Securities administration - South Africa
Asset servicing data collection
The information source used in South Africa is mainly limited to Strate as primary source for all events except advice of AGM/EGMs. This information is sent by Strate electronically through SWIFT advices. Other sources include JSE’s Securities Exchange News Service (SENS) system, Reuters, company notices and local English press.
Income collection
For equity type securities, the JSE introduced a new asset servicing model with the introduction of Strate. This model involves a Last Day to Trade (LDT), Record date and Payment date. Shareholders who are registered holders of dematerialised securities on Record date are paid the income on Payment date by Strate, via their CSDP (non-controlled clients) or broking member (controlled clients). The LDT ensures that the electronic register is correct and up-to-date on Record date.
| Market Record date | Ex-date | Basis for entitlement | Standard interest calculation rule | |
| Coupon payment | Varies | Government bonds (Gilts): Payment date -10 days Corporate bonds: Payment date -1 day | Settled position on Record date | Actual/365 |
| Dividend payment | Payment date -1 (=LDT +3) | LDT +1 | Settled position on Record date a | Not applicable |
a. All deals traded before or on LDT (= Record date -3) are entitled to the dividend.
Corporate actions
Most common corporate events
In addition to the usual income payments, the main corporate EVENT types in South Africa include the following:
- Capital change or reorganisation
According to the JSE Listings Requirements, a company seeking a listing of its shares on the JSE is obliged to appoint a sponsor.
For a new issue, a prospectus must be lodged with the Registrar of Companies for approval. When the prospectus is published, the public is invited to subscribe in accordance with the method of issue decided upon by the company, which can be any combination of the following:- Public Issue;
- Public Tender;
- Private Placing;
- Offer for Sale.
For a private placing, the sponsoring broker is required to place an agreed proportion of the shares (at least 30% of the actual number being issued to the public) with the broker’s clients and with other members of the JSE.
- Rights issue
In a rights issue, a company offers its existing shareholders the opportunity to purchase additional securities at a stipulated price. A typical rights Issue is handled as 3 consecutive corporate events, as follows:- Rights Issue: Nil-paid letters (NPL) are created based on the holdings of the mother share. NPLs can be traded in parallel with the mother share until expiration.
- Rights Closure: NPLs are wiped out after the closing of the take-up period.
- Rights Take-up: Customers can instruct to take up the rights to receive the new shares at a stipulated subscription price.
- Exchange offer
In an exchange offer, the issuer offers to exchange its securities for those of another issuer. - Takeover or merger
A takeover or merger can take many forms but it usually involves the combining of two or more entities through the direct acquisition by one of the net assets or total issued share capital of the other. Shareholders of the “target” company are offered shares in the “bidder” company to replace their existing holding. - Conversion
A conversion is an exchange of one security of an issuer for another type of security of the same issuer. An example would be the exchange of “new” ordinary shares for “old” preference shares. - Name change
In a name change, certificated shareholders are required to return all old certificates to the company in exchange for certificates bearing the new name. For dematerialised securities held via a CSDP, shareholders will automatically receive the new securities bearing the new name. - Distributions
The following types of distribution are made in South Africa:- Bonus Shares or Capitalisation Awards: the dividend is paid in stock instead of cash.
- Unit Trust Distribution: the Unit Trust holder is given the option to receive dividend payment either in cash or in stock (as additional units).
- Split/Consolidation: the division of the outstanding shares of a corporation into either a larger number or (in the case of a consolidation) a smaller number of shares with equitable par value, without changing the sum of the total share capital.
Organisation of AGM/EGMs
Every company in South Africa is required to hold an AGM open to all shareholders.
Any business matters may be brought up at the AGM in addition to the election of officers and directors when appropriate.
Proxy voting and meeting attendance
It is common practice in South Africa to issue proxies on request directly to the shareholder who is to attend the meeting.
Certificated shareholders receive communication directly from Transfer Secretaries. At the client’s instruction, the nominee company holding certificates will arrange for voting on his or her behalf.
For dematerialised securities, shareholders may be on the sub-register or held within a nominee register. Sub-register holders are entitled to attend and vote at any meeting. The beneficial shareholder within a nominee has the option either to request a proxy or letter of representation from his nominee and attending himself or to instruct his nominee how to vote. The nominee cannot vote shares without a specific instruction from the beneficial owner.
Other market specifics
Last Day to Trade minus 5 days (LDT-5) is the date on which the corporate event and its details become irrevocable such that no further changes to any of the pertinent details can be made by the issuer and the corporate event can only be cancelled under specific circumstances. This applies to companies with their primary listing in South Africa.
LDT itself is the last date on which anyone can trade on-market in order to qualify for or participate in the corporate event. From LTD+1, all trades on the JSE are “ex dividend”, excluding the entitlements. 1
However, according to the Strate rules and directives, a corporate event can be cancelled prior to record date if a “higher authority” makes a decision affecting the outcome of the event.
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1. Account transfers of securities are not permitted between LDT+1 and record date where there is a pending corporate event and may incur a Strate penalty.