The JSE Limited (‘the JSE’), which advocates for enhanced corporate governance and an improvement in companies’ financial disclosure reporting mechanisms, recently published draft amendments to the JSE Listings Requirements (‘the Listings Requirements’).
Pursuant to the promulgation of the Companies Amendment Act (‘the Amendment Act’) and Companies Second Amendment Act, neither of which is in force yet, the proposed modifications seek to align the Listings Requirements with sections 30A and 30B of the Amendment Act, which regulate shareholder approval of remuneration policy and reporting. To that end, the draft amendments, which were circulated for comment, alter the following corporate governance-related provisions:
Deletion of paragraph 3.84(j)
Introduced in 2017, paragraph 3.84(j) of the Listings Requirements provides for the tabling of a company’s remuneration policy and implementation report for shareholders’ non-binding advisory votes at annual general meetings. In accordance with sections 30A and 30B of the Amendment Act, all state-owned and public companies will now be required to prepare and submit a remuneration policy and accompanying remuneration report for the approval of shareholders. Given the incorporation of this new requirement, the JSE is of the view that the significance of paragraph 3.84(j) has fallen away and thus recommends its deletion.
Modification of the foreign primary issuers requirement
Since foreign companies with a primary listing on the JSE – or those seeking same – are not subject to the provisions of the Companies Act, the Listings Requirements regulate remuneration for foreign primary issuers. As such, the JSE suggests largely retaining the requirement for the tabling of the remuneration policy and implementation report for non-binding advisory voting on remuneration at AGMs for foreign primary applicant issuers.
In addition, the JSE proposes that the invitation for dissenting shareholders to engage with the issuer should be triggered in instances where 50% or more of exercised votes oppose the remuneration policy, remuneration report, or both – up from 25% or more. Notably, this amendment aligns with the provisions of the Amendment Act.
Removal of Schedule 14: Requirements for share incentive schemes
For the JSE, remuneration, inclusive of incentive schemes, is adequately covered by the disclosure mechanisms under section 30(6) of the Companies Act read with sections 30A and 30B of the Amendment Act, which impose shareholder approval of tabled remuneration policies and reports. Accordingly, it recommends the wholesale removal of Schedule 14 from the Listings Requirements, which currently outlines the requirements for share incentive schemes.
Introduction of new provisions: Dilutive share schemes
Relatedly, the JSE intends to introduce new provisions governing dilutive share schemes. Set out under new paragraphs 5.54 to 5.56, the draft requirements for dilutive share schemes include specifying the category of participants and a cap on the total number of equity securities that may be issued. With the exception of regulating the approval of dilution to shareholders, basic content of dilutive share schemes, and general governance provisions, the JSE envisages playing a ‘reduced role’ in the monitoring of such schemes.
Pursuant to the removal of Schedule 14 and paragraph 3.84(j) from the Listings Requirements, the JSE proposes various minor amendments to other provisions to further align the instrument with the new corporate governance provisions of the Amendment Act.
For further information or legal advice on the JSE Listings Requirements, contact our commercial law specialists at commercial@stbb.co.za.
Access the JSE’s draft amendments here.
