On 22 May 2017, the Johannesburg Stock Exchange ("JSE") announced that it has made amendments to the JSE Listings Requirements in relation to the adoption of the King IV Report on Corporate Governance and other governance arrangements, including a race diversity policy and the publication of a compliance report pursuant to the Broad-Based Black Economic Empowerment ("B-BBEE") Amendment Act, 2013. It has also circulated a letter confirming the implementation dates of certain amendments, notwithstanding an effective date of 19 June 2017.
Although the JSE encourages early implementation, the implementation dates for the amendments are as follows:
Under the amended Listings Requirements, the specific corporate governance requirements that issuers are obliged to implement are expressly stated to be mandatory. In respect of other King IV practices, issuers are, as before:
- required to disclose a narrative statement of how they have applied the principles set out in King IV, providing explanations that enable shareholders to evaluate how the principles have been applied; and
- required to disclose a statement addressing the extent of their application of the principles of King IV and the reasons for each and every instance of non-application during the accounting period.
King IV follows an "apply-and-explain" approach in that a company is required to explain (in the form of a narrative account) which recommended practices have been implemented and how these achieve or give effect to a King IV principle, to reveal how judgement was exercised when considering the recommended practices. Under King IV, a company is not required to conduct a quantitative assessment of, and then disclose, whether or not each principle has been implemented. The amended Listings Requirements have, however, retained the requirement to address the extent of non-application.
The specific corporate governance requirements under the amended Listings Requirements include the following:
- all issuers, in accordance with King
IV, must appoint (i) an audit committee; (ii) a committee
responsible for remuneration; and (iii) a social and ethics
- the composition of such committees must comply with the Companies Act, 2008 and should be considered in accordance with the recommended practices in King IV on an apply-and-explain basis, provided that each committee must comprise at least three members;
- a brief description of the committee mandates, the number of meetings held and other relevant information must be disclosed in the annual report.
- the board or the nomination committee of the issuer must have a policy on the promotion of race diversity at board level. This is in addition to the requirement that the board or the nomination committee of the issuer must have a promotion of gender diversity policy at board level. The issuer must confirm this by reporting to shareholders in its annual report on how the board or the nomination committee has considered and applied the policy of race diversity in the nomination and appointment of directors. If applicable, the board or the nomination committee must report on the progress of agreed voluntary targets;
- the issuer's remuneration policy and implementation report must be tabled every year for separate non-binding advisory votes by shareholders at the annual general meeting;
- the remuneration policy must record the measures that the board commits to take if either the remuneration policy or the implementation report, or both, are voted against by 25% or more of the votes exercised; and
- if either the remuneration policy or the implementation report, or both, are voted against by shareholders exercising 25% or more of the voting rights exercised, the issuer must, in its voting results announcement, provide for (i) an invitation to dissenting shareholders to engage with the issuer; and (ii) the manner and timing of such engagement.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.