GOVERNANCE AND ETHICS
Learning Unit 5: The Governance of listed and State-owned companies
Theme 1: The Governance of listed companies
LO1: In layman’s terms, summarise the general principles of the JSE Listing
Requirements.
The JSE LR fall into two categories
1. The general principles
2. And the main body
For example, the sections, schedules, and practice notes which are delivered from the
application and the interpretation of general principles.
The JSE also has discretion to modify the application of any requirement in the main body in
exceptional circumstances.
The general principles, which are quoted from the JSE are set out below:
i. To ensure the existence of a market for the raising of primary capital, an efficient
mechanism for the trading of securities in the secondary market, and to protect
investors
ii. To ensure that security will be admitted to the list only if the JSE is satisfied that it
is appropriate for those securities to be listed
iii. To ensure that full, equal, and timeous disclosure is made to all holders of
securities and the public at large regarding the activities of an issuer that are
price sensitive
iv. to ensure that holders of relevant securities are given full information are afforded
adequate opportunity to consider in advance and vote upon any of the following:
1. substantial changes in an issuers business operation
2. other matters affecting a listed company's constitution or the rights of holders
of securities
v. to ensure that all parties involved in the dissemination of the information into the
marketplace, whether directly to holders of relevant securities or to the public,
observe the highest standards of care in doing so
1
, vi. to ensure that holders of the same class of securities of an issuer are accorded
fair and equal treatment in respect of their securities
vii. to ensure that the listing requirements, and in particular the continuing
obligations, promotes investor confidence in standards of disclosure and
corporate governance in the conduct of applicant’s issuers affairs and in the
market as a whole
The nature of the JSE LR is that they are frequently reviewed and accordingly the
importance of obtaining appropriate advice when dealing with the JSE LR cannot be over
emphasized.
LO2: Explain the legislative powers and authority of the JSE and what they entail.
The JSE is given wide powers – S1 of the JSE LR:
- To grant, defer, refuse, suspend or remove a listing of securities from the JSE list;
- Prescribe, enforce, rescind, or amend the JSE LR with which Listed Companies,
Listed Company group directors, sponsors, various experts and audit persons and
IFRS (accounting standards) advisers must comply.
The JSE is required to review all listed securities annually and does so by requiring all Listed
Companies to submit an annual compliance certificate ito LR 1.19 evidencing annual
compliance with the JSE LR
A company that has failed to comply may have its listing suspended or terminated.
Listed Companies group directors and audit persons may object to a JSE decision via a
formal procedure.
Only 2 matters are appealable in the JSE LR – a JSE initiated delisting and deregistration of
a sponsor
2
, Suspension and termination
The JSE has a general power to suspend trading of Listed Company’s shares at its instance
when a Listed Company is in breach of the JSE LR or it is considered in the public interest to
do so.
Prior to effecting such suspension, the JSE will consult with and receive representations
from the Listed Company’s board.
The JSE LR also provide for non-consultative automatic suspension where Listed Company
is in breach of certain JSE LR, namely:
- Financial reporting, submission of annual compliance certificates and cash company
requirements
Listed Company’s board can also voluntarily request the JSE to suspend trading of its
shares when Listed Company:
- is in financial difficulties, including provisional liquidation, business rescue, cessation
of business, CIPC issue of a ceased trading compliance notice or CIPC
deregistration
- there is a false market, being two levels of information in the market because of a
leak of confidential information which is unable to be cured by an announcement
When a Listed Company’s securities are suspended, the Listed Company must continue to
comply with the JSE LR and must report the status of curing the problem which gave rise to
the suspension monthly to the JSE and quarterly to Listed Company securities holders.
The JSE has the power to terminate a listing, subject to consultation with Listed Company
and will do so after a Listed Company has been suspended for a lengthy period, has been
unable to cure a suspension problem.
A voluntary termination of a listing is complex and is dealt with in corporate action tables.
Penalties for contravention
Subject to consultation, the JSE is empowered to censure a listed company and a listed
company group director publicly or privately, individually or jointly, in an event of a
3
Learning Unit 5: The Governance of listed and State-owned companies
Theme 1: The Governance of listed companies
LO1: In layman’s terms, summarise the general principles of the JSE Listing
Requirements.
The JSE LR fall into two categories
1. The general principles
2. And the main body
For example, the sections, schedules, and practice notes which are delivered from the
application and the interpretation of general principles.
The JSE also has discretion to modify the application of any requirement in the main body in
exceptional circumstances.
The general principles, which are quoted from the JSE are set out below:
i. To ensure the existence of a market for the raising of primary capital, an efficient
mechanism for the trading of securities in the secondary market, and to protect
investors
ii. To ensure that security will be admitted to the list only if the JSE is satisfied that it
is appropriate for those securities to be listed
iii. To ensure that full, equal, and timeous disclosure is made to all holders of
securities and the public at large regarding the activities of an issuer that are
price sensitive
iv. to ensure that holders of relevant securities are given full information are afforded
adequate opportunity to consider in advance and vote upon any of the following:
1. substantial changes in an issuers business operation
2. other matters affecting a listed company's constitution or the rights of holders
of securities
v. to ensure that all parties involved in the dissemination of the information into the
marketplace, whether directly to holders of relevant securities or to the public,
observe the highest standards of care in doing so
1
, vi. to ensure that holders of the same class of securities of an issuer are accorded
fair and equal treatment in respect of their securities
vii. to ensure that the listing requirements, and in particular the continuing
obligations, promotes investor confidence in standards of disclosure and
corporate governance in the conduct of applicant’s issuers affairs and in the
market as a whole
The nature of the JSE LR is that they are frequently reviewed and accordingly the
importance of obtaining appropriate advice when dealing with the JSE LR cannot be over
emphasized.
LO2: Explain the legislative powers and authority of the JSE and what they entail.
The JSE is given wide powers – S1 of the JSE LR:
- To grant, defer, refuse, suspend or remove a listing of securities from the JSE list;
- Prescribe, enforce, rescind, or amend the JSE LR with which Listed Companies,
Listed Company group directors, sponsors, various experts and audit persons and
IFRS (accounting standards) advisers must comply.
The JSE is required to review all listed securities annually and does so by requiring all Listed
Companies to submit an annual compliance certificate ito LR 1.19 evidencing annual
compliance with the JSE LR
A company that has failed to comply may have its listing suspended or terminated.
Listed Companies group directors and audit persons may object to a JSE decision via a
formal procedure.
Only 2 matters are appealable in the JSE LR – a JSE initiated delisting and deregistration of
a sponsor
2
, Suspension and termination
The JSE has a general power to suspend trading of Listed Company’s shares at its instance
when a Listed Company is in breach of the JSE LR or it is considered in the public interest to
do so.
Prior to effecting such suspension, the JSE will consult with and receive representations
from the Listed Company’s board.
The JSE LR also provide for non-consultative automatic suspension where Listed Company
is in breach of certain JSE LR, namely:
- Financial reporting, submission of annual compliance certificates and cash company
requirements
Listed Company’s board can also voluntarily request the JSE to suspend trading of its
shares when Listed Company:
- is in financial difficulties, including provisional liquidation, business rescue, cessation
of business, CIPC issue of a ceased trading compliance notice or CIPC
deregistration
- there is a false market, being two levels of information in the market because of a
leak of confidential information which is unable to be cured by an announcement
When a Listed Company’s securities are suspended, the Listed Company must continue to
comply with the JSE LR and must report the status of curing the problem which gave rise to
the suspension monthly to the JSE and quarterly to Listed Company securities holders.
The JSE has the power to terminate a listing, subject to consultation with Listed Company
and will do so after a Listed Company has been suspended for a lengthy period, has been
unable to cure a suspension problem.
A voluntary termination of a listing is complex and is dealt with in corporate action tables.
Penalties for contravention
Subject to consultation, the JSE is empowered to censure a listed company and a listed
company group director publicly or privately, individually or jointly, in an event of a
3
