There have been calls for the JSE to amend its Listings Requirements to allow listed companies to issue shares more quickly in times of crisis ‘without interference from shareholders’.
The JSE’s regulatory framework already provides listed companies with various capital raising methods, including some expedited methods. Having to obtain shareholder approval is an important element of this regulatory framework because it encourages transparency and accountability to shareholders.
The time it would take to implement some of these methods has recently been reduced by the introduction of some process adjustments, by the JSE. The principal adjustments are:
Expedited review and approval process
On 17 April 2020, the JSE advised that it will reduce the timelines applicable to rights offer circulars during the COVID-19 pandemic, provided that the JSE has capacity. The first round of informal comments on a rights offer circular will be made within 48 hours. The second round of informal comments will be made within a further 48 hours, leading to informal approval. The JSE will then decide whether to grant formal approval within 24 hours after informal approval had been granted. This will significantly reduce the JSE’s review and approval time.
This expedited review and approval process will only apply to rights offer circulars (that is, non-renounceable rights offers, renounceable rights offers and claw-back offers). These are disclosure-based and do not require the approval of shareholders. Where the circular involves foreign issuers and shareholders, confirmation must be sought from the JSE that the expedited review and approval process will apply. The expedited timelines are subject to JSE capacity and compliance with the JSE Listings Requirements upon the first submission. If other capital raising circulars require a faster review and approval than usual, issuers and sponsors can contact the JSE, which will consider each request on a case-by-case basis.
Expedited shareholder approval process
On 29 May 2020, the JSE advised that the requirement for listed companies to hold a shareholders’ meeting before they can issue shares for cash has been suspended. Subject to the listed company’s memorandum of incorporation, the company can now obtain the consent of shareholders for the issue of shares for cash through a written resolution rather than having to hold a shareholders’ meeting (whether physical or virtual).
Listed companies are required to distribute written resolutions to shareholders for approval and within 24 hours, to release an announcement on SENS that sets out the details of the proposed resolution. Shareholders have 20 business days to vote on an issue of shares for cash. Shareholders can begin voting immediately and the company can act once the requisite 75% majority of shareholders entitled to vote has been obtained, even if this occurs before the 20 business day period has expired. This can be much quicker than calling and holding a virtual shareholder meeting, which would still require 15 business days’ notice.
This exemption will expire at the end of December 2020.