Big changes coming to the JSE 

The Financial Sector Conduct Authority (FSCA) has approved amendments to the JSE’s Listing Requirements, which come into effect on 23 September 2024. 

These changes specifically deal with market segmentation, enabling the JSE’s Main Board to split into the Prime and the General Segment. 

This new structure aims to offer varying levels of regulation tailored to the size and liquidity of listed companies to make it more attractive for smaller companies to join the exchange. 

Africa’s largest stock exchange has been plagued by a delisting crisis over the past few decades, with the number of listed companies dropping from 850 in the 1990s to less than 300 in 2024. 

This has largely been attributed to overregulation and unfavourable market conditions, as well as the rise of private capital markets. 

Many South African companies have also gone overseas to search for more liquidity and greater pools of capital to fund their expansion. 

The JSE has been aware of these challenges for some time and has worked to simplify its listing requirements and reduce its regulatory burden on companies. This is part of its multi-phase Simplification Project. 

As a part of the project, the JSE announced last year that the FSCA had approved amendments to the JSE Listings Requirements regarding financial reporting disclosures.

On Tuesday, it announced that it had received approval from the FSCA regarding the segmentation of its market into the Prime and General segments.  

The General Segment affords issuers on the Main Board listing with a different application of certain provisions of the Listings Requirements. 

Issuers seeking to apply for the General Segment can submit an application to the JSE from 23 September 2024. 

This segment aims to give companies meaningful regulatory relief whilst maintaining transparency and disclosure.

Some of the benefits include significant cost savings, more efficient and cost-effective financial reporting, greater flexibility for boards, and more enabling capital-raising requirements.

“We believe it will create a flexible and enabling environment for certain companies listed on the Main Board to raise capital and undertake corporate actions within an appropriate and relevant regulatory framework,” says Andre Visser, the director of Issuer Regulation at the JSE.

The General Segment offers the following advantages to companies –

• An automatic annual rolling general authority to issue shares for cash without shareholders’ approval, representing up to 10% of the issuer’s issued share capital;
• A general repurchase authority not requiring shareholders’ approval, not exceeding 20% in any one financial year;
• A specific repurchase authority not requiring shareholders’ approval, subject to it not involving related parties and does not exceed 20% in any one financial year;
• Removal of fairness opinions for related party corporate actions and transactions, with more focus being placed on governance arrangements and transparency (agreements open for inspection), and exclusion from voting for related parties and associates;
• Removal of the requirement to release results announcements within three months. Issuers will only be required to prepare an annual report within four months
• Removal of the preparation of pro forma financial information but rather the inclusion of a detailed narrative on the impact of the transaction/corporate action on the financial statements;
• Increasing the category one percentage ratio to 50% or more (increase by 20%, currently 30%), which increases the category two thresholds accordingly;
• Requiring only two years of audited historical financial information for the subject of a category one transaction (currently three years of audited historical information);
• Increasing the small-related party transaction percentage ratio to 3% and less than or equal to 10% (increase from 0,25% and 5%); and
• Increase the classification of a material shareholder from 10% to 20%.

Classification into the General Segment is only available to Main Board issuers who are not included in the FTSE/JSE All Share Index.

The JSE said it remains committed to creating an enabling environment for listed companies and continually assesses its Listing Requirements to ensure they are relevant and applicable.