COMPANY LAW UPDATE
DEBRIEF ON THE DTI COMPANY LAW SEMINAR
In our last
Corporate Round-up, we reported that the Department of Trade and Industry (DTI) is considering amendments to the Companies Act 2008. The recently-released DTI's 2016/2017 annual report provides additional information in relation to the extent of the amendments and the timing for the amended legislation. The DTI's annual report indicates that the Companies Amendment Bill (Bill) was developed and will be processed in 2017/2018. The Bill seeks to address issues relating to the social and ethics committee, the disclosure of beneficial ownership, the rotation of audit firms, and public interest score. Key stakeholders such as the Independent Regulatory Board for Auditors, the South African Institute of Chartered Accountants and the Banking Association of South Africa were consulted on various issues relating to the Bill, including the issues of the rotation of mandatory audit firms, public interest score, and financial distress.
EQUITY CAPITAL MARKETS
NOTIFICATION OF CHANGE IN AUDIT FIRM
In light of recent enquiries received by the Johannesburg Stock Exchange Limited (JSE) and in a move to increase transparency, the JSE announced that issuers are required, as of 20 September 2017, to publish a SENS announcement informing investors of the termination or resignation of the issuer's audit firm. Previously, the JSE had the discretion to request an issuer to publish an announcement informing shareholders of the termination or resignation of the issuer's auditor. The mandatory announcement must be published without delay and by no later than the end of the business day following the decision by the issuer to terminate or after receipt of the audit firm resignation. The announcement must include the following information:
- whether the change of audit firm was initiated by (i) the issuer or (ii) the audit firm;
- the reason(s) for the change of audit firm;
- the effective date of the change of audit firm; and
- the name of the newly appointed audit firm (unless none has yet been appointed in which case this fact must be disclosed).
Appropriate amendments will be made in due course to the JSE Listings Requirements to reflect this new requirement. It seems that the new requirement will only apply to changes in audit firm and not to designated individual auditors.
ACCREDITATION OF AUDITORS BY THE JSE
The JSE also made amendments to the JSE Listings Requirements relating to the accreditation of audit firms and individual auditors, among others advisers. The changes became effective on 15 October 2017. The changes come amid intense scrutiny of KPMG SA. The amended requirements set out strict accreditation mechanisms, eligibility criteria for accreditation and the role and responsibilities of audit firms and individual auditors and other accounting specialists. Only an audit firm accredited by the JSE may perform the statutory audit of a listed company.
Click
here to read the the amended requirements.
CLARIFICATION IN RELATION TO PUBLICATION OF BBBEE ANNUAL COMPLIANCE REPORT
In June 2017, the JSE introduced a new provision requiring issuers to publish their annual compliance prepared pursuant to section 13G(2) of the Broad-Based Black Economic Empowerment Amendment Act 2013 (BBBEE Amendment Act), through a notice of availability on SENS and to make the report available on the issuer's website. The JSE issued a guidance letter in October 2017 confirming that this requirement is only applicable to primary listed issuers that have a reporting obligation pursuant to the BBBEE Amendment Act. The JSE further clarified that:
- secondary listed issuers on the JSE are not required to comply with this publication requirement; and
- foreign primary listed issuers should seek legal advice to determine whether they have a reporting obligation pursuant to the BBBEE Amendment Act and therefore whether they need to comply with the publication requirement. These issuers should send the legal advice they obtained, by email to the JSE.
MANDATORY AUDIT FIRM ROTATION
Since announcing that mandatory audit firm rotation would be a requirement for listed companies from 2023, the Independent Regulatory Board for Auditors (IRBA) has been tracking the results of shareholder voting at annual general meetings with respect to the reappointment of auditors. A visible trend towards voting against the reappointment of auditors is developing, with 27% of the surveyed ordinary resolutions increasing the opposing votes by up to 40%. This appears to be the case, particularly for those companies where the tenure is excessively long.
Click
here to read the data collected by the IRBA.
NEW SECURITIES EXCHANGE
The Financial Services Board granted Equity Express Securities Exchange (Proprietary) Limited (EESE) a licence to operate a securities exchange in terms of the Financial Markets Act 2012. EESE becomes the fourth recently licensed securities exchange in South Africa which hopes to compete with the JSE. EESE promises reduced listing and compliance costs to prospective issuers. EESE's listing requirements and exchange rules are available on their
website.
COMPETITION LAW UPDATE
NEW MERGER NOTIFICATION THRESHOLDS AND FILING FEES
New merger notification thresholds for intermediate mergers compulsorily notifiable to the South African competition authorities, as well as new merger filing fees for intermediate and large mergers, were put in place on 1 October 2017. Businesses currently planning mergers in South Africa may have to consider whether these new merger notification thresholds and filing fees will have any effect on the regulatory aspects of their transactions. The changes are summarised below:
- the new threshold for an intermediate merger will be met where: (i) the acquiring and target firms have combined turnover or assets (whichever combination is higher) of ZAR 600 million or more (currently the merger threshold amount is ZAR 560 million); and (ii) the target has turnover or assets (whichever is the higher) of at least ZAR 100 million (currently the merger threshold amount is ZAR 80 million);
- the higher thresholds for large mergers (combined threshold of ZAR 6.6 billion and target firm threshold of ZAR 190 million) remains unchanged (for the time being); and
- the merger filing fees will be: (i) ZAR150 000 (previously ZAR100 000) for an intermediate merger; and (ii) ZAR500 000 (previously ZAR350 000) for a large merger.
