Legal updates and opinions
Post Author
News / News
New treatment of fractional entitlements in terms of the JSE listings requirements
A recent change to the Johannesburg Stock Exchange (JSE) Listings Requirements, which deals with the manner in which entitlements to fractions of securities are treated, may necessitate an amendment to the memorandum of incorporation (MOI) of a listed company.
INTRODUCTION
Fractional entitlements will typically arise in the context of a capitalisation issue, a rights offer or a scrip dividend. For example, a shareholder may be offered, in lieu of a cash dividend, 1.65 shares for every 100 shares held. Fractional entitlements may also arise in the context of a scheme of arrangement or an unbundling.
Only whole shares, and not fractions of shares, may be issued by a company and traded on the JSE. Previously, the Listings Requirements provided that all allocations of securities by a listed company will be rounded up or down, based on the standard rounding convention (i.e. an allocation will be rounded down to the nearest whole number if it is less than 0.5 and rounded up to the nearest whole number if it is equal to or greater than 0.5).
LISTINGS REQUIREMENT
In terms of the amendment to the Listings Requirements, allocations of securities must now be rounded down to the nearest whole number and shareholders must receive a cash payment for the fractions of securities to which they would otherwise have become entitled. The Central Securities Depository Participants and brokers will then sell the shares constituted by the aggregation of the fractions in the open market.
CONCLUSION
If a listed company’s MOI provides for fractional entitlements to be rounded up or down, based on the standard rounding convention, it has until 1 May 2017 to amend its MOI to bring it into line with the change to the Listings Requirements. Until such time as the company has amended its MOI, the provisions of the MOI, and not the amended Listings Requirements, will apply in relation to fractional entitlements. A listed company must clearly state the rounding convention being applied in all relevant corporate action announcements.
Click on the link if you’ like to more information on Werksmans expertise in the Corporate Mergers & Acquisitions sector.
Latest News
Mind the Conduct: A Guide to COFI – Part 5: Governance and Accountability
by Hilah Laskov, Director Introduction In this article series, we take a deep dive into the South African Conduct of [...]
Misuse of the business rescue process – failure before it begins
by Dr. Eric Levenstein, Director and Head of Insolvency & Business Rescue and Amy Mackechnie, Senior Associate Business rescue was introduced [...]
Constitutional Court clarifies rights of innocent contractors under invalid state contracts
by Sarah Moerane, Director and Kuhle Joja, Associate In Minister of Defence and Military Veterans v Zeal Health Innovations (Pty) [...]
Untangling the mischief of section 43 of the Electronic Communications Act: A missed opportunity in the Amendment Bill
by Corlett Manaka, Director and Head of Disputes, Akhona Bilatyi, Director and Koketso Rapoo, Senior Associate On 12 March 2026, [...]
A charge by any other name would smell as sweet
by Bradley Workman-Davies, Director The Labour Appeal Court's judgment in Machi v Chep SA (Pty) Ltd and Others serves as [...]
When a misdirected email becomes a data breach: The Information Regulator issues an enforcement notice on internal and accidental security compromises
by Armand Swart, Director, Hlonelwa Lutuli, Associate and Isabella Keeves, Candidate Attorney On 22 May 2026, South Africa’s Information Regulator [...]
