Many companies have humble beginnings, but almost all business owners have a vision of seeing their company grow to become a large and successful enterprise.
One of the most significant milestones for any company can be when it has grown large enough to be listed on the stock market. Selling shares of a company in this manner (or ‘going public’, as it is often referred to), is often taken as an indication that the company in question is becoming a major player on the international market, and is a prestigious achievement for any business to attain.
About the JSE
In South Africa, the Johannesburg Stock Exchange (or JSE for short) has long provided a central hub on which various financial products, such as stocks and shares, can be traded. Today, it is a modern, fully electronic securities exchange capable of keeping up with the extremely fast-paced world of international finance.
Being listed on the JSE is often the first major step that South African companies take towards becoming international market forces.
Advantages to listing
In addition to the prestige involved, there are many advantages to listing a company on the JSE, including the ability to raise equity capital from shareholders, an enhanced ability to take out bank loans, increased interest from potential investors, employees, and customers, and the overall improvement of the company’s performance as a result.
As with any major business move, the process of listing a company involves certain defined steps that need to be taken. When considering making such a listing, it is important to be aware of these in order to ensure that no important procedures or considerations are left out.
The listing procedure
The first important step in listing a company on the JSE is to consult with and/or appoint professional advisors to determine whether the company should be listed in the first place. If so, a sponsor must be appointed in order to make the initial listing. This sponsor is responsible for ensuring that the company and its directors are capable of fulfilling the requirements of a listed company, and that all criteria for listing a company have been met. The sponsor is then tasked with submitting the required documentation for listing and acting as a liaison between the JSE and the company in question. A corporate advisor may also be appointed to further guide the process, although in many cases the sponsor fulfills this role as well.
In addition to professional advisors, sponsor, and corporate advisor, companies are generally advised to appoint legal advisors as well to facilitate the drafting of all necessary documentation and to ensure that the company is in compliance with all relevant legal requirements. An accredited independent accountant (being a person who is a registered accountant and auditor) is also required to report on the company’s financial position over the preceding three years. Transfer secretaries, public relations consultants, technical advisors, and printing firms are all often included to further facilitate the listing process in various ways.
The listing process generally takes between nine and thirteen weeks depending on various factors. By far the best way to ensure a speedy listing is to follow the prescribed timeline as closely as possible. First, the various advisors should be appointed and met with in order to consider all the implications for legal and financial matters. The preparation and drafting of necessary documents (such as the accountant’s report) should also begin as soon as possible.
Within three weeks, these documents should be finalised and ready for submission. Once all these are finalised, the official application for listing can be compiled and submitted to the JSE for informal comment. This provides the applicant for a chance to receive feedback before final submission, and clear up any inconsistencies or errors that may be present. Finally, after a period of five to eight weeks, formal approval should be granted and the company listed on the JSE itself.
Requirements for listing
The official requirements that a business must fulfill in order to qualify for listing on the JSE depends on which market the company wishes to be listed. The JSE operates two markets: the Main Board, and AltX.
In order to be listed on the Main Board, the company must meet the following principal criteria:
- A subscribed capital of at least R25 000 000 (this includes reserves but excludes minority interests, as well as revaluations of assets that have not also been evaluated by an independent expert within the last six months)
- At least 25 000 000 equity shares in issue;
- A profit history for the preceding three financial years that has been satisfactorily audited. At the time of the last audit, a minimum profit must be registered of at least R8 000 000 before tax and after a headline earnings adjustment.
- The business must be performing its regular activity either directly or through a subsidiaries. It must also be an independent entity that is supported by a historic revenue earning history and control over a majority share of its assets
- For companies with a majority of their assets invested in other JSE-listed , 20% of each equity securities class must be held by the public
- Certain other criteria apply to investment entities, mineral companies and property companies that wish to be listed on the JSE
In addition to the above requirements the following requirements apply for a company to be listed on AltX:
- A Designated Adviser (DA) must be appointed
- The applicant issuer must have at least R2 000 000 in share capital
- At least 10% of each equity securities class must be held by the public and the number of public shareholders must be at least 100
- All directors must complete the JSE-mandated ALTX Directors Induction Programme
- An executive financial director that is approved by the audit committee must be appointed
- A profit forecast must be produced for two years from the date of listing
- The applicant issuer’s auditors or attorneys must hold 50% of the shareholding of each director and the DA in trust
- A minimum of three directors, or 25% of all directors must be non-executive
