Legal updates and opinions
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
Strike action in circumstances where there has been a long delay between the issuing of a certificate of outcome and the subsequent election to embark on a strike
PRASA t/a Metrorail v SATAWU and Others (C190/2016) ISSUE Whether a strike is protected in circumstances where there has [...]
Is length of service reason to pay different salaries to employees performing the same functions?
Pioneer Foods (Pty) Ltd v Workers Against Regression (WAR) & others ISSUE Whether length of service is a [...]
Is a trade union entitled to organisational rights in terms of the LRA after acquiring majority representation at a single branch?
Professional Transport and Allied Workers Union obo members / Professional Aviation Services [2016] 4 BALR 421 ISSUE Whether a [...]
Asset for share transactions – beware of selling your shares within 18 months especially in the context of a share buy-back
To prevent tax considerations from discouraging the incorporation of a business, a specific form of ‘rollover relief’ is available when an asset [...]
A new era dawns – criminalisation of cartel conduct
On 22 April 2016, a Presidential Proclamation (“Proclamation”) appeared in the Government Gazette which confirmed that the provisions contained in [...]
The employer’s responsibility during the transfer of an employee
Senne and others v Fleet Africa [2016] ZALCJHB 48 ISSUE One of the automatic consequences of a transfer in [...]
