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
Werksmans POPIA e-learning Course
Werksmans POPIA e-learning Course The Werksmans Protection of Personal Information Act (“POPIA”) e-learning course will provide your business and staff [...]
POPIA: A Guide to the Protection of Personal Information Act of South Africa
An Introduction to POPIA POPIA or POPI was promulgated on 26 November 2013. The Protection of Personal Information Act (POPIA) [...]
Large fines show FSCA is focused on enforcement to leave the grey list – a red flag for non-compliant financial services providers as more fines likely
Gone are the days of box-ticking. The FSCA has imposed penalties on financial services providers for non-compliance with FICA The [...]
Shifting gears and driving competition: Proposed changes to the Guidelines for Competition in the South African Automotive Aftermarkets
The Competition Commission is proposing changes to its Guidelines for Competition in the South African Automotive Aftermarkets ("Guidelines"), and interested [...]
The AI National Policy: South Africa’s initial step to establish an AI policy and regulatory framework
At the AI Government Summit on 5 April 2024, the Department of Communications and Digital Technologies ("DCDT") launched South Africa's [...]
Striking a balance: The impact of strike violence on protected strikes
Danelle Plaatjies - Candidate Attorney and Hanan Jeppie - Candidate Attorney Issue Whether a protected strike that was characterised [...]
