new Section 3 (New Listings).

The JSE invites comments to Sections 6 and 7 by 26 August 2024 and the remainder of the sections by 13 September 2024.

All of the sections have now been released for public comment. The JSE will release a final simplified consolidated version of the Requirements after the expiry of the public consultation process.

New Section 3: New Listings

• Applicants, sponsors and advisors should be able to visit only this section to view the listing criteria for all of the JSE’s listing offerings, being Main Board; the ALTX; Secondary Listings; Development Stage Company; Property Entities; Mining/ Oil and Gas Companies; Investment Entities; SPAC; Weighted Voting Share Structure; Preference Shares; BEE Segment; and Depositary Receipts.
• Applicants should also separately comply with the industry-specific sections.
• This section covers financial information, corporate governance and MOI approval.
• It also covers methods of listing (introduction, placing and offer for sale and subscription).

Section 4: Conditions of Listing

The entry criteria of listing offerings will generally remain same, save for the following:

• The existing subscribed capital calculation is prohibitive, which excludes items (i) recorded in the financial statements in terms of IFRS, (ii) substantiated by the business of the issuer and (iii) independently assured by the applicant’s auditor. The construct of net asset value has been introduced, which is calculated based on the audited financial statements of the issuer, as a simpler and more meaningful measure for determining suitability for listing.
• The existing three-year period of control over the majority of assets is unnecessarily prohibitive. The period of control has been revised to a 12-month period as this, together with the retained requirements for three years of financial history and the meeting of the profit test, is considered sufficient to ensure that the group is properly established.
• The exception to three years of financial history is maintained for development stage companies and an issuer group that is put together for purposes of a listing, with the 12-month period of control preserved in these instances.
• The net asset value construct has been carried across to all other listing entry criteria requiring subscribed capital of a certain amount.
• The provisions relating to a JSE discretion on listing criteria have been removed.
• Alt X corporate governance provisions are also covered in this section.

Section 6 (Pre-Listings Statement) and Section 7 (Listing Particulars)

• The concept of summary pre-listing statements and summary circulars is to be removed for Main Board issuers. Summary circulars will be maintained for Alt X issuers.
• The definition of circular will be amended to remove the exclusion of results, proxy forms and dividend or interest notices.
• The Requirements will be amended to cross-refer to the Companies Act requirements in ‘Appendix 1 to Section 7: Disclosure for a PLS’ to avoid duplication of the wordiness of PLS requirements. Prospectus requirements which are set out in the Companies Act will remain applicable to PLSs where the requirements overlap with PLS requirements. The proposed disclosure regime for a PLS does not mean that the PLS requires registration with or the involvement of the Companies and Intellectual Property Commission (CIPC). The JSE is merely mandating some of the disclosures required for a prospectus, for purposes of a PLS. However, if shares are being offered to the public, a prospectus will need to be registered with CIPC. The JSE remains the sole custodian of a PLS issued in terms of the Requirements.
• Certain paragraphs in ‘Appendix 1 to Section 7: Disclosure for a PLS’ contain bespoke JSE-required disclosures rather than cross-referring to the Companies Act (ie in the case of, inter alia, details required concerning controlling and major shareholders; statements of public shareholders; and financial information).
• The new disclosure regime, as set out above, will have an impact on the specific disclosures required for corporate action and transaction circulars in other sections, which will be remedied in the future.
• Obligations relating to working capital will no longer rest with the sponsors.

Section 14: Pyramid Companies

• Section 14 will be deleted in its entirety.
• Pyramid companies will be dealt with under the new listings section, under the general provisions.
• The existing test for a pyramid will be substantially retained, with the additional provision to assess whether the holding company is reliant on the listed controlled company: ‘is unable to demonstrate to the JSE that it has: (i) a business of substance; or (ii) a business that may qualify for listing, in its own right, without the interest held in the listed controlled company’.
• The holding company should be able to demonstrate that it is a ‘business of substance’, ie that it stands on its ‘own feet’, and does not merely serve as a flow-through from the listed controlled company level.
• A new listing of a pyramid company will be prohibited.
• An existing issuer will still be classified as a pyramid company if it meets the definition.
• More time will be afforded to cure the classification as a pyramid (it is proposed that this period should be two years), subject to conditions.

Section 15: Investment Entities

• The JSE clarified which exemptions from Section 4 apply in relation to the listing of investment entities. The exemption applies to 4.28(a) only, dealing with audited profit history and control. Control with a reasonable spread of assets will exclude the ability to actively participate in the management thereof (so that true minority interests can be held).  The control provision will now read as follows: ‘it must have a reasonable spread of direct interests in the majority of its assets and must have done so for a period of at least twelve months’.
• SPACs are to be housed with Investment Entities in Section 15, as they are investment vehicles.

Section 17: BEE Section

• A bespoke BEE Section has been created which is currently the subject of public consultation. Once approved, it will be added as a new Section 17.

Section 18: Dual Listings and External Companies

Secondary Listings:

• It is proposed that the lists of (i) approved exchanges and (ii) accredited exchanges be collapsed into one list, that will be known as approved exchanges for purposes of secondary listings, which will also include fast-track listing process.
• The approved list of exchanges will now comprise: Australian Stock Exchange; London Stock Exchange; New York Stock Exchange; Toronto Stock Exchange; Singapore Stock Exchange; Hong Kong Exchanges and Clearing Ltd; The Nasdaq Stock Market; Euronext Amsterdam; Euronext Brussels; Frankfurt Stock Exchange; Luxembourg Stock Exchange; and SIX Swiss Exchange.
• The period to qualify for the fast-track route will be reduced from 18 months to 12 months (to be listed on an approved exchange). 
• External companies will be moved to Section 3 (New Listings), as a matter to be considered when seeking a listing.
• Alt X: This will face no material changes, save for easing the business plan process for fast-track secondary listings.
• Dual Listed company structure: This structure has been simplified. A company of this sort can either have a primary or secondary listing on the JSE (no longer only primary); and can follow its primary exchange rules (no longer the most onerous of the two).
• Depositary Receipts: Depositary receipts have been moved from Section 19 (Specialist Securities) to Section 18, but this is currently the subject of public consultation.

Section 20: Hybrid Securities

• Historically, there has been confusion as to what constitutes a hybrid security. All of the instruments currently listed under the hybrid secure requirements are preference shares, so this section is to be removed in its entirety and titled ‘Preference Shares’.
• Weighted voting shares are to be housed in a new Section, along with preference shares, as these are bespoke share structures.  
• Issuers no longer need to apply to the JSE to determine if an instrument falls within this section.
• Previous uncertainty is to be cleared up with the clarification that all of the Requirements, except for those that have been specifically excluded, will apply to preference share issuers.

Section 21: Alt X

• All the provisions relating to venture capital companies have been removed.
• The involvement of auditors, attorneys and CSDP concerning lock-up of shares held by the directors and the DA have been removed, as these are not regulated parties in terms of the Requirements.
• The provisions of Section 8 are generally applicable to financial information.
• The concept of a summary circular and PLS has been removed.

Schedules

• Part I and II documents will be moved to the JSE forms portal. Certain forms have been removed.
• Schedule 5 on Independent Fairness Opinions has been significantly reduced. The JSE will no longer approve experts and the responsibility for their appointment will be placed on the directors, with an imposed obligation to review competency and independence. The board of directors is the appropriate body to appoint an expert. The JSE will only regulate independence indicators and the disclosure items for a fairness opinion.
• Schedule 11 on Rescue Operations will be deleted in its entirety. Business rescue proceedings are now a well-established process under the South African companies regime. The JSE will require disclosure through SENS when an issuer is placed in business rescue and will require that certain functions in terms of the Requirements can be continued. If not, the JSE may consider the suspension of the issuer. 
• Schedule 14 on Share Incentive Schemes will not be amended at this stage as the impact of the Companies Amendment Acts on the Requirements (particularly the non-binding vote on remuneration) still needs to be considered.
• Schedule 10 on Requirements for the Memorandum of Incorporation is to be amended in certain provisions to remove duplication. Continuing obligations will now require that a SENS announcement be made for general meetings.
• A new schedule on Pre-Issued Trading and Price Stabilisation will be introduced: These provisions apply to new listings and price stabilisation also applies to issues for cash. An enabling provision will be included in the new Section 3 (New Listings) and 6 (Corporate Actions), affording the opportunity to undertake pre-issued trading and price stabilisation with reference to the new schedule. No amendments were made to price stabilisation and pre-issued trading was only simplified.
• A new schedule will be created to accommodate Appendix 1 to Schedule 11 (Guidelines on the publication of information). In this regard, see the discussion on ‘Continuing Obligations’ above.

Written by Mili Soni, Senior Associate, Bowmans South Africa