Issuers’ announcement of directors’ dealings in securities: important changes to the JSE listings requirements with effect from 2 December 2019

The Financial Sector Conduct Authority has released Board Notice 180 of 2019, stating that certain approved amendments to the JSE Listings Requirements will go into effect as from 2 December 2019. The draft amendments were first released in July 2019. The amendments cover a number of issues relating to both primary and secondary listings. Among the results of the amendments are that issuers must now announce pledges of shares by directors, company secretaries and their associates, which pledges were not previously required to be disclosed unless enforced, and transactions by prescribed officers and their associates, which transactions were generally not previously required to be disclosed.

Paragraph 3.63 of the JSE Listings Requirements requires that an issuer announce the details of transactions in “securities” (defined in the FMA to include, inter alia, ordinary shares, preference shares, debt securities, etc) of the issuer by certain parties, including the issuer’s directors and the company secretary or their “associates” (defined in the JSE Listings Requirements to include inter alia, close family members, trusts of which such a person is a beneficiary and companies controlled by such a person). Finally, the term “transaction” is defined in paragraph 3.64 of the JSE Listings Requirements to include inter alia, purchases and sales of the issuer’s securities, as well as derivatives referencing the issuer’s securities and any other transaction providing direct or indirect exposure to the issuer’s share price.

With effect from 2 December 2019, the announcement requirements will be expanded significantly.

The definition of “transaction” will be expanded to include the use of the issuer’s securities as “security, guarantee, collateral or otherwise granting a charge, lien or other encumbrance over the securities” (paragraph 3.64(h)). Issuers will now be required to announce its directors’, company secretaries’ and prescribed officers’ pledges of rights in the issuers’ securities (including rights in listed shares for which a notation is made in accordance with section 38 of the Financial Markets Act 2012). Other transactions used for security purposes, such as stock loans, for example, may arguably also be captured by this amendment.

The explanatory memorandum that was released with the draft changes in July pointed out that disclosure of such security arrangements is currently only required at the time of enforcement against the security, and not at the time that the relevant security agreement is entered into. As amended, paragraph 3.64(h) states that a transaction (for which an announcement is required) occurs at the time a security agreement is entered into, at the time when a right of the secured party is exercised, and at the time that an existing security agreement is amended or terminated.

In accordance with the amended paragraph 3.63(b)(ix), the announcement of a transaction under paragraph 3.64(h) must disclose not only the number, value and class of securities being used as security, but also the nature, term and amount of the financial obligation that is secured by the issuer’s securities.

Finally, issuers will also be required to announce transactions entered into by their prescribed officers (and their associates), in addition to those by directors and company secretaries (and their associates).

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.