CORPORATE

ACTIONS
HAND BOOK
1. Executive summary P.1 6. Types of corporate events and P.46
2. Introduction P.3 complexities
3. Legislative environment P.5 Definitions P.46
The Prudential Authority (PA) P.5 Event types P.46
The Financial Sector Conduct Authority (FSCA) P.5 7. Industry problems highlighted P.70
SRDII and FATF P.5 Flow of information P.70
Companies Act 71 of 2008 P.6 Adherence to market practice P.71
Financial Markets Act 19 of 2012 P.8 Spreadsheets P.71
JSE Listings Requirements P.8 Disclosure of personal and confidential P.74
information
Strate Rules P.9
Automation of manual processes P.74
Strate Directives P.9
Corporate action timelines P.74
Financial Intelligence Centre Act 38 of 2001 P.9
Trading in entitlements P.75
Protection of Personal Information Act 4 of P.10
2013 Taxation P.75
4. Market model P.11 8. Case Study P.76
The nominee structure P.11 9. Glossary P.82
Principles of corporate actions P.12 10. Acknowledgements P.88
The relevance of SWIFT and Securities Market P.14 11. Annexures P.90
Practice Group (SMPG) JSE Schedule 2 Form H P.90
Generic corporate action timelines P.15 Event Classification P.90
Basic steps in processing a corporate event P.15 Strate Corporate Actions Directives P.90
Generic exception handling P.17 Companies Act 71 of 2008 P.90
A bird’s eye view of corporate actions in 2022 P.17 Financial Markets Act 19 of 2012 P.90
Factors contributing to complexity in P.18 JSE Listings Requirements P.90
corporate actions Issuer Regulations Guide P.90
5. Role-players P.22 Impact of the Shareholder Rights Directive – P.90
The role of issuers P.23 PWC July 2020
The role of exchanges P.26 SMPG Event Template 2022 P.90
The role of the sponsor P.30 SSRN: Why do public companies go private by P.90
The role of the Central Securities Depositories P.31 Andile Nikani and Mike Holland
The role of the transfer secretaries P.33 References P.90
The role of the brokers/members P.35 Questions posed in engagement with P.90
stakeholders
The role of CSD Participants P.38
The role of administrators P.41
The role of institutional investors P.43
The role of the legal fraternity P.45
1. EXECUTIVE SUMMARY
The rationale for a Corporate Actions Handbook for careful planning and analysis to ensure seamless • Better ways to obtain shareholder information
the market is primarily twofold: execution. when required
• A different settlement cycle to major
i) to highlight to stakeholders the complexities The corporate actions landscape in South Africa is international markets complicates corporate
associated with certain corporate events and complex, and any action taken by one party is likely actions
create awareness of the risks and challenges to affect several others in the value chain. The market • Striking a balance between issuer regulation
faced by the market when there are unique must be enabling for issuers without compromising and shareholder protection
requirements for a corporate event, and the protection of shareholders. Corporate events are • Adherence to timelines
ii) to offer key insight into the roles of the various managed within a legislative framework that impact • Perceived unwillingness of some CSD
intermediaries in the corporate action chain of all parties in the ecosystem. What has become clear Participants to work with the market to find
events. following some of the challenging events of the past solutions
two years is that there is a need for greater clarity and
At the core of our ecosystem are issued securities, increased transparency related to complex corporate Many parties expressed concern that there is often
and the market exists because of issuers, both actions to create more certainty for all stakeholders. insufficient information on complex events, which
listed and unlisted, and their shareholders. Other results in shareholder queries and uncertainty in
stakeholders connect these two parties and play Large, complex corporate actions, such as the Naspers/ terms of processing. This often relates to matters of
an equally important role in facilitating trading, Prosus complex corporate action in August 2021, have participation, entitlement and tax treatment.
settlement, safekeeping, recording and execution of highlighted a number of issues facing the industry. In
rights associated with the shareholding. light of this, industry members have provided valuable The lack of transparency of ownership was raised,
insight during in-depth engagement with a wide range which is particularly evident in nominee structures.
As role-players in the South African financial market of stakeholders in the drafting of a Corporate Actions The drive to reverse South Africa’s greylisting may
infrastructure ecosystem, regulators and custodians Handbook. The themes and concerns that have necessitate greater transparency and a market
need to promote the country as an attractive emerged are captured in this handbook as a starting debate about the benefits versus costs of a Securities
investment destination to ensure our sustainability. point to create more transparency and certainty for Ownership Register.
There is a requirement to provide a world-class service corporate actions. This is a working document that will
and accommodate issuer requests where possible, evolve based on input received and market changes. Almost all issuers expressed the desire for greater
bearing in mind that most events are fully automated. transparency of their company registers to facilitate
The number of corporate action events for equities up The themes and concerns raised are wide-ranging shareholder engagement. The quality of information
to 31 December 2022, is 1733. Across all three asset and encompass the following: received from brokers, FSCA-approved nominees and
classes, i.e., equities, bonds and money market, for CSD Participants to generate the Beneficial Owner
the same period it is 27 125 events. The principle of • Insufficient information on complex events Register, is poor. Stricter regulation and enforcement
straight through processing applies to more than 99% • Lack of transparency of ownership in nominee in this regard may be required to drive market
of these events. In any given year, there are seldom structures standards.
more than five high-risk complex events, but those are • A requirement for greater transparency of
the ones where risk is elevated. These events require company registers

1 | Corporate Actions Handbook

Manual processing via Excel spreadsheets when and achieve the desired outcome. Others focus solely
beneficial shareholder information is required, is on systems and risk mitigation, citing standardisation
frowned upon. The belief across the board is that in as an obstacle when bespoke requirements are
the digital era, there must be better ways to obtain expected. Parties often propose solutions that work
shareholder information. for them, not necessarily the market. This mindset
is not promoting South Africa as an investment
Some raised the point that the market should address destination.
the settlement cycle to mirror major international
markets, as it is difficult to coordinate corporate Issuers at large believe the market to be sophisticated
action timetables across different jurisdictional and able to serve issuers and shareholders well.
territories, to ensure fair and equitable treatment of
all shareholders.

Globally, the number of listed companies has

declined. South Africa is no different. In the late 1980s
there were over 700 listings on the JSE. Today, it is
a little under 300. Many issuers are grappling with
the benefits of being listed versus the financial and
regulatory burden placed on listed entities. Removing
complexity in terms of regulation and striking a
balance between issuer regulation and shareholder
protection, especially for mid-cap and smaller listed
institutions, should be considered. Stakeholders want
an enabling market.

Key risk for most exchanges and custodians is

adherence to the timelines and ensuring shareholders
will receive entitlement on the due date of the event.
In addition, systems should be able to accommodate
processing and reduce manual intervention.

Local and foreign issuers and sponsors commented

on the perceived unwillingness of some CSD
Participants to work with the market to find solutions
to execute complex events. Some institutions aim at
being enablers and will do whatever it takes to assist

2 | Corporate Actions Handbook

2. INTRODUCTION
The Corporate Actions Handbook aims to give an honest where certificates were misplaced, not surrendered in an ISO standard, ISO 15022, and ISO 20022. In most
status report of corporate actions as experienced by time or tainted. Following the first electronic settlement instances, SWIFT message types between custodians
various stakeholders, including exchanges, issuers, of equities by Harmony on 9 November 1999, Strate follow the ISO standards.
sponsors, brokers, transfer secretaries, CSDs and initiated the electronic processing of corporate
CSD Participants, fund managers and administrators. actions in South Africa. Corporate action departments ISO 15022 is the preferred choice of messaging
In addition, the views of the legal fraternity and ASISA were rationalised with the move away from physical standards for securities messaging for Financial Market
have been included. The handbook will supplement securities. The Corporate Actions Enhancement Infrastructures (FMIs) around the world. The SARB’s
forums such as the Corporate Action Work Group, Project in 2010 brought further benefits to the Samos V8 project implemented payment messaging
CSDP Forum and Strate Market Meetings. In terms of market. In 2015 Strate introduced a new corporate standards based on ISO 20022 in September 2022.
the scope, only equities as an asset class is covered. action solution to improve the way in which corporate Some broker and asset management firms use non-
action payments were processed via the South African SWIFT messaging and templates with event details
Corporate actions departments are part of a larger Reserve Bank Real Time Gross Settlement system. are dispatched to their clients. Some non-bank CSD
ecosystem within custodians’ business models. There These changes revolutionised the way processing was Participants do not use SWIFT and provide event
are multiple in-house touchpoints between the various done in corporate action departments. information via email or portals to clients. Clients log
other departments housed in the custody services onto these portals and can receive corporate action
businesses and corporate actions departments. Other Some CSD Participants embarked on major automation event information in this manner if they elect not to
service areas include Settlements, Data Management, projects within corporate actions departments and receive email notification.
Securities Lending and Borrowing, Fund Accounting, developed programmes aimed at:
Collateral Management, and the management of In the past two decades corporate actions processing
physical securities. Corporate actions are potentially ▷ efficient client communication; became more standardised and aligned to the
impacted by each of these departments when a ▷ workflow tools to automate manual processes; Securities Market Practice Group (SMPG) principles –
complex corporate action is being processed. Apart and this approach catered for the bulk of the processing
from the in-house touchpoints, multiple external ▷ outsourced dedicated processing hubs to volume in corporate actions and straight through
stakeholders are involved in devising and planning a process corporate actions to mitigate risk. processing methodology is applied. This benefits the
corporate event, communicating it to the market and industry as most corporate actions are processed in a
processing events to finality. Moving from a paper-based processing methodology seamless and efficient manner.
to a totally electronic settlement model necessitated
Corporate action departments have had to deal major changes to operational models. Globally,
with many challenges over the past two decades. In the 5-series SWIFT message standards relating to
the physical share environment, share certificates corporate actions were adopted. SWIFT message
often had to be manually surrendered to transfer types are the format or schema used to send
secretaries. This created a huge administrative burden messages to financial institutions on the SWIFT
for large, listed companies that have thousands of network. The original message types were developed
shareholders, leading to substantial losses and risk by SWIFT. A subset was retrospectively conceived into

3 | Corporate Actions Handbook

Deviation from standard processing methodology or 2021 was an exceptionally busy year for corporate It is well worth perusing the annexures at the end of the
unique requirements for a specific corporate event actions as several large, listed companies announced handbook as they play a critical role in the corporate
creates challenges in highly automated systems and high-risk corporate events. The requirements from actions ecosystem and cover legislation, message
processes. These deviations can be of a simple nature the issuers and sponsors, as well as the high trading standards and critical information required per event
such as: price of the securities, led several CSD Participants type. For detailed information on the Corporate Event
to raise their concerns to Strate about these events. templates, refer to SMPG Event Template 2022 under
✓ changes to the processing timelines; or In addition, some CSD Participants suffered losses the addendum section. The SMPG guide to Corporate
✓ unique requests such as shareholders liable on these corporate events. There is a clear need for Actions gives an overview of corporate actions, some
for securities transfer tax which is not part of a review of the current processes and practices and message structures and fields.
corporate actions processing under normal overarching principles must be agreed.
circumstances.
In response, Strate initiated a special project to deal
Issuers devise corporate actions in line with the with corporate action concerns. As part of this, Strate
company strategy and pay specific attention commissioned an independent consultant to facilitate
to shareholder restrictions, tax treatment and the drafting of a Corporate Actions Handbook for the
apportionment of costs where applicable. Any deviation market. All four of the exchanges that trade in equities
requires changes to the tried and tested processes. were consulted in producing this handbook. Exchange
This normally requires engagement with the CSD or neutrality is an ideal but is not practical at this stage
custodians’ system vendors to accommodate unique as most corporate events are announced by the JSE
processing. This can be more easily accommodated which plays a dominant role in this regard. The JSE
at some CSD Participants than others due to inter- listing requirements, processes and JSE Schedule 2
operability between departments. Form H, feature predominantly in this handbook. As
the market grows and evolves, this will be revisited.
The COVID-19 global pandemic tested the resilience A growing number of JSE primary listed securities are
and strength of corporate action departments being secondary listed on A2X. To the extent that an
internationally with entire departments having to event is announced by an issuer that is secondary
change their working models expeditiously. Many listed on A2X, it is important to consider the impact
processes had to be re-engineered in ways previously to A2X from a trading and settlement perspective.
thought impossible. Today, few corporate actions A similar pattern is developing with CTSE. While
departments still use physical files. The industry the issuer regulations departments of the various
moved to electronic file-keeping almost overnight. exchanges govern the relationship with listed issuers,
All departments went through a rigorous audit the handbook aims to provide issuers and sponsors
process with the overwhelming majority passing with with context to some of the challenges faced by
flying colours. This is testament to the resilience of custodians in the value chain.
these highly complex and mostly, extremely busy
departments.

4 | Corporate Actions Handbook

3. LEGISLATION
Corporate actions are devised, coordinated, and The Financial Sector Conduct some matters to be resolved in SRDII, in the interest of
executed within an extensive legislative framework. transparency issuers are looking at beneficial owner
Authority (FSCA)
This applies to all locally listed issuers and more information irrespective of the jurisdiction in which
so to dual listed entities that must adhere to multi- shareholders reside. SRDII has an extraterritorial scope,
The FSCA supervises the actions of financial services
jurisdictional legislation. This section highlights the meaning that it applies to all financial intermediaries
firms and how they conduct their business, to enhance
most important South African legislation that impacts holding SRD eligible securities, wherever they are in
the integrity of the financial system and to protect
on corporate actions. On 1 April 2018 South Africa Europe or outside Europe. Therefore, it relates to any
financial customers, which includes ensuring they are
adopted a new financial regulation model called client-holding in listed equities from European issuers,
treated fairly by these institutions. The Commissioner
Twin Peaks, which came into effect through the which need to comply with SRD II provisions. (See
heading up the Financial Sector Conduct Authority is
Financial Regulation Act 2017. It aims to strengthen annexure 9 Impact of Shareholders Directive II – Strate
appointed by the Minister of Finance.
the regulatory framework and move away from the July 2020).
multiple regulator model that had individual oversight
Exchanges and CSDs are self-regulated organisations
of the various financial services areas. It is going to impact the South African market in future
and play a critical role in the financial market
when some of our largest listed companies will have
infrastructure and regulation. Exchanges regulate
The Twin Peaks model consists of two regulators: to comply with SRDII requirements, which will have a
their members while CSDs regulate their participants.
ripple effect on the local market. South Africa will have
Legislation impacts all role-players in the market.
1. Prudential Authority (PA); and to gauge what is happening from a global perspective
Some of the most important South African legislation
2. the Financial Sector Conduct Authority (FSCA). and manage the impact on the market to ensure
impacting the custody industry includes:
compliance. The current ownership structure for the
The Prudential Authority (PA) ✓ The Companies Act 71 of 2008;
equities model is complex and opaque due to the
nominee structure. Multiple foreign nominees have
✓ The Financial Markets Act 19 of 2012;
The Prudential Authority operates within the very large holdings within the market.
✓ The JSE Listings Requirements;
administration of the South African Reserve Bank ✓ Strate Rules and Directives;
(SARB), which is the Central Bank of South Africa. Due to the current delay in the industry adoption
✓ Financial Intelligence Centre Act 38 of 2001; and
The SARB is responsible for licensing, regulating, of Securities Market Practice Group (SMPG)
✓ Protection of Personal Information Act 4 of 2013.
and providing oversight to South African banks and recommended MX20022 messaging, much of
monitors their activities in line with the Banks Act the desired automation, efficiency, and increased
Besides this legislation, foreign legislation such as
94 of 1990, the Mutual Banks Act 123 of 1993, and transparency that the European regulators hoped
Shareholder Directive II (SRDII) and the ambit of
international regulatory and supervisory standards to bring to the industry is still to be achieved. The
foreign organisations such as the Financial Action Task
as set out by the multiple international financial different national definitions of “shareholder” also
Force (FATF), must be considered as these may impact
regulators. The Prudential Authority, which replaced impact the usefulness of the disclosure requirement
South Africa.
the SARB’s supervision department, is responsible for under SRD II in certain markets. In the United Kingdom,
ensuring the soundness and safety of banks, insurance Ireland and Malta the “shareholder” is defined as the
SRDII and FATF registered holder, thereby challenging the disclosure
companies, multiple other financial institutions, and
certain financial market infrastructures, in order to requirements under SRD II.
Shareholder Directive II (SRDII), which applies in the
maintain financial stability.
UK and Europe, is much debated. While there are

5 | Corporate Actions Handbook

The Financial Action Task Force (FATF) , the global South Africa are likely to decline. Borrowings from Companies Act 71 of 2008
anti-money laundering watchdog placed South global bodies, especially for banks and state-owned
Africa on its grey list on Friday, 24 February 2023. It enterprises will increase. Every counterpart across the https://www.gov.za/sites/default/files/gcis_
warned the country of this possibility four years ago, world will have to apply higher levels of due diligence document/201409/321214210.pdf
and it outlined severe deficiencies in our standards to South African businesses and individuals with
to fight corruption and money laundering. Although offshore interests. The Companies Act 71 of 2008 provides for the
the country recently made an effort to improve its incorporation, registration, organisation and
legislation to avert being grey listed, it will need to do National Treasury must address the deficiencies in our management of companies. All companies, whether
more. Doing so will require a dedicated focus from financial system with urgency. Regulations, processes listed or unlisted, are subject to the Act, which seeks
the government to pass additional relevant legislation, and procedures must be in place to curb corruption to promote transparency and accountability in the
fund the investigative authorities to combat money and money laundering in the country. When a country South African corporate sector. Corporate governance
laundering and terrorist financing activities, and is seen as non-compliant, the discussion around looks at the processes, structures and decision
ensure the effective and speedy prosecution of a centralised, national approach makes sense. To making within the organisation, with the aim of
individuals and institutions undertaking such crimes. this effect a centralised repository of customer data promoting good corporate governance. It defines the
According to President Ramaphosa the grey listing is would assist banks and custodians of financial assets relationship between companies and their respective
an opportunity for South Africa to tighten its controls to manage customer information more effectively, shareholders, provides opportunities for redress for
and improve our response to organised crime. improve customer due diligence and reduce the risk investors and provides for the establishment of various
of non-compliance. Financial institutions have an institutions such as the Companies and Intellectual
South Africa failed to implement the necessary ongoing responsibility to implement effective AML Property Commission, the Takeover Regulation Panel,
legislation and measures to prevent money laundering and CTF measures that comply with international a Companies Tribunal, and the Financial Reporting
and terrorist financing since 2019 and now joins a standards. This includes ensuring regulatory Standards Council.
club of 25 countries on the grey list. Countries on compliance, conducting risk assessments, automating
this list include Albania, Barbados, Burkina Faso, Haiti, compliance processes, and having a centralised As this has relevance for corporate actions in the
Jordan, Nigeria, Panama, South Sudan, Syria, Turkey repository for customer data. South Africa must custody industry, specific reference is made to section
and Yemen. There is an opportunity cost associated continue and intensify the required measures to be 56 of the Companies Act 71 of 2008, which deals with
with this greylisting as the country is now deemed to removed from the list. In a coordinated manner many beneficial ownership of securities. The relevance stems
pose a higher risk of money laundering and terrorist other countries have instituted a centralised KYC from requests by issuers for beneficial shareholder
financing. FATF will increase its monitoring of South database successfully and this is an aspect that can information. A brief extract from the Act stipulates the
Africa and countries on the list face economic be taken one step further in the securities industry. following:
sanctions from the likes of the IMF and development A central repository of beneficial owners can add
funders like the European Union and World Bank. great value in removing ambiguity associated with the Beneficial interest in securities
Many countries will now look to other jurisdictions for opaque ownership structure of nominees and will go
long-term investments and the greylisting will likely a long way to manage the risk of non-compliance. 56. (1) Except to the extent that a company’s
lead to reduced trade opportunities, a downgrade of Memorandum of Incorporation provides otherwise,
ratings, and a shrinking economy according to several the company’s issued securities may be held by,
views. The rand immediately weakened following the and registered in the name of, one person for the
announcement, and capital and portfolio flows to beneficial interest of another person.

6 | Corporate Actions Handbook

(2) A person is regarded to have a beneficial interest ✓ (b) the number and class of securities held for ✓ (b) publish in its annual financial statements, if it
in a security of a public company if the security is held each such person with a beneficial interest. is required to have such statements audited in
nomine offıcii by another person on that first person’s terms of section 30(2), a list of the persons who
behalf, or if that first person— (4) The information required in terms of subsection hold beneficial interests equal to or in excess
(3) must— of 5% of the total number of securities of that
✓ (a) is married in community of property to a class issued by the company, together with the
person who has a beneficial interest in that ✓ be disclosed in writing to the company within extent of those beneficial interests.”
security; five business days after the end of every month;
✓ (b) is the parent of a minor child who has a and While some CSD Participants have objected to
beneficial interest in that security; ✓ (b) otherwise be provided on payment of a providing information to issuers due to the onerous
✓ (c) acts in terms of an agreement with another prescribed fee charged by the registered holder and often manual process to contact nominee clients,
person who has a beneficial interest in that of securities. . this requirement is governed by the Companies Act
security, and the agreement is in respect of the 71 of 2008. Information requested by issuers must
co-operation between them for the acquisition, (5) A company that knows or has reasonable cause be provided. The market is considering the following
disposal or any other matter relating to a to believe that any of its securities are held by one options under the Strate Corporate Actions Special
beneficial interest in that security; person for the beneficial interest of another, by notice Projects Workshops:
✓ d) is the holding company of a company that in writing, may require either of those persons to—
has a beneficial interest in that security; 1. Review the current equities model to allow
✓ (e) is entitled to exercise or control the exercise ✓ (a) confirm or deny that fact; for transparency, which talks to visibility of
of the majority of the voting rights at general ✓ (b) provide particulars of the extent of the ownership that would eliminate the requirement
meetings of a juristic person that has a beneficial beneficial interest held during the three years for spreadsheets.
interest in that security; or preceding the date of the notice; and 2. Retain the model and accept that spreadsheet
✓ (f) gives directions or instructions to a juristic ✓ (c) disclose the identity of each person with a requirements are part of the process and fully
person that has a beneficial interest in that beneficial interest in the securities held by that automate these processes where possible.
security, and its directors or the trustees are person. 3. Investigate a market platform where registered
accustomed to act in accordance with that nominee shareholders can provide beneficial
person’s directions or instructions. (6) The information required in terms of subsection ownership information onto a platform or
(5) must be provided not later than 10 business days tool, thereby taking ownership of providing the
(3) If a security of a public company is registered in after receipt of the notice. information to the issuer.
the name of a person who is not the holder of the
beneficial interest in all of the securities in the same (7) A company that falls within the meaning of
company held by that person, that registered holder ‘‘regulated company’’ as set out in section 117(1)(i)
of security must disclose— must—

✓ (a) the identity of the person on whose behalf ✓ (a) establish and maintain a register of the
that security is held; and disclosures made in terms of this section;

7 | Corporate Actions Handbook

Financial Markets Act 19 of 2012 JSE Listings Requirements ✓ Section 16 Documents to be
submitted to the JSE
The Financial Markets Act 19 of 2012 (the FMA) is the The JSE Listings Requirements is a comprehensive ✓ Section 17 Listing and other Fees
legislative framework regulating the South African document covering all aspects of listing on the JSE. It ✓ Section 18 Dual Listings and
financial markets. The objectives of the FMA are, contains general and specific principles that are set Listings by External
amongst others to, out in over 450 pages. The document can be accessed Companies
via the link below: ✓ Section 19 Specialist Securities
✓ Section 20 Hybrid Financial
Promote the international and https://www.jse.co.za/sites/default/files/media/ Instruments
domestic competitiveness of ✓ Section 21 Alternative Exchange
documents/2019-04/JSE%20Listings%20
the SA financial markets and
Requirements.pdf ✓ Section 22 Accreditation of
securities services
Audit Firms, Reporting
The following topics are covered in the Listings Accountants, Reporting
Requirements: Accountant
Ensure that the SA financial
✓ Specialists and IFRS
markets are fair, efficient and
transparent ✓ Section 1 Authority of the JSE Advisers to provide
✓ Section 2 Sponsors accounting and/or
✓ Section 3 Continuing Obligations advisory services
Objectives to applicant issuers
✓ Section 4 Conditions for Listing
of the FMA Increase confidence in the SA ✓ Section 5 Methods and ✓ Schedules
(no 19 of financial markets Procedures of bringing ✓ Practice Notes
2012) Securities to Listing ✓ Index
✓ Section 6 Pre-Listing Statements ✓ JSE Limited Listings
✓ Section 7 Listing Particulars Requirements Guidance
Promote the protection of letters
✓ Section 8 Financial Information
regulated persons, clients
and investors ✓ Section 9 Transactions
✓ Section 10 Transactions with
Related Parties
✓ Section 11 Circulars, Pre-listing
Statements/
Reduce systemic risk Prospectuses and
Announcements
✓ Section 12 Mineral Companies
✓ Section 13 Property Entities
The FMA can be accessed via the link below: ✓ Section 14 Pyramid Companies
✓ Section 15 Investment Companies
https://www.gov.za/documents/financial-markets-act

8 | Corporate Actions Handbook

Strate Rules ✓ Bonds of South Africa. This Act, amongst others, imposes
✓ Money Market certain duties on institutions and persons who
Strate rules can be found on https://www.strate. ✓ Fines might be used for money laundering purposes. The
co.za/wp-content/uploads/2022/11/Strate-Rules- ✓ ZAR X Promotion of Access to Information Act 2 of 2000, also
August-2021.pdf and in terms of Section 2, covers the ✓ CTSE called the freedom of information law in South Africa,
following aspects: ✓ A2X provides for the constitutional right of access to any
✓ EESE information held by the State and any information
✓ Section 1 – Interpretation and Definitions held by private bodies required for the exercise and
✓ Section 2 – Powers, Management and Control In terms of equities, there are three directives protection of any rights.
✓ Section 3 – Strate Participation applicable to processing corporate actions in the
✓ Section 4 – Conduct and Ethics South African market. They are listed below: The Financial Intelligence Centre Act can be accessed
✓ Section 5 – Duties of Participants via the link below:
✓ Section 6 – Accounts ✓ Directive SC.4 – Processing of Corporate
✓ Section 7 – Settlement Actions – Equity Securities – Listed and Unlisted https://www.gov.za/sites/default/files/gcis_
✓ Section 8 – Risk and Compliance Securities document/201409/a38-010.pdf
✓ Section 9 – Fees and Charges ✓ Directive SC.5 – Voting Procedure - Domestic
✓ Section 10 – Resolution of Disputes Companies – Equity Securities
✓ Section 11 – Supervision ✓ Directive SC.6 – Voting Procedure - Foreign
✓ Section 12 – Disciplinary Procedure Incorporated Companies – Equity Securities
✓ Section 13 – Notices
✓ Section 14 – General Directive SC.4 – Processing of Corporate Actions –
✓ Section 15 – Complaints Procedure Equity Securities – Listed and Unlisted Securities
✓ Section 16 – Procedures for Management of governs the standard market process for corporate
Participant’s Insolvency Proceeding events in South Africa.
✓ Section 17 – Issuers
Please refer to the Strate website for the most recent
version of the directives.
Strate Directives

A complete list of Strate Directives can be found Financial Intelligence Centre Act
on the website: https://www.Strate.co.za/Strate- 38 of 2001
directives/ and covers the following aspects:
The Financial Intelligence Centre Act has relevance
✓ CSD Participation to corporate actions because money laundering via
✓ Securities – General equities, bonds and money market securities is rife
✓ Equities in certain global jurisdictions. This is an aspect that
is also being addressed with the FATF greylisting

9 | Corporate Actions Handbook

Protection of Personal ✓ to provide for the issuing of codes of conduct;
✓ to provide for the rights of persons regarding
Information Act 4 of 2013
unsolicited electronic communications and
automated decision making;
Corporate actions often require the provision
✓ to regulate the flow of personal information
of sensitive client information to issuers when
across the borders of the Republic; and
beneficial shareholder information is required. This
✓ to provide for matters connected therewith.
information can include identity numbers or company
registration numbers, address details, client holdings
Due to the confidential nature of client information and
in a particular ISIN on record day, tax or VAT numbers,
the risks associated with client information ending up
and so forth. This information is often required by
in the wrong hands, custodians of client information
issuers or institutions such as SARB. However, if
are very sensitive and aware of the risks associated
sensitive data falls into the wrong hands, it can lead
with the distribution of client information. A fine
to fraud, identity theft, or similar harms. Given the
balancing act is thus required between the right to
cost of a security breach—losing customers’ trust and
access shareholder information and the responsibility
potential litigation, it is crucial to ensure that personal
to protect client information.
information is managed appropriately.

Legislation impacts the issuer who needs to manage

The specific Act can be accessed via the link below:
a listed entity in line with the Companies Act and
Exchange Listing Requirements. The sponsor’s
https://www.gov.za/sites/default/files/gcis_
primary objective is to ensure that every corporate
document/201409/3706726-11act4of2013popi.pdf
actions meets all regulatory requirements. The
Exchange needs to approve an event and finalise
The aim of the Protection of Personal Information Act
the timetable, and the CSD communicates the event
(POPIA) is:
details to the market. Participants, Members, and
Institutional shareholders need to process events in
✓ to promote the protection of personal
line with legislation and must ensure adherence to
information processed by public and private
every aspect of legislation. Adherence to legislation is
bodies;
also part of the licensing conditions of all stakeholders.
✓ to introduce certain conditions so as to establish
minimum requirements for the processing of
personal information;
✓ to provide for the establishment of an
Information Regulator to exercise certain
powers and to perform certain duties and
functions in terms of this Act and the Promotion
of Access to Information Act, 2000;

10 | Corporate Actions Handbook

4. MARKET MODEL
This section covers firstly, an explaination of the 37,94% of all securities on the JSE were foreign-owned Global custodians and institutional shareholders have
complex nominee structure found in the equities and mostly form part of a foreign nominee structures, footprints on most continents and in most countries,
model. The equities account holding model, unlike the the local BOR to issuers only provides a partial view of which means beneficial owner information must be
well-entrenched SOR (Securities Ownership Register) beneficial shareholders at best, depending on foreign obtained from various jurisdictions and time zones,
model for money market securities, allows for limited ownership of a particular counter. Foreign ownership increasing the risk and likelihood of an error when
transparency. The SOR model is a very transparent as of 31 December 2022 stands at 37,66% based on manual intervention is required. The FSCA, JSE and
model that allows for visibility of ownership down market information from www.Strate.co.za. Strate websites confirmed the number of nominees
to beneficial owner level. In terms of the scope of below on 30 November 2022.
the handbook, the focus is only on equities. Under
this model, securities accounts may be opened at a Strate approved CSD Participant
10
nominee or own name/beneficial owner level. Beneficial nominees
ownership below a nominee is not transparent and
Strate recognised nominees for the
such shareholder information must be disclosed to
purpose of beneficial ownership 18
issuers wanting clarity of the true ownership in their
disclosure
entity. This section of the handbook also highlights
the corporate action principles agreed in the market,
Number of FSCA approved nominees 103
provides the generic timelines for corporate events
as well as the generic steps in processing corporate
events and basic exception handling. Broker nominees 37

The nominee structure The current equities model and permissible

nominee structure do not allow for full beneficial
The nominee structure is legislated in the South owner disclosure, which adds complexity to the
African market. CSD Participant nominees are corporate actions landscape when this is required
regulated by Strate. Other nominees, such as pension by the issuer. When full disclosure is required by
funds and insurance companies, are regulated by the the issuer, the limited transparency of the equities
FSCA. Broker nominees are regulated by the relevant model implies that the information must be sourced
exchange. from various stakeholders in the chain. Currently,
beneficial ownership disclosure is obtained through
Weekly BORs are scheduled in the market with the spreadsheets, although the industry is investigating
option to schedule ad-hoc BORs where required alternatives.
by issuers. Although this provides the required
information for South African registered nominees,
foreign nominees are excluded from the BOR process,
and this is not legislated. Considering that in 2021,

11 | Corporate Actions Handbook

When considering solutions for the complexities of the (d) the Record Date must be on a Friday unless the (k) any corporate action must be declared
corporate actions landscape, it is crucial to keep the Friday is public holiday in which case it will be on unconditional on or before the Finalisation
bigger picture in mind. Attempting to solve for some the last business day of that week; Date;
of the challenges without addressing more serious
international compliance matters does not make (e) the Last Day to Trade (LDT) must be three (l) with respect to securities affected by a corporate
sense. Visibility and transparency are key features to trading days before Record Date. To be action, no dematerialise or rematerialise orders
adhere to in international compliance. recorded in the register on the Record Date, will be processed in respect thereof from the
trade must take place three trading days before business day following the Last Day to Trade
Although regulators and exchanges periodically review the Record Date; up to and including the Record Date but will
nominee accounts, the process is not performed daily. recommence on the first business day after
A BOR is scheduled weekly to ensure reconciliation (f) on Declaration Date (DD) an announcement the Record Date.; If the company maintains a
between Strate, JSE (brokers), Participants and FSCA- must be published including the declaration certificated register, it must be closed for this
approved nominees. Strate obtains weekly beneficial data. The Declaration Date must be on or period.
downloads from the CSD Participants, exchanges and before the date of issue/posting of any circular
FSCA-approved nominees. Every Friday these parties and/or other documents and must be at least (m) suspension and removal of a listing as a result
provide their beneficial download to Strate, which is thirteen business days before the Record Date; of a corporate action will always take place at
subsequently consolidated. While the picture that can the commencement of business.
be drawn for locally registered nominees is quite clear, (g) an announcement including the finalisation
foreign nominee ownership is required by all parties information must be made by 11h00 on or (n) all share entitlement ratios and cash entitlement
for the complete picture of ownership. before the Finalisation Date (FD) which must be rates (which cash payments are measured in
at least eight days before the Record Date and cents) must be reflected to five decimal places;
Principles of corporate actions at least five days before the Last Day to Trade;

The following principles have been adopted and form (h) declaration data and finalisation information
the cornerstone of corporate actions in South Africa. can be announced on the same day if the
These principles apply to all corporate actions that are announcement is published at least thirteen
clearly set out in the JSE schedule 2, Form H: days before the Record Date;

(a) all timetables are based on business days and (i) changes to the pertinent details of a corporate
not calendar days; action between Finalisation Date and the Last
Day to Trade will result in the cancellation of the
(b) settlement takes place three business days corporate action;
after trade (T + 3);
(j) the securities concerned will trade ex-
(c) the Record Date (RD) is the date on which the entitlement on the first business day after the
register must be in final form; Last Day to Trade;

12 | Corporate Actions Handbook

(o) in respect of fractional entitlements that arise, (r) Information to be included in all documentation: documentation and action same in order for
all allocations of securities will be rounded the holders of securities vote(s) to be taken
down to the nearest whole number resulting i. wherever reference is made to holders of account of at such meeting.
in allocations of whole securities and a cash securities of a company the procedures for vi. the salient dates section of the circular and/
payment for the fraction. In the event that it is certificated and dematerialised holders of or documents must include all the dates in the
a new listing, and no trading has taken place securities must be detailed. declaration data and finalisation information.
on LDT+1, the issue price or estimated issue ii. the surrender of securities certificates will only The definitions for these dates must be included
price, less 10% must be used; An applicant apply to certificated securities holders and the in the “definitions” section of the circular and/or
issuer must release an announcement by surrender forms must state this; document; and
11h00 in respect of the cash value determined. iii. in the case of dematerialised holders of vii. if new securities are to be issued, holders of
The weighted average traded price for LDT + securities, the CSDP or broker will automatically securities must receive the new securities in
1 less 10% must be used as the cash value. (i) take care of the equivalent of the surrender of dematerialised form.
Standard rounding is applied to Rights Offers, securities certificates;
where fractional entitlements less than 0.5 are iv. election forms only apply to certificated holders (s) the timetables in this schedule do not include
rounded down to the nearest whole share and of securities and the election forms must state election dates or deadlines due to such dates
fractions of 0.5 and greater are rounded up to this. The circular and/or documents must varying between brokers and CSDPs and
the next whole share. also state that the dematerialised holders of their clients in respect of the dematerialised
securities election must be provided to their environment in terms of the agreements
(p) all affected securities holders will have to appointed CSDP or broker in the manner and between clients and their brokers or CSDPs and
anticipate their holdings on the Record Date by time stipulated in the custody agreement yet another date in respect of the certificated
considering all unsettled trades concluded on entered into between the holder of securities environment. However, issuers must take
or before the Last Day to Trade which are due and the CSDP or broker. account of such dates of election for each
to be settled on or before Record Date. This will v. the form of proxy included in the circular and/or corporate action and must clearly indicate in
enable affected securities holders to provide documents must state that it is for completion by documents and announcements the dates,
their CSDP or broker with their election based certificated holders and dematerialised holders taking account of the varying dates of election
on their anticipated holdings by the election who have “own name” registration of securities applicable to investors in the dematerialised
deadline. only. The documentation must state that environment as well as the date of election for
dematerialised holders of securities who wish certificated securities holders.
(q) elections not made by the election deadline will to attend the general/annual general meeting
result in the default provisions set out in the must inform their CSDP or broker of their (t) rights offer declaration announcements
relevant corporate action being applied by the intention and the CSDP or broker will issue them must clearly indicate as to whether excess
CSDP in respect of those securities for which with the necessary documentary authorisation applications are allowed or not; and
no election has been made; (i) Closing date for to attend and vote at such meeting. Alternately,
elections on secondary listed companies for should they not wish to attend the meeting in
dividend options may be extended to up to 10 person, holders of securities may provide their
days after the Record Date (ii) Add offer open CSDP or broker with their voting instruction and
and close date to all offers such CSDP or broker will complete all necessary

13 | Corporate Actions Handbook

(u) any restrictions that may be applicable with (x) all announcements pertaining to cash payments In the securities industry, STP principles have been
regard to an event where securities are issued, declared in a foreign currency and converted to adopted globally. According to the SMPG website,
the entity name and the QIB cut-off time Rand (ZAR) at the exchange rate, must include the Securities Market Practice Group is a group
must be disclosed in the declaration SENS the date on which the foreign payment will be of experts who devote their time on a voluntary
announcement and press announcement converted to Rand (ZAR). If not converted on a basis to define global and local market practices for
(where applicable), clearly stating whether specific date but over a period, this information the benefit of the securities industry. The market
restrictions on foreign shareholders apply or the applied methodology must also be practice documentation and recommendations
or not, and where possible, the relevant included in the announcement produced by this organisation are intended to solve
jurisdictions that are affected. common problems across the securities industry,
(y) should a new ISIN be applicable to a corporate from which financial institutions can derive clear
(v) all announcements pertaining to distributions action, it must be added to the declaration benefits, to harmonise business processes and to
where Dividend Withholding Tax is applicable, announcement. facilitate the usage of message protocols ISO 15022
and where the payment is made from a foreign and ISO 20022. While the Securities Market Practice
source, (made from outside South Africa), the (z) on a name change and reverse listing, specify Group encourages the implementation of the market
country from where the payment is being paid on the SENS announcement if the company will practices it develops, it is up to the financial institutions
from, needs to be disclosed. If the distribution is retain history or not within each market to implement the market practices
partially paid from a foreign source and partially according to their needs and agreements with their
from a local source, the amount needs to be business counterparts to support their businesses as
The relevance of SWIFT and
split accordingly and disclosed accordingly (i) efficiently as possible.
All announcements pertaining to the payment
Securities Market Practice Group
of cash where Dividend Withholding Tax (SMPG) The combination of SWIFT and market standards have
is applicable must be stated clearly (ii) All revolutionised the industry. That is evident from the
announcements pertaining to the issue of SWIFT and the SMPG both have specific relevance large volume of corporate actions processing that is
securities where STT is applicable and payable, to corporate actions. Market practice is aligned to handled in a straight through processing manner. As
must be stated clearly, and whether STT is the Strate Rules and Directives. Globally, financial of 31 December 2022, year to date, there have been
payable by the shareholder, CSDP or company institutions use the SWIFT messaging network to 1733 corporate events on equities as an asset class.
securely transmit information and instructions A fraction of these required manual intervention and
(w) the Issuer must comply with the Strate Directive through a standardised system of codes. SWIFT has manual processing. Some difficulties arise when there
where the total cash entitlement needs to be become a crucial part of global financial infrastructure is deviation from the timelines, and this is dealt with in
available at 10h00 on payment date, by funding and corporate actions processing, and information more detail later in the handbook.
its bank account (the Designated Bank Account) flow is disseminated via SWIFT internationally. Most
in respect of the dematerialised holdings, as financial institutions and stakeholders associated with
provided to the Issuer or its agent (their agents) financial markets infrastructure, subscribe to SWIFT
by Strate. standards and protocols. This has brought about an
exceptionally high level of straight through processing
(STP) and automation. This in turn has reduced risk
and errors associated with manual processing.

14 | Corporate Actions Handbook

Generic corporate action timelines dispatches MT564 reconciliation messages from 12:00 onwards.
✓ CSD Participants submit elections where required to Strate by 13:00.
The below illustrations depict the mandatory and elective event timelines that are in ✓ Strate submits all elections received to issuer agents upon receipt.
place. These event timelines are followed in most cases. Exceptions occur from time ✓ Strate sends MT564 pre-advice to CSD Participants from 11:30 for mandatory
to time, especially on PLC companies where there needs to be alignment between events and after 13:00 for elective events.
markets with different settlement cycles ✓ Payment Date: This is the date on which entitlements will be paid or posted.

Mandatory / Elective event timeline

CUM Ex
Basic steps in processing a corporate event

First Day to Payment or

1. The issuer decides on a specific corporate action driven by the strategic
Declaration Date Finalisation Date Last Date to
Trade with New
Entitlement Record Date
Withdrawal Date direction of the company or regulatory requirements. This can be a dividend
Trade payment, rights offer, annual general meeting or various other events.
RD -13 or earlier RD -8 RD -3 RD -2 RD -1 RD RD +1
LDT -10 LDT -5 LDT LDT +2 LDT +2 LDT +3 LDT +4
2. If a complex corporate action is planned, legal teams, sponsors and
accountants may be involved from inception to provide expert opinion and
1 2 3 4 5 6 7
guidance. Transfer secretaries are sometimes part of these discussions, but
this is at the issuer’s discretion.

3. The sponsor as the go-between the issuer and exchange will ensure
✓ Declaration Date (DD): the Date on which the corporate action and the compliance with Issuer Regulations and various legislation, and normally
Declaration data (including any conditions precedent to which the corporate captures the event details on a template for verification by the exchange.
action is subject) are announced and released through SENS.
✓ Finalisation Date (FD) – RD – 8: The date on which the event and its details 4. The issuer will publish the pertinent details of the event on the Exchange
become unconditional in all respects and irrevocable, i.e. no further changes News Service. At the JSE it is SENS and at A2X it is A2X News Service.
to any of the pertinent details can be made by the Issuer and the event can
only be cancelled in certain circumstances. 5. Strate will capture the event details on its system and a SWIFT notification
✓ Last day to Trade (LDT) : The last business day to trade in a security in order to MT564 PNOE (Preliminary Notice of Event) is despatched to all CSD Participants.
settle by Record Date and to qualify or participate in the event.
✓ Ex date: Excluding or non-qualifying for an entitlement arising from a corporate 6. Concurrent to the above, the sponsor may decide to involve the wider
action. The first trading date after LDT. All On-Market trades from this day will market as the process of finalising the circular is undertaken. Some prefer
exclude the right to receive entitlement. this approach; others do not involve the broader market and their focus is
✓ Record Date: The date on which the holdings upon which the entitlement adherence to legislation and regulatory compliance.
is based are ascertained. Record Date is one settlement cycle after LDT
(currently 3 days) or one settlement period.
✓ All SLB same day returns must be in ready-for-settlement status by 10:00.
✓ Strate calculates event eligibility where settlement has taken place on RD and

15 | Corporate Actions Handbook

7. On RD-8 the SWIFT MT564 FNOE (Final Notice or fund manager of their election; this will roll depending on the events processed during the
of Event) will be released by Strate. On this up to an entity where the individual will notify its month.
date all pertinent details of the event become asset manager if it is a non-mandated portfolio, 17. After X number of days, the event is moved
irrevocable. If any pertinent event details the asset manager its global custodian, from to ground status and archived depending on
are changed or modified, the event must be there to the CSD Participant who will annotate it internal policy.
cancelled and a new event created. This is not a as part of an election for a specific nominee and
preferred approach as this creates uncertainty submit the election to Strate on record date.
that leads to large volumes of enquiries. If it is
an elective event, clients must re-instruct, which 12. The custodian may have one or several nominee
creates rework and duplication of effort. The accounts and will submit their SWIFT election
preferred approach by most custodians is to to Strate. If additional information is required
update the event. on a spreadsheet, this will be done outside of
the custody system. Various nominee/client
8. Some CSD Participants follow the straight spreadsheets will be received and consolidated
through processing methodology and relay the by the custodian. This is always an onerous task
information to their clients, while others will and regarded as high risk. Currently nominees
intercept the message and enrich the event and brokers must provide to CSD Participants
information as part of the service offering to their spreadsheets by RD-1 at the time
clients before it is manually released. This is stipulated by the service provider.
normally applicable to elective events.
13. Strate will communicate the final elections to
9. Clients, global custodians, fund managers and the transfer secretary, who will liaise with the
broker clients receive the MT564. They in turn sponsor and issuer, and if required, will provide
relay the information to their clients either via allocations to the market, via Strate.
SWIFT, online portals or email communication.
14. CSD Participants will update allocations to
reflect entitlements received from the transfer
10. Internal management of trades and securities secretary on their custody systems, either
lending that may impact on the event and manually or via file upload capability.
corporate actions will be maintained up to
record date. Client tax statuses must be 15. The event will be disbursed, and clients will
confirmed by latest record date to ensure receive entitlement on payment date.
accurate tax processing and reporting to South
African Revenue Service. 16. Where relevant, DWT claims are processed and
administered by the relevant team. Depending
11. If a client election is required, it will follow the on the client base, there can be claims of
chain in reverse. Clients may advise their broker hundreds or even thousands per month,

16 | Corporate Actions Handbook

Generic exception handling
Number of Security
Asset class Cash disbursement ZAR
events disbursement ZAR
1. In most cases, exceptions occur because of event information that is not
present or there is uncertainty about interpretation of the event. These Bonds 9945 765,214,547,584.16 -
exceptions are normally clarified by the sponsor or the issuer’s legal teams. Equities 1733 455,509,278,116.15 38,351,163,469.00
Money market 15447 910,881,405,283.65
2. Delays in providing clarity by the issuer or sponsor creates anxiety for Total 27125 2,131,605,230,983.96 38,351,163,469.00
processing hubs and clients who must ensure correct processing and tax
treatment. Where multiple jurisdictions are involved, and several legal teams The number of corporate events and values disbursed for bonds, equities and
must provide input into a query, it understandably will not be resolved or money market as at 31 December 2022 are reflected below. Details can be found
clarified immediately and may take several days. on https://insights.strate.co.za/MarketInsights/corpactions/

3. In some instances, especially where there are bespoke processing

requirements and deviation from normal market practices, market meetings
may be required between the issuer/sponsor, legal teams, exchanges, the
CSD, CSD Participants and brokers.

4. The exchanges and CSDs as the regulators are best suited to make a judgement
call in terms of event complexity. Through their market-wide relationships with
brokers and CSD Participants, they can facilitate liaison between all parties
when required.

5. Crisis market calls occur when there is a deviation from the agreed timelines Across all three asset classes the number of events as well as cash and securities
and processes. In those instances, the priority will be to ensure that the disbursed for 2022 as at 31 December 2022 is indicated below:
corporate action is successfully executed albeit with increased levels of risk.

6. Post-mortem sessions will be scheduled following high-risk events where

certain actions or inactions resulted in higher than usual risk. This is normally
done at the discretion of the regulators in order to learn from what transpired
during the event to prevent a reoccurrence.

A bird’s eye view of corporate actions in 2022

Market statistics from www.Strate.co.za for the period 2 January 2022 – 31 October
2022 provide the following number of events and disbursement:

17 | Corporate Actions Handbook

While bonds and money market securities as asset 2. Requests for beneficial shareholder information after an event, the risk falls squarely on
classes had the highest number of corporate events, add complexity due to the number of nominees accountable institutions. The impact of
this is handled seamlessly in the industry with few and foreign nominees present in the market. This incorrect withholding of DWT and STT is high.
exceptions or risk. Most of the risk is found in the information is often required on spreadsheets SARS has specific expectations relating to tax
equities asset class, especially on elective events. The which is manual at many institutions and adds treatment of corporate events to ensure full
market refers to most corporate events as “vanilla” pressure to corporate action departments. Risk compliance with legislation. The reputational
events as they do not pose any material risk. These increases exponentially when the requirements impact also affects larger businesses, especially
events can be seamlessly accommodated in many for spreadsheets and non-standard information at the Bank-CSD Participants.
of the tried and tested processes with guaranteed are communicated late in the process. To
outcomes and high levels of straight through balance spreadsheet information to the final 4. One CSD Participant stated, “a DRIP is not a DRIP
processing. However, there is substantially more risk and irrevocable election that CSD Participants is not a DRIP”. Where one DRIP event can be
on the more complex events. Complex corporate need to make to the CSD, mostly on an event’s seamlessly executed, you may find another that
events are not necessarily linked to a specific event record date, is often a stressful and intense can become very challenging due to a specific
type, although events such as tender offers are process, especially for CSD Participants. This requirement of the event. Where processing
often notoriously complex. The South African market challenge also applies to the transfer secretaries does not align to normal event timelines and
seldom processes more than five highly complex and who must consolidate the market spreadsheet requires market testing prior to execution of the
risky equity events per annum. information into a consolidated spreadsheet event, it creates complexity. There are multiple
for the issuer. CSD Participants in the market – banking and
Factors contributing to non-banking CSD Participants - with some
3. Tax treatment is often a bone of contention, having resource constraints and many internal
complexity in Corporate Actions
specifically for brokers and CSD Participants who projects to manage. Market testing that must
are withholding tax agents and have to comply be coordinated at short notice becomes a
The complexity of a corporate event is often linked to
with regulatory obligations such as monthly challenge and increases risk and exposure to
several factors, including: -
South African Revenue Service reporting. Many potential loss. At some institutions the testing
queries arise when there is uncertainty about of complex events with the market reverts to
1. All required information applicable to the event
tax liability or clients having to pay taxes such the processing team who must manage this
must be known as early as possible in the
as securities transfer tax. Corporate actions in tandem with operational challenges and
process. Where information is not available or
management and staff are seldom tax experts internal projects.
incomplete, it leads to high volumes of enquiries
and require clarification about this early in the
from shareholders/clients and uncertainty
process. Asset management institutions face
about processing. Even simple events can
similar frustration when there is uncertainty
introduce risk when relevant information is not
about an event’s tax treatment. They must
made public from the event’s inception. Behind
account for the net asset values of various
a query is always a client requiring clarity to
portfolios. If their reporting is not accurate, it
ensure correct processing and adherence to
impacts regulatory compliance which is a major
regulation.
reputational risk. If incorrect tax is withheld or
expected to be recovered from shareholders

18 | Corporate Actions Handbook

5. Qualified Institutional Buyer Letters (QIBs) or shareholders may feel disenfranchised, and reviewed as the risk is high and can have a huge
Sophisticated Investor Letters (SILs) can create brokers and CSD Participants carry the brunt of impact on the market if a sizable trade were to
complexity. Often beneficial shareholders must queries in this regard. When a corporate event fail. Alternatively, traders in such securities must
complete these and remit to the legal team of cannot be moved to ground status and remains ensure that they do not trade the full anticipated
the issuer for verification which is an opaque pending in certain respects due to unpaid entitlement. The risk, however, remains high.
process. This process falls outside the scope entitlements, it adds risk and requires ongoing
of corporate actions processing at the brokers follow-up to ensure all shareholders are paid. 9. Securities lending and borrowing departments
and CSD Participants. The challenge lies in This often leads to risk items being listed on often have to face the dilemma that lenders
linking registered nominees to the beneficial audit reports as corporate actions teams are of securities recall these securities when they
shareholders which often is done only on rarely adequately staffed to constantly monitor perceive the corporate event to be risky. This
domicile details that may be incorrect. A global and follow up on past corporate events. creates non-availability of securities in the
fund manager with a registered US domicile market which is a substantial risk especially
may have beneficial shareholders with different 7. Restricted domiciles are a risk especially when when a specific trade must be honoured. Where
domicile details to the registered nominee. shareholders who already have a holding in a there are insufficient securities for settlement,
Exclusions on that basis may be risky and open specific counter are excluded from participation and no securities available for borrowing in the
to challenge. The required QIB templates must in an event. Uncertainty about whether domicile market, it may lead to failed trades.
be made available as soon as possible in the restrictions apply to registered or beneficial
process, as well as the contact and delivery shareholders lead to volumes of queries. This is
address details where these forms must be a crucial aspect that must be addressed upfront
delivered. Uncertainty in this regard leads to ensure there is no uncertainty to all in this
to multiple queries to custodians. Clients or process. This must form part of the declaration
institutions, as shareholders, who do not adhere announcement to provide clarity.
to the stipulated timelines communicated by the
issuer, often ask CSD Participants, who are not 8. Trading patterns have been entrenched and
part of this process, to obtain extensions from established over the last two decades with fund
issuers or sponsors. managers and institutions trading in entitlements
from ex-date. Trading in entitlements from
6. Where beneficial or registered shareholders ex-date is a risk when potential scale-back is
must open accounts with foreign custodians, applicable to the corporate event. If scale-back
such as brokers, to ensure receipt of security reduces the entitlement to be received and
entitlement, this becomes a difficult process this is only known late on record date, it can
to administer. Normally, these accounts must create systemic risk in the market. On a tender
be validated prior to receipt of the entitlement, offer event in 2021, the JSE issued a cautionary
failing which securities are deposited with an announcement about trading in entitlements due
issuer nominee account and a subsequent claim to the foreseen scale-back on the event. Trading
process must be followed. Where this process in entitlements from ex-date on events where
is not communicated clearly and well in advance, scale back may be applicable, may have to be

19 | Corporate Actions Handbook

10. When issuer entitlement (allocation) is 11. The issue of early engagement has been raised 13. Trading in an ISIN after LDT on events where
communicated via spreadsheet to the market by some CSD Participants. While some require the ISIN will change/delist creates the risk of a
and there is a delay from the issuer, sponsor to be part of the discussion before the event debit balance of securities and must be strictly
or transfer secretary, it has significant impact details are published, others do not want to be managed at broker and CSD Participant level.
on the CSD Participants. End of day processing part of the process until the event has been At CSD Participant level, a debit balance of
is initiated via schedulers at most institutions announced to mitigate risk of insider trading securities is an infringement that is frowned
and various downstream processes follow from and being privy to confidential information, upon. A CSD Participant must not give, or give
there. If there is a delay in this process, it impacts which creates another risk for CSD Participants. effect to, an instruction which would result in
the entire market, impacting daily reconciliation Issuers are very sensitive to disclosing certain any of the securities accounts maintained by
processes and client statements to name but information before it is made known to the the CSD Participant reflecting a debit balance
two. Once specific corporate event late in 2021 market – leakage of sensitive information may according to Strate Rule 7.4. A fine of R50
created huge impact on the market in terms jeopardise the entire event. Consensus view 000 per instance where a securities account
of end-of-day processing. The issuer/sponsor however is that all pertinent information must reflects a debit balance may be issued by Strate
did not adhere to the agreed timeline to notify be available on the declaration announcement, Supervision. Where a CSD Participant does not
the market of the client entitlement and this if available. This matter has also been finalised notify Strate Supervision within twenty-four
information was only released very late at night by the JSE who confirmed that issuers cannot hours of the occurrence of a debit balance,
on the record date. Some banks had to abort be mandated to involve CSD Participants before this will be reported to the Strate Regulatory
the corporate action processing and started the event has been publicly announced. and Supervisory Committee who may impose
their end-of-day processing around midnight a further penalty. Daily reconciliation processes
on the day. Insufficient time to complete this 12. Where the appointed agent must sell restricted are established across the market to mitigate
process successfully, can have huge risk for entitlements for shareholders who are not this risk.
banking institutions whose systems may not eligible to participate in the event, it may
be able to start up the following day unless create uncertainty when the process is not 14. Trading in securities where a shareholder
day end processing for the previous day has well communicated. The appointed agent has already accepted an offer can cause risk.
concluded successfully. Some institutions were will consolidate the pool of securities to be Securities that have been tendered must
very vocal about the risk that was introduced sold and will dispose of the securities in a be disabled for trading purposes to ensure
to the banks. A repeat of an incident of this controlled manner to arrive at a uniform price securities are available for delivery on the
magnitude may have significant consequences to all shareholders. Restricted securities are relevant date. Where securities have been
for the issuer, sponsor, or agents for this event. normally sold, and the proceeds relayed to CSD tendered for an offer event and the same
It cannot be allowed that delayed processing on Participants a few days after record date plus securities have subsequently been traded, this
the part of an issuer/sponsor impacts the entire one. For every corporate event where restricted creates a risk of a potential debit balance of
ecosystem of corporate events and introduce entitlements must be sold, the correct cash securities.
massive risk to the ecosystem and clients. rate must be communicated after the sale is
completed.

20 | Corporate Actions Handbook

15. Extension of the closing date of the offer. While lack of clarification to relationship managers which in
there may be good reason for the issuer to turn affects the client scorecards and CSD Participant
extend the closing date of a tender offer due ratings. If there are spreadsheet requirements that
to delays in obtaining approvals or regulation have not been confirmed by finalisation date (RD –
hurdles, delaying this indefinitely causes stress 8), this has a knock-on effect where clients queries
in the operational environment. Shareholders’ are received in large volumes. Where there are non-
securities are ring-fenced for longer periods standard columns to complete, CSD Participants must
and are effectively taken out of the market engage with their clients and must often arrange
for trading purposes. It may happen that on-on-one sessions to explain the spreadsheet in
shareholders wish to retract their election or detail and take the nominee clients through the detail
acceptance of the offer especially if the terms to explain to their clients what is required. This is
of the extended offer become more favourable. particularly the case with offshore clients. Sometimes
Most of the time however, once an election has meetings must be scheduled with up to fifty or sixty
been submitted, it is irrevocable. clients depending on the client base of the event.
This must be done in a very short time frame to
16. Apportionment ratios is a problem especially mitigate risk. If this is not done clients may advise the
in the asset management industry where relationship managers that their service provider is not
daily portfolio valuations are required. These providing the required skill and care in the execution
apportionment ratios on unbundling events are of the corporate event. Clients often come back at
only confirmed on record date but trading in the eleventh hour to request extension before they
entitlements starts from ex-date. Reprocessing submit elections. This causes the CSD Participant to
must be triggered once final ratios are known run the risk of being unable to meet market deadline
which causes much frustration in this part of and putting their clients at risk of potential default.
the ecosystem. It also implies additional costs
as back-office processing is often done by third
parties and any recomputation or reprocessing
of events are charged for.

CSD Participants perception is that there is a lot of

pressure in the process that falls on them for which they
are taking an extra-ordinary portion of the risk. Some
CSD Participants have had major losses on corporate
events. If the corporate action communication is
unclear, clients send queries to CSD Participants in
droves to clarify certain aspects of the event. If the
issuer or sponsor is not very fast on turnaround times
for queries, this causes shareholders to report the

21 | Corporate Actions Handbook

5. ROLE PLAYERS
“It is important to understand who the various
Exchanges Strate Central Securities Depository Participants
role-players in the South African financial market
ecosystem are and the roles they perform in creating i) Johannesburg Stock Exchange i) Absa Bank Limited
a sound South African financial market for the benefit ii) A2X ii) Citibank N.A. – South African Branch
of the investment community. It is also important to iii) Cape Town Stock Exchange iii) Computershare (Pty) Limited
understand that actions taken by a company or issuer iv) Equity Express Securities Exchange iv) FirstRand Bank Limited
may be regulated by more than one regulator and that v) JSE Investor Services CSDP (Pty) Ltd
Central Securities Depositories
there is inter-play between these regulators. These vi) Nedbank Limited
role-players provide critical checks and balances for i) Strate CSD vii) The Standard Bank of South Africa Limited
a robust governance ecosystem of all companies ii) Granite CSD viii) South African Reserve Bank (SARB)
doing business in South Africa” – JSE Listings ix) Standard Chartered Bank – Johannesburg
Transfer secretaries/Services
Requirements. Branch
i) Computershare Investor Services
Legal teams
The role-players involved in corporate actions include ii) JSE Investor Services
issuers, exchanges, CSDs, transfer secretaries, iii) Singular Systems i) Werksmans Attorneys
sponsors, CSD Participants, brokers, nominees, iv) Cape Town Stock Exchange ii) Linklaters LLP
fund managers and the legal fraternity. Some of the iii) Webber Wentzel Attorneys
Sponsors
industry role-players are listed below:
Asset management institutions
The list is not exhaustive. For a complete list, consult
Issuers the exchanges’ websites. i) M&G Investments
ii) Allan Gray Investment Management
In South Africa there are currently just under 300 i) Java Capital iii) STANLIB Asset Management
listed companies on the JSE. These issuers are all part ii) RMB iv) Ninety-One Asset Management
of the ecosystem for corporate actions and excludes iii) Investec
Administrators
the unlisted and private companies. The list is too iv) Nedbank Corporate and Investment Bank
exhaustive to include all issuers, but details can be v) Standard Bank Corporate and Investment i) Curo Fund Services
found on the exchange websites of all listed issuers. Bank ii) Maitland Fund Services
CIPC should have the details of all private companies. vi) Questco Corporate Advisory iii) Prescient Fund Services
A2X has 71 secondary listings on its platform as at 20 vii) One Capital iv) State Street Fund Administration
October 2022. Other exchanges have a relatively small
Brokers
number of listings and some offer bespoke services to
issuers. i) Nedbank Private Wealth
ii) SBG Securities
iii) Navigare Securities

22 | Corporate Actions Handbook

The role of issuers iv) ensure that the company is not performing Some of the feedback we received from issuers is
business activities that violate any laws in provided below.
An issuer is a legal entity that develops, registers any jurisdiction and is free from any litigation
and sells securities for the purpose of financing its proceedings; and An issuer who declares dividends bi-annually, operates
operations. v) keeping the investors in the company updated a substantial securities buy-back programme,
on the company’s progress on a periodic basis. and had an odd-lot offer, several acquisitions and
Issuers may be governments, corporations or securities dividend alternative, said it considers clear
investment trusts. Issuers are legally responsible for: Issuers are also required, on a continual basis, to have: communication to shareholders and the market
important. The issuer requires assurance around
▷ obligations regarding the issue of securities; ▷ a board of directors appointed that complies execution of its corporate events, and that nothing will
▷ reporting financial conditions within prescribed with the Listing Requirements; go wrong that it is not able to control. It was expressly
periods in the prescribed format; ▷ various board committees; stated that it does not want to be embarrassed
▷ notifying the market of material developments; ▷ a company secretary; because of delays or non-payment and prefer to have
and ▷ a listing sponsor; and a truncated timetable where possible.
▷ any other operational activities as required by ▷ an auditor.
the regulations of their jurisdictions. An issuer mentioned that its sponsor would only
Most issuers view the sponsor as the interface between come in later in the transaction. From the onset, it put
The most common types of securities issued are: themselves and the market who must ensure that together a multi-disciplinary team that is as small as
regulatory aspects are adhered to. Issuers require possible to ensure confidentiality, and the corporate
▷ equities: ordinary and preference securities; backing from the appointed sponsor and transfer bankers and attorneys form part of the initial core
and secretaries in their engagement with the exchange, team.
▷ debt: bonds, notes, debentures and treasury to ensure compliance with Exchange Requirements,
bills. Issuer Regulation, Strate Directives and the various The first consideration when contemplating any
Acts. Sponsors are the channel between the company corporate action for an issuer listed for over 100
Issuers must ensure that the following minimum and the exchange, both upwards and downwards. years, is the strategic rationale. It would focus on the
requirements are met: Sponsors provide guidance to issuers and translate overall strategy of the group and whether that can be
the requirements into a to-do list of what must be achieved organically or inorganically, or if the board
i) the documentation submitted for due diligence done, when and by whom. needs to execute acquisitively through a corporate
must be valid documents; action to fulfil that strategy. Any corporate action must
ii) offerings documents to the investor must be In terms of the expectation from the exchange, CSD make strategic sense. It would look at a merger or
valid and not violate any law; and CSD Participants and the roles they play, some acquisition as a tool to realise the strategic objective.
iii) informing regulators or representatives of issuers advised that they expect all role-players to fulfil
any material adverse changes in any offering their respective roles to ensure that the corporate
documents or business activities of the action is executed. Clear guidance is required from
company during the offering period or after the the exchange on what needs to be done, and the
minimum funding amount is completed; sponsor will assist with that.

23 | Corporate Actions Handbook

Another consideration for issuers is around terms For some issuers corporate actions are all about have a long lead time, and issuers keep their circle of
and the pricing of the transaction versus where the unlocking shareholder value. If a dividend is declared, confidants as small as possible.
issuer believes it is valued. The execution risk of any they must have sufficient capital reserves to pass
transaction is also a factor. Consideration is given the solvency and liquidity test; if capital is required, Generally, issuers try to ensure that a transaction
to how the transaction or corporate action could be they may contemplate raising capital either via rights works well at the CSD Participants as well as the rest
facilitated and the prospects following the transaction. offer to shareholders or consider debt funding. Some of the market. Many deals done in the private markets
The right management team or the right partners are issuers have no objection in principle to liaise with cannot be replicated in the public markets because
critical to realise the strategy. CSD Participants at the right moment if they believe of the complexities and issuers shy away from those
the transaction warrants engagement, but they do not transactions in the listed environment. Most issuers
Another issuer advised that the principles it considers want to introduce this concept for all events as this is have no insight into the custody systems or client
before any corporate action is contemplated are: not a productive use of time. messaging structure (SWIFT) and believe the technical
system detail is best left to licensed custodians to
✓ the cost-benefit of undertaking the corporate A company that has been doing securities buybacks work out.
action over the medium and longer term; and for the past 15 years and corporate actions for even
✓ the benefits for shareholders. longer, said its legal team is not always involved, but A REIT issuer with a large exposure to European
when it is, it will be at an early stage for the company markets, compiles a detailed analysis of its register
Corporate action transactions are driven fundamentally to understand what it can and cannot do. Many of the monthly but believes information at a granular level
by the company strategy because they communicate aspects are dealt with by the company secretary. If a would be a game-changer for the issuer. It actively
a message to the market. Operational performance is more complex corporate event is planned, a multi- manages its institutional shareholders on an ongoing
the starting point in most cases, but what is crucial disciplinary team consisting of the legal team, sponsors basis. For this issuer, having direct line of sight on the
is the outlook for the company. Even if a payment and accountants will form part of the engagement. It outcome of decisions is crucial. Transparency of the
to shareholders will be modest, the questions to be depends entirely on the complexity of the transaction register is critical to have meaningful engagement. It
asked are: and the nature of the risks that may be inherent in the has to figure out shareholder detail on the company
transaction. register by deduction because it is not transparent.
✓ What message is conveyed in an entitlement to
shareholders? In most instances, issuers should only announce a
✓ Has it increased from the previous declaration transaction to the market once there is board approval
period, is it down and what story is being told? and deal closure simply because of price sensitivity.
✓ Do shareholders have reason to have There is strong requirement from the TRP to ensure
confidence in the business? that price-sensitive information does not leak and
✓ Does the company require funding for to ensure that information is contained. In terms of
expansion or is a potential take-over on the highly sensitive transactions, only a handful of people
cards? should know about it early on. Most issuers concur that
✓ What are they doing to grow the company and prior engagement with other parties is not an option.
is there productive use of capital? Warren Buffet remarked that markets are bipolar and
can exacerbate to the upside and the downside on
sensitive information. Complex transactions always

24 | Corporate Actions Handbook

A clear requirement from the majority of issuers is to Exchange control regulations are considered when standard transactions. Withholding tax legislation
have a detailed register that provides all shareholder issuers contemplate cross-border transactions where in South Africa is particularly complex. It is not a
information. Ideally, it should include details of the either the counterparty, legal counsel/s or advisors simple 20% across the board due to exemptions and
mandated asset manager. Some issuers spend vast or the transaction itself are outside of South Africa. depends on whether you are a company, a particular
amounts of money to obtain shareholder information, Issuers engage with the South African Reserve Bank entity, a trust or an individual. On top of that, double
especially on the international side of their business. for all cross-border transactions. tax agreements around the world constantly change.
Although it is a grudge purchase, it does provide Most issuers believe they fulfil the requirements of the
valuable information. An issuer which has many Several issuers view the reluctance of CSD Participants exchange in terms of taxation and source of income,
tracker funds from Europe and the US on its register to provide information not as a Protection of Personal but shareholders need to interpret what it means for
finds asset managers in those locations typically Information Act issue, but rather an assistance issue. them, which includes reading the circular. Some issuers
don’t engage with them as they outsource their Several issuers find it awkward that they are unable to have appointed senior tax specialists who liaise with
voting. Transparency makes for good stewardship determine who may have voted in a particular manner the legal team and sponsor on all tax-related matters.
from a management point of view, but also from an at their Annual General Meeting. Market practice Shareholders are always responsible for validating the
institutional shareholder point of view. dictates that an issuer’s request for disclosure must effect on their personal tax with their tax practitioner.
be sent to Strate. In turn, Strate will request that CSD Withholding tax agents, however, require certainty
Some issuers say it is time to move to T+2 or T+1 Participants provide the information. CSD Participants about the dividend withholding tax to be withheld and
settlement cycle. This view is supported by a high- send the request for disclosure to shareholders who paid to the South African Revenue Service. Uncertainty
profile legal firm involved in many corporate actions. must advise whether the information may be provided causes risk. Stakeholders, especially CSD Participants,
Aligning settlement cycles with major foreign markets to the issuer. CSD Participants cite confidentiality as a brokers and asset managers, need to know what they
would reduce risk and complexity locally, especially reason why it cannot be provided without consent from must do, when they must do it and what they can
coordinating timetables between jurisdictions. All the shareholders. This is frustrating for issuers who expect.
issuers consider a corporate event that requires a are expected to embark on a process of engagement
vote as risky. but do not know who to engage with. Some portals In the digital era, every shareholder whether listed or
such as e-Voting have a disclosure indicator that not, must have an electronic communication address.
The view of several issuers on elections post record makes it simpler to manage these types of requests. One international issuer said CSD Participants are
date is that the primary objective is to get it right. They not investing sufficiently in their systems to enable
are comfortable if it takes a bit longer to ensure that Issuers view the role of the transfer secretaries as the corporate actions. Its experience with some CSD
it is right on complex transactions. One issuer who maintenance of the entire register and looking after Participants has not been positive. It has found most
had a complex corporate event in 2021 with several the total securities register when there is a corporate CSD Participants are helpful and cooperative, but a
jurisdictional restrictions, said it is better for elections action. Transfer secretaries deal with certificated couple were focused on reasons why an event could
to be provided post record date if it will assist the shareholders, communicate with them and pay the not be executed. An issuer who was recently involved in
process and reduce the risk. Another issuer believes dividends due to them. When required they will also a prominent corporate action said Excel spreadsheets
that elections must be provided on record date sell restricted entitlements. introduce risk and a better way to provide information
because that is when it is needed. must be found.
All issuers consider tax implications on the company
and shareholders. Issuers attempt to work out the
most efficient course of action, especially for non-

25 | Corporate Actions Handbook

The information format must be aligned to beneficial element of flexibility. It is inevitable that for some 9. The perceived unwillingness of some CSD
downloads, and the BOR that Strate provides to events where rules cannot be adhered to, special Participants to cooperate with the market is a
its clients must be meaningful for the market. The circumstances might prevail. CSD Participants should concern for some issuers.
accuracy of information is also vital to the issuers and be enablers in the market and produce world-class 10. The cost of being a listed entity and all associated
industry. service. The issuer must put the CSD Participant in a costs are a concern to several issuers.
position to meet its settlement obligation. 11. Some issuers with large investments in other
Most issuers don’t view trading in entitlements from jurisdictions support a market move to T+2 or
ex-date as needing to change and are comfortable Recommendations and take-aways based on T+1 settlement cycle. Most local issuers do not
with the status quo. There are views supporting trading engagement with issuers: have strong views about this aspect.
in entitlements only from payment date but opposing 12. Most issuers believe in terms of taxation and
views say the market should not be backward looking. 1. The quality of information on the BOR should source of income, they fulfil the requirements
Instead, risk must be better managed rather than be improved. of the exchange and that circulars must be read
halting the trading in entitlements until payment date. 2. BOR should ideally provide information down to in more detail.
A mindset shift needs to happen, and systems and beneficial shareholder level and must provide
processes must be enabling instead of trying to steer for greater transparency, including contact The role of exchanges
the markets from trading, according to some issuers. details.
Most issuers acknowledge the timelines of corporate 3. The BOR should include details of the managing Exchanges are licensed in terms of the provisions of
events in South Africa may be slightly different to the institutional shareholder or asset manager, thus the Financial Markets Act No.19 of 2012 and regulated
rest of the world in terms of election timeline and enabling the issuer to engage with shareholders by the Financial Sector Conduct Authority (FSCA) and
payment date, but prefer having a short timetable when required. Prudential Authority (PA) of South Africa. Exchanges in
where payment follows immediately after a record 4. Issuers are not prepared to engage with CSD South Africa are obliged to make listings requirements
date. Participants prior to the announcement of an and enforce them. They provide facilities for the
event on the Exchange News Service due to listing of securities and provide users with an orderly
All the issuers interviewed during the handbook price sensitivity and protection of information. marketplace for trading in such securities and regulate
drafting period are of the view that even though there 5. Systems used by stakeholders require the market accordingly. Exchanges advocate for the
may be opportunities for improvement, the market investment to ensure optimal functioning and enhancement of corporate governance and the
provides a very sophisticated framework. To date greater levels of automation. quality of financial reporting disclosures by companies
there has not been a corporate action that the market 6. Spreadsheets are a concern, especially those
was not able to execute, despite some challenges. produced manually. (i) that have issued equity securities listed on the
Some issuers advised that they are willing to take 7. Most issuers want to retain the status quo with exchange; and
some guidance in terms of processing and systems, trading in entitlements from ex-date. (ii) that have their debt securities listed on the
while the majority felt that stakeholders cannot 8. There are opposing views about client elections exchange, for the benefit of shareholders,
prescribe the outcome – that is the prerogative of post record date. While some issuers are securities holders, investors and other market
the issuers and informed by the strategic direction of agreeable to move the election date out, others stakeholders.
the company. Systems should provide for sufficient say the market should be enabling and instead
flexibility and should be principle-based rather than of changing the market practice, should manage
rules-based for the complex, rare events. For routine the risk better.
corporate events, you could specify rules with an

26 | Corporate Actions Handbook

The JSE as the primary exchange houses an Issuer Regulation Division, commonly The JSE is Africa’s largest stock exchange and has listings across various asset classes
known as the Listings Division. It is the custodian of the Listings Requirements and and types. The JSE is a regulator of the listed companies as well as the sponsors in
responsible for the interpretation, application and enforcement of the Listings South Africa. There is liability on the JSE and market consensus that the JSE should
Requirements. The detailed disclosure includes, but is not limited to, ensure that corporate action information should be made available timeously as it
understands the risk to the various parties.
✓ information on the applicant issuer itself,
✓ its operations, As of 22 September 2022, the JSE had the following number of issuers posted on
✓ its financials, www.JSE.co.za
✓ its corporate governance arrangements, including
Exchange
✓ disclosures regarding its board of directors. Equities Warrant Interest Debt ETN
Traded Funds

Issuers are required to comply with the Listing Requirements on an ongoing basis 297 10 4 163 13 7
to ensure that shareholders or investors are at all times apprised of price sensitive
Structured Sponsored Unsponsored
activities of the issuer. ABF Hybrids AMCI
products DR DR
6 3 0 0 20 1
The licensed exchanges currently operating in South Africa are
Trends: Listed companies on the JSE from 2010 - 2021

Market
JSE Market
End New Net Companies Capitalisation.
The Johannesburg A2X Cape Town Stock Equities Express Delistings Capitalisation.
year listings Listings Listed per company
ZAR billion.
Stock Exchange Exchange Stock Exchange ZAR billion

2010 15 17 -2 407 6 698,7 16,5

The JSE – Johannesburg Stock Exchange 2011 19 17 2 406 6 908,5 17
2012 15 18 -3 402 8 384,0 20,9
The JSE offers an open market model and trades equities on a T+3 on-market 2013 13 26 -13 389 10 626,4 27,3
settlement cycle. The JSE was formed in 1887 during the first South African gold rush.
2014 30 22 8 391 11493,7 29,4
Following the first legislation covering financial markets in 1947, the JSE joined the
2015 23 19 4 395 11 727,6 29,7
World Federation of Exchanges in 1963. It upgraded to an electronic trading system
2016 18 25 -7 388 15 461,4 35,0
in the early 1990s. The bourse demutualised and changed from being owned by its
members to being listed on its own exchange in 2005. 2017 21 32 -11 377 12 682,0 41,0
2018 12 17 -5 372 17 440,3 34,1
In 2003, the JSE launched an alternative exchange, AltX, for small and mid-sized 2019 6 24 -18 354 17 854,0 49,3
listings, followed by Yield X for interest rate and currency instruments. The JSE then 2020 5 20 -15 229 17 854,0 52,7
acquired the South African Futures Exchange (SAFEX) in 2001 and the Bond Exchange 2021 7 19 -12 327 19 193,0 58,7
of South Africa (BESA) in 2009. Today it offers five financial markets, namely Equities,
Bonds, Financial, Commodity and Interest Rate Derivatives (www.JSE.co.za). Source: JSE Market Statistics August 2021

27 | Corporate Actions Handbook

When an issuer advises the exchange of a particular shareholder information to prevent unintended tax A2X offers an open market model and T+3 settlement
corporate action event it intends to pursue, it logs liability. cycle.
onto a specific interface and captures the required
information onto the platform for standardised events. A2X CTSE – Cape Town Stock Exchange
This is validated against the minimum requirements
for the specific event. If the criteria are met, the The A2X exchange offers a secondary listing option to Ordinarily the fee structures and governance
event is approved by the relevant Issuer Regulations listed companies that are primary listed on the JSE or requirements of a traditional securities exchange
Department. For more complex events, meetings CTSE. A2X opened its doors on 6 October 2017 and have prevented many SMEs and mid-cap businesses
may be required. Most corporate events, such as refers to its services as fast, fair and efficient. It offers from considering a market listing as an avenue for
dividend declarations, do not require approval from cross-market trading so that brokers can obtain the raising capital. According to the Cape Town Stock
the exchange. The exchanges attempt to reduce and best deals for clients. Its service offering according to Exchange web page, https://ctexchange.co.za its focus
eliminate red tape for issuers by making the business its website www.A2X.co.za focuses on: is on time-saving, cost, risk and removing complexity.
environment as seamless as possible. Its belief is that its completely digital exchange offers
» Choice – a complementary venue to secondary list safe, easy and cost-effective listing and trading. The
Exchanges should encourage investment into the securities for trade; CTSE also considers itself to be approachable.
SA market and ensure that from an SA-Incorporated » Real benefits - lower transaction fees, narrower
perspective, barriers are removed as far as possible. spreads and increased liquidity generate material CTSE offers a cloud-based platform that is efficient,
Multiple regulatory requirements act as a deterrent for savings for the end investor; simple, transparent and makes both listing and trading
foreign direct investment. SA Incorporated requires » Best execution – when brokers look across cheaper, faster and secure. It has an in-house registry
much greater foreign investment to address the ever- markets, they find the best deal for clients; operating off its own registry technology, making the
increasing problem of unemployment, poverty, and » Latest technology - By using the latest high- entire listing process easier, cutting through red-tape
low levels of investment. performance exchange technology and industry and reducing the cost involved. It provides governance
best-practice A2X can offer large fee savings on and transfer secretarial services.
As the evolving corporate actions landscape introduces the end-to-end cost of transacting.
more complex events and risk to the intermediaries A CTSE representative said it works closely with all
in the chain, a balance must be struck between the As of 31 December 2022, A2X had 93 secondary listed companies and does not focus only on large
interests of all parties. Legal and tax frameworks have listings and a market capitalisation across these issuers. It maintains its competitive edge lies in good
become more complex and onerous as evidenced by listings of more than R5,3 trillion. A2X has grown trade relationships and using both its people and technology
corporate events such as Naspers/Prosus, Northam value to over R26 Billion in 2022. It has 17 of the top to support everyone participating on CTSE. Another
Platinum, Alexander Forbes and PSG. The jurisdiction 40 constituents listed. The reasons that issuers obtain aspect it focuses on is making investing simple and
of the primary listing will always take preference while a secondary listing on A2X can be summarised in the affordable for both retail and institutional investors by
adherence to local legislation must be maintained. words of Sygnia CEO, Magda Wierzycka: “We support offering securities trading without minimum fees, and
Representatives from the JSE advised that recent disruption, competition and best practice in South a simple fee structure. Its Capital Solutions division
SARS rulings indicate that issuers will be held liable for Africa’s capital markets. International experience has offers unlisted debt options for businesses too. CTSE
capital gains tax and dividend withholding tax for any shown how competition helps drive a more efficient offers both an open and closed market model, T+3
securities distributed to a shareholder in a restricted and responsive industry, which ultimately benefits the and T+ 0 respectively.
jurisdiction. This creates additional complexity end consumer and assists in the overall growth of the
for issuers and increases the need for beneficial market.”

28 | Corporate Actions Handbook

offers unlisted debt options for businesses too. CTSE Regulation Department and this includes any form complexity to the corporate actions process due to
offers both an open and closed market model, T+3 of corporate actions. A2X listing requirements and the settlement of trades on different exchanges.
and T+ 0 respectively. its Issuer Regulation Department must be consulted
regarding corporate actions but this is more focused on One exchange pointed out that the major risks in
Equity Express Securities Exchange the risk of settlement complexity. The JSE as the primary corporate actions relate to ensuring that shareholders
exchange approves complex corporate actions. A2X receive their rightful share of entitlement on time.
This exchange was specifically created to look after the ensures that from a complexity perspective the event There have been occasions where dividends were
needs of broad-based Black Economic Empowerment can be accommodated, but does not involve itself with not paid out when a corporate event was published
schemes. It is unique in the exchange environment in its approval. CTSE approves corporate actions for its and then did not take place. Since the market trading
that it specifically caters for companies with restrictions, listings, and its model is binary – it has an open market model is based on certainty about entitlements,
although these restrictions do not necessarily only model (T+3) and a closed market model (T+0). and trading of security entitlements from ex-date,
relate to shareholder matters. Information about there is certainty that cash or security entitlement is
EESE can be obtained from www.EESE.co.za. Securities The JSE looks at corporate actions from two specific guaranteed. When a corporate event is cancelled after
traded on CTSE have issuer-imposed restrictions and angles. One focuses on the execution of the corporate ex-date, this creates systemic risk in the market due
the securities register forms the basis of the trading actions with the sponsors and issuers. The second to the trading that would have already occurred on
platform. EESE seeks to bridge the gap between the angle is the Broker Dealer Accounting system and how the trading in entitlement. To unravel and undo the
over-the-counter market and the listed environment it processes it on the BDA system – feedback from the trading that has taken place is a huge risk that may
in catering to the needs of both sophisticated and brokers during the engagements indicate this is a very affect the entire market.
unsophisticated investors. EESE offers companies manual system, but workarounds have been devised
that want to impose restrictions on the nature of the over the years to automate some processes and From an exchange point of view, corporate actions
investors and/or size of holding an efficient platform requests from issuers. For standard corporate actions risk is more focused on the certainty of a corporate
to guarantee pre-trade eligibility of investors. The such as dividends, no approval is required from the event occurring and certainty that entitlements will
risk of settlement is significantly reduced through JSE. Once the pertinent details are captured the be paid on the due date. The announcement must
pre-funding and online trading facilities are in place. sponsor sends the announcement for publication on provide clarity to all stakeholders in the process and
Settlement takes place on a delivery versus payment the Stock Exchange News Service. Other exchanges there should be no ambiguity about the event. All the
basis and is effected on the same day. EESE obtained have similar broadcasting services such as CTSE News exchanges should have systems that accommodate
its exchange licence on 11 September 2017. Service and A2X News Service. all types of corporate actions, even if components of
the event are executed manually.
Focus on Corporate Actions One exchange pointed out that one of the biggest
risks in the complexity of the corporate actions is
Exchanges have been involved in corporate actions processes for clearing and settlement – this is linked
for many years through random working groups, to the Securities Lending and Borrowing market.
primarily from the JSE. The JSE remains the primary Every time there is a complex corporate action, many
Exchange. Exchanges such as A2X currently accepts lenders recall securities, creating pressures in the
secondary listings only and have no primary listings market. Some exchanges have an inter-operability
at this moment - that may change in the future. The model, especially where primary versus secondary
JSE manages listed companies through the Issuer listings are held, such as JSE versus A2X. This adds

29 | Corporate Actions Handbook

There is a fair amount of system manipulation. This i) Advising the applicant issuer on the application defined timeline. All sponsors interviewed say they
implies that the system vendors are consulted to of the Exchange Listing Requirements; put every effort into making sure all the detail of a
accommodate complex events when they occur, and ii) Ensuring that all documents submitted to the corporate action is written out in simple language
they often need to devise special purpose reporting exchange comply with the Exchange Listing in the circular so that it is understandable. In their
or processing methodology for a complex corporate Requirements; experience custodians read circulars at a high level
event. This introduces risk to processing of other iii) Informing the exchange if an issuer has and raise questions about the event that are covered
events and requires close interaction with operational breached the Listings Requirements or has in the circular. Tax matters are dealt with in the circular
teams. Additional monitoring is required and although reason to believe that the Exchange Listing and not on declaration of the event as this is governed
some of the custodians have vendor assistance on- Requirements may have been breached; by regulation.
site, most of the vendor support is located offshore iv) Ensuring that the directors of the applicant
and time zone differences introduce complexity. issuer are aware of their responsibilities Sponsors are paid for a service provided to issuing
Where a custodian has an offshore processing hub, pursuant to the provisions of the Exchange companies. The only exchange to regulate sponsors
this makes matters more convoluted. Listing Requirements; and is the JSE. The JSE can censure a sponsor or fine
v) Approving all Exchange News Service them if they don’t process the corporate action as
One exchange remarked that cross-jurisdictional announcements before dissemination to the they should. Some sponsors engage with the transfer
events create risk and complexity. When issuers market secretaries when structuring a corporate action and
request information – that they are entitled to – take note of market practice, regulation and practical
there is a duty and legal obligation on stakeholders The sponsor is responsible for all interactions between implementation. When there are deviations from
to provide them with the information. Stakeholders the company and the exchange. the process or timelines, they engage with market
cannot refuse to give it to them. If it becomes participants to find a way to execute a corporate
impossible for a listed company in South Africa to Sponsors are not required in all jurisdictions. For event. Some sponsors advised that 90% of issuers
manage its shareholder information, there is a risk example, issuers in Canada can approach the Toronto request information down to beneficial holder level
that the country will lose those listings. It was said that Stock Exchange without the assistance of a sponsor, on complex events – thus necessitating spreadsheets.
in terms of money laundering and potential greylisting according to one legal view. In South Africa exchanges Where there are multiple options on an event, this
in South Africa, beneficial ownership details are critical require certainty that applications received from needs to be drilled down to the lowest level.
and a requirement internationally. Issuers must be issuers adhere to certain minimum requirements,
able to drill right down to shareholder details. hence the need for sponsors. The sponsor’s duty Some sponsors say the most pertinent risks are tax
first and foremost is to ensure compliance with the related and reiterated that they are not tax advisors. It
The role of the sponsor exchange listing requirements. There are various is not possible for issuers to explain every possible tax
other regulations, and the sponsor must ensure scenario or provide a rate for every jurisdiction when
The listing sponsor must execute the responsibilities that the corporate event is structured in such a way an issuer is represented in markets across the globe.
imposed by the exchange in terms of the exchange’s that it does not breach any regulations. According to When another jurisdiction is involved in a corporate
Listing Requirements. The responsibilities include, but sponsors, regulation will always be followed. action, especially with a different settlement cycle, it
are not limited to: is difficult to satisfy all parties. Some find it frustrating
Sponsors need to draft the documents required, that they must tailor their announcements for
process the exchange and client comments, and get secondary-listed companies to fit local systems and
the advisors to contribute to the document within a prescribe to companies listed on the London Stock

30 | Corporate Actions Handbook

Exchange what they can and cannot do. Involvement Respondents said the most risk to the market was exactly who the shareholders are as it would simplify
with the broader market only commences once the posed by events that require manual intervention and many issues when planning corporate actions.
terms announcement has been approved by the elections, not only specific types of complex events.
sponsor for imminent release due to price sensitive The most complex events involve a flow of funds One sponsor said it deals instantly with standard
information. and equities as these involve settlement procedures. queries. More intricate technical topics are referred to
Events where shareholders are involved beyond just the deal team or the legal team. As part of a dividend
The complexities introduced by deviations from Strate a vote to make an election are regarded as risky. declaration, it will provide tax information such as
timelines causes a lot of frustration – sometimes it Another sponsor singled out rights offers as risky. dividend withholding tax. If it is a complex transaction,
takes up to three weeks to finalise rights offer event Several sponsors mentioned the biggest risk is where the circular would address the tax matters and the
details and agree on a timetable. One sponsor regards people have information while a transaction is being sponsor will obtain a directive from a tax expert whose
the Australian Stock Exchange as sophisticated finalised. A rights offer is not necessarily more complex responsibility is to provide wording for the circular.
and says we can learn from it. In terms of beneficial than an unbundling or tender offer – it depends on The issuer will always include a blanket statement that
shareholder information, one sponsor suggests that the specific terms of the event. shareholders must consult their own tax practitioner
a beneficial download for foreign nominees should be for advice and guidance on tax implications and not
done weekly to provide details of foreign ownership. Some sponsors expressed the need for education as rely solely on the information contained in the circular.
Another suggestion was to extend the timelines for they don’t have a full understanding of how the entire
shareholder elections and allocations to reduce the process unfolds. A few sponsors acknowledged that The role of the Central Securities
risk. This would result in moving out the payment date they have very little in-depth technical knowledge
Depositories
by potentially a week. Once this becomes standard of corporate actions, although they are intimately
practice for complex events, it will be accepted by all. involved in the process. One sponsor said the last day
The Financial Markets Act defines a Central Securities
Questioned about delays in the turnaround time to trade should mean last day to trade for everyone.
Depository as a juristic entity which constitutes,
of queries, one sponsor remarked that it will always Currently post last day to trade trading can still occur
maintains and provides an infrastructure for holding
consult with its legal team. If the issuer’s legal advisers off-market and according to one issuer should not
uncertificated securities, which enables the making
are in a foreign jurisdiction, they will need to liaise be allowed. Deviations from Strate timelines and
of entries in respect of uncertificated securities, and
with the legal team in the foreign jurisdiction as well. exchange timetables normally occurs for companies
which infrastructure includes a securities settlement
This creates delays. The more complex the query, the incorporated in a foreign jurisdiction that are subject
system.
longer the delay. Technically the shareholder should to different legislation and rules. A record date for
consult its own advisor, especially on a tax matter as a general meeting is 28 days before the meeting in
Currently there are two licensed depositories in South
the issuer is not required to give tax advice. the UK while in South Africa it is normally the Friday
Africa, i.e., Strate and Granite CSD. Granite CSD is
before.
licensed by the FSCA to act as a Central Securities
One sponsor advised that they don’t normally involve
Depository under the Financial Markets Act to
the market; once the timetables are laid out, they Sponsors agree that their businesses are susceptible
perform custody and settlement services for listed
follow the standard timetable. Another sponsor was to reputational risk because of the public role they
and unlisted bond and money market securities.
very open to accommodating requests from the play. Sponsors generally advise their clients to request
Based on information from its website, it plans to
market. a BOR from Strate. They all shared the view that it
apply for an amendment to its license conditions to
would be great to simply pick up a register and see
include holding equities as an asset class in the future.

31 | Corporate Actions Handbook

Strate, as South Africa’s principal central securities then, all trading in securities has moved to an electronic Directives cover all aspects of the market such as
depository and central collateral platform, serves the platform. As South Africa’s principal central securities settlement, corporate actions, company meetings,
financial market through the safekeeping of the legal, depository, Strate digitally connects the financial fees and penalties. Through its special purpose fund,
digital record of securities ownership, enabled through market ecosystem with world-class technology Strate has hosted workshops to increase market
registry, settlement and asset services, and through platforms. In 2021, Strate securely transmitted skills and implemented initiatives aimed at the more
facilitating the reuse of securities for the benefit of 91 million messages and processed 7,5 million efficient functioning of the market. It has played a
the South African economy. Recognised locally and settlements with a value of R46 trillion, servicing over a vital role in offering a meeting place for the market
internationally as a Financial Market Infrastructure, thousand clients across various market segments. As to table industry problems, challenges and pursue
Strate has been a key component of the financial at 31 December 2022 the total cash disbursed for the new opportunities. Another Strate initiative is the
market ecosystem for over 20 years, responsible for year across 27126 events totalled R2, 131, 605, 230, facilitation of a corporate actions handbook for the
delivering services critical to the smooth functioning 983.96. For the same period the value of securities industry.
of the South African financial market. disbursed was R38, 351, 163, 469.00.
As a key institution in the financial market infrastructure
Strate as an enabler safeguards ownership rights for Strate Supervision, a division of Strate, ensures ecosystem, Strate offers the following services:
public and private market securities in South Africa. compliance with applicable rules and directives and
These records, held digitally, represent the legal record performs the following market monitoring aspects. ▷ Settlement across equities, bonds and money
of ownership for all equities, bonds, money markets and market securities
participatory notes in collective investment schemes ▷ Full corporate action suite of services
(ETFs) entrusted to Strate for safekeeping. The market Monitoring the following Risk ▷ e-Voting
trusts Strate to maintain the legal record of securities ▷ Collateral management
ownership independently and accurately, safeguard Participation eligibility criteria Market risk ▷ OTC platform for derivative clearing
investors’ rights and contribute to upholding financial Reputational ▷ Unit trust settlement
market stability. It has played a pivotal role in the Knowledge and skill of the
risk/operational
modernisation of the custody industry and is globally employees The CSD is dependent on the information received
risk
regarded as one of the best internationally. CSDs, from the exchange to enable the process of corporate
Systemic/market
as self-regulated organisations via the publication System capability and DR/BCP action communication with the market. From the
risk
of various rules and directives, ensure discipline in Exchange News Service publication, the data is
the market environment. The South African financial Record keeping/maintenance Investor risk captured onto SWIFT MT564 standard message format
market is generally seen as sophisticated and effective. Reconciliation (balancing)/ for the CSD Participant, which in turn communicates
Settlement risk
Beneficial ownership to all its clients, including brokers, nominees and
Strate shareholders are the JSE, Nedbank, Standard Financial/ asset managers. This usually takes place within 4 to
Bank, RMB, Absa and Citibank. Established in 1999, Financial soundness prudential/ 24 hours, depending on the service level agreement.
Strate aimed to provide a market for the electronic market risk
settlement of transactions in contrast to the Settlement and CA parameters/ Settlement/
certificated environment that was riddled with fraud, timeframes operational risk
tainted certificates and market claims. The first share Approval of CSD Participants
counter to be dematerialised was Harmony Ltd. Since Regulatory risk
and FSCA approved nominees

32 | Corporate Actions Handbook

For equities as an asset class, Strate interprets the Transfer secretaries regard themselves as the ✓ A process of engagement with the issuer will
information from the Exchange Announcement, intermediary between the attorneys, the issuers and follow with a view to adapt the outcome to the
capture the event/s and releases it to the market. sponsors. Transfer secretaries maintain they are the established market processes that are in place;
Some of the CSD Participants enrich the content of party that ultimately pulls it all together as the issuers or
the notification from Strate. They need to ensure when require the results from them as the appointed agent. ✓ If this approach does not bear fruit, the
the event is set up it is correct, as this will feed through They also keep the register balanced from a statutory transaction is taken apart to see what the
to the ultimate investor in many cases. The principle register maintenance perspective. issuer is attempting to achieve and how it can
of record date mostly on a Friday, with payment the be achieved in the market, especially when it is
following business day is well entrenched in the local Transfer secretaries often experience navigation not market practice.
market. challenges with corporate action processing that
require certain legal obligations, which at times may Generally, transfer secretaries are of the view that
The role of the transfer not be in line with market practice. They often make the onus rests on shareholders to indicate whether
suggestions or proposals to issuers for processing to they are eligible to participate in a corporate event
secretaries
accommodate market practice. Sometimes issuers and receive the entitlement. In several recent
consult with transfer secretaries prior to publishing events, attorneys have explicitly stated that in terms
Transfer secretaries perform transfer agency and
information but mostly after the information is in of the Companies Act 71 of 2008, it is the issuer’s
share registration services to issuers. They are
the public domain. There is also no set timetable for responsibility to ensure that securities are not issued
sometimes also involved in employee equity plans
engagement – it depends on the issuer, sponsor and in restricted jurisdictions, and they need to abide by
and soliciting for proxies and company meetings.
legal team. They say sponsors often do not have full the law. If the onus rests on issuers, they may be liable
They often provide some stakeholder communication,
knowledge of the market process, so a lot of time is if securities are allocated to somebody who does
manage the certificated shareholder register and
spent on educating attorneys and sponsors. Their view not qualify. Issuers are faced with the problem of
governance services.
suggests that attorneys often look at a transaction excluding non-eligible shareholders. The basis to be
from a purely legal perspective. The challenge lies used for the exclusion of shareholders must also be
Most issuers will appoint a transfer secretary, whether
in executing an event efficiently from a practical clear, but mostly focuses on domicile details. Foreign
they are fully dematerialised or not. Since all new
perspective. nominee exclusions cannot simply be based on an
issues are done electronically in terms of the Financial
asset manager or nominee domicile. These nominees
Markets Act 19 of 2012, no new issue can have any
Transfer secretaries attempt to find a balance between may have thousands of underlying beneficial investors
certificated shareholders, unless rematerialised. The
the risks of the various role-players by looking at what whose address details may differ from the nominee or
issuers always require assistance with maintaining
the issuer wants to achieve, and whether that can be asset manager, or they may be Qualified Institutional
share registers, regulatory requirements such as
done with standard processing present in the market. Buyers. The company register will provide insufficient
procedural aspects during meetings and shareholder
If standard processing can be done in line with Strate detail of beneficial shareholders. An ad hoc BOR can
engagement. These roles are mostly performed by
Directives, risk is well mitigated. If standard processing be requested from Strate 48-hours prior to the record
the transfer secretary, along with other parties in the
is not achievable, there are two options: date of the corporate event. This will provide beneficial
process.
shareholder information which is one level down and
should be sufficient for the local market.

33 | Corporate Actions Handbook

Transfer secretaries have occasionally dealt with carry a financial implication. Delays place a burden South Africa is one of the few markets that has
issuers using foreign-based companies that analyse on transfer secretaries, especially when there are guaranteed settlement and settled positions are
company registers but who do not have detail of all extensions requested. Information and results for known by record date. The concept of electing on an
nominee accounts. The problem is trying to validate funding purposes are delayed, especially from a cash anticipated position is not without risk and is not the
QIB letters and reconcile those to the shareholder point of view, more so if it is a non-banking institution. norm globally. Theoretically nothing is stopping the
register, which is not always possible. When you Another concern of transfer secretaries centres market from reviewing some of these aspects without
receive a QIB from a broker with a foreign domicile around the consequences when extensions are affecting guaranteed settlement. It is possible to have
that rolls up to a local nominee account, the details of requested. If one CSD Participant requires extension, election date post the record date for complex events,
the broker will not appear on the register. there are no final balancing figures released by Strate, as is the case with many dual listed companies listed
which delays downstream processes. If an issuer does on the exchanges. Payment date could effectively
According to one transfer secretary, initiatives to not grant an extension and the event default must be record date plus X day/s to mitigate risk. If
eliminate manual processes are difficult and every be applied, consequences may be severe, even if a unreasonable timelines introduce undue risk to some
corporate action needs to be looked at. You cannot CSD Participant, broker or institutional shareholder parties, this must be considered. Such a change will
assume that all rights offers are the same. It must be have one or two percent of the entire share capital make this market less risky, more efficient and more
determined what the issuer is trying to achieve and under custody. Where one CSD Participant delays understandable to a global shareholder. It reduces
whether the market has processes in place to do it. the process, others are impacted due to no fault or risk and complexity when elections are based on a
Transfer secretaries perform functions related to cash management shortcomings on their side. static position that is unaffected by settlement, or
and securities balancing down to beneficial holder securities lending and borrowing risk. Very complex
level. To enable this function, they dictate spreadsheet According to transfer secretaries, requests for an events seldom exceed five per annum.
requirements that are often onerous to complete. extension to the deadline time by CSD Participants
While this is enabling to the issuer, it introduces huge are almost a weekly occurrence. Some request an One transfer secretary suggested that the BOR needs
risk to the stakeholders downstream, notably those extension while others insist on getting feedback of the to be looked at again as it often provides incomplete
who must compile consolidated spreadsheets with results or allocations, leaving transfer secretaries in the information. They say some parties do not understand
large volumes of sensitive information. middle when they request the issuer to accommodate the POPI Act. The law does not prohibit the provision of
the market. There is also a risk around the eligibility information to anybody. Issuer rights are entrenched
Prompted about which corporate events they would where an issuer or sponsor excludes or includes a in legislation and there is an obligation on the issuer
classify as the riskiest, all transfer secretaries indicated party incorrectly with potential consequences. Some to engage with shareholders at times. If beneficial
that all elective events are risky and carry a financial CSD Participants rarely request extension and have shareholder information or contact details are not
implication if processing is not done correctly. If a built up a solid reputation for efficiency. made available, this obligation cannot be fulfilled.
CSD Participant is late with the election to Strate, and This ties in with the comments from all issuers in this
the necessary arrangements with the issuer/sponsor Most of the transfer secretaries believe that the regard.
to grant extension is not approved, the specific CSD market needs to drive the change in payment date
Participants’ shareholders may be defaulted. In such for complicated elective events, especially securities
an instance, the CSD Participant will have to make payment. If payment date on other global markets is
good to its clients. Thus each CSD Participant, broker analysed, payment rarely occurs one day after record
and institutional shareholder faces a financial risk for date.
elective events. If anything goes wrong, someone will

34 | Corporate Actions Handbook

Issuers and sponsors may be aware of complexities Transfer secretaries face substantial risk with the upon receipt within 24 hours after publication on any
when it comes to taxation for stakeholders and take receipt of spreadsheets from CSD Participants. of the Exchange News Services portals.
great care to address this issue. On a recent corporate Sometimes a wrong attachment is received, often
event, one issuer advised it was their responsibility to replacement spreadsheets are sent. If a wrong All transfer secretaries believe that a handbook will
pay over the capital gains tax for foreign shareholders attachment is used, it could compromise the entire be beneficial to the market and elevate the level of
who unduly receive entitlements. They needed to event. They want to avoid manual opening and understanding of corporate actions, especially the
reduce their tax liability as far as possible, and it could closing and copying and pasting as it increases the complexities, to the broader market. The desire was
not be done without information. The need for an number of resources and time required to validate all expressed that it will lead to better market processes
information portal is becoming more pressing. How information. for complex events. Their preference is ideally to
do issuers reduce their tax liability without having move out the payment date for securities events and
access to the underlying details of shareholders? A major concern faced by transfer secretaries is election deadline date as these are major contributors
the inability of some CSD Participants to provide to market risk from the transfer secretaries’ point of
Taxation on events for the CSD Participants and information related to extended offers or voting view.
brokers is a standard issue. They need to ensure that: information about meetings. Many custodians
consolidate voting instructions and release this The role of the brokers/members
✓ the correct tax information is provided; information only on the deadline date. Requests are
✓ systems are set up correctly to apply the correct often received for information to be released earlier South Africa has several different broker or member
taxes to a varied client base; and so that the issuer can get a better understanding of types, i.e., trading brokers, forex brokers, investment
✓ tax reporting to SARS is correct. the election patterns without it being final. Currently brokers and so forth. Institutional brokers are not
this is an obstacle for issuers who are heavily reliant generally as affected by corporate actions as retail
In terms of the delivery mechanism for spreadsheets on the information from the market. The process does brokers. Exchanges regulate their brokers or members
and shareholder information, the market relies heavily not seem to be enabling for issuers. in South Africa.
on email. On one high-risk events in 2021, a transfer
secretary created a portal where CSD Participants Issuers often request this information to monitor The broker community would have the same need to
had to upload their respective files to the platform, thresholds and avoid breaching a certain percentage obtain complete information from the issuer/sponsor
but this is not the norm. This matter is currently of acceptances. The latter may force a mandatory as CSD Participants and institutional shareholders.
receiving attention in the market and options are offer to shareholders. Where the Takeover Regulation Retail brokers may have hundreds or thousands of
being investigated. Most institutions follow encryption Panel is required to provide approval for an clients. The client base can be diverse; some may
and protect documents with passwords. This seems affected transaction, information about shareholder be discretionary clients, some provide standard
to be compliant with internal security protocols. acceptances is required. instructions while some do not. If brokers are not
From a market perspective, there was a request to able to process an event, or if the JSE is unable to
investigate alternative safe delivery mechanisms such Transfer secretaries are concerned that brokers on automatically process the event via the BDA (Broker
as Secure File Transfer Protocol for spreadsheets as occasion announce the events late. This has been Dealer Accounting) system, it has a knock-on effect as
they contain sensitive client information. This should experienced on a few events with several brokers. manual processes must be introduced. The biggest
provide for more opportunity to be automated from The same concern was raised by a few sponsors. CSD issues for brokers on complex corporate actions has
CSD Participant systems as opposed to using email, Participant notifications go out to its clients on the been around taxation and the pricing of securities.
similar to the automated Beneficial Owner Register same day as most have service level agreements in
process. place. This stipulates that notifications will be released

35 | Corporate Actions Handbook

Concerns were also raised by brokers about timelines Events such as dividend in specie or reverse spin-offs on the securities lending and borrowing side of the
not aligned to market standards. The complexity are automatically updated on BDA to ensure weekly market. The implication is that you are unable to get
of corporate actions over the past number of years BORs balance with the CSD Participants. There is a the securities for lending and borrowing purposes
has increased and with that the requirements for daily match with the CSD Participant and at the end across the market. Between LDT and payment date
disclosure, which is mostly manual. of every week, a beneficial download is sent by the lenders will not lend their securities out due to the
JSE and Strate. Strate holds the information from risk of being unable to deliver. The first step they take
The BDA is a mandatory system that every JSE- an electronic securities register perspective. The is to recall the securities which they won’t lend out
approved broker uses for pre- and post-trade entries transfer secretary holds the certificated portion. From until payment date when they are able to validate the
and corporate actions. It has served the industry well the BDA, the beneficial download register will only securities credited to their account. The implication is
to date. It indicates whether a client opts to receive send Strate the dematerialised shareholding. Most that there may be a shortage for three or four days
event documentation from the issuer and contains clients have discretionary accounts with brokers and when securities cannot be borrowed at all. The more
vital client information. Every broker has a proprietary therefore don’t want to receive any updates or any complex the corporate action, the greater the chances
account as well as a nominee account for controlled information. Similarly, the brokers prefer not to share that the available pool of securities will be recalled and
clients. Clients’ securities are ring-fenced in a specific that information either, so they provide it in the name unavailable for securities lending and borrowing.
nominee account. From a CSD Participant point of of the nominee.
view, one might see a consolidated amount to be The question of what will simplify and reduce risk in
invested for the nominee, but under the nominee The major risks according to brokers is trading pre- and the market for brokers got a uniform response: early,
could be thousands of clients. The BDA system is a post a corporate event. If a reverse stock split event simple and clear communication. Often exchange
repository of all the client’s information and securities, was performed on a one-for-ten basis, and the broker announcements must be read several times to
closing prices, ISIN numbers and sectors as well as receives an order for one million securities when understand their meaning; they are sometimes open
corporate actions. it is supposed to be a hundred thousand securities to interpretation and the sponsor is required to clarify
post the consolidation, there is a risk that a trade is the event/s or terms. The sponsor normally refers it
If the corporate action is not loaded correctly, it will executed and creates a debit balance of securities in to the legal teams, and this causes a delay. It would
filter through to every client. For the brokers, the the market. Where there has been a subdivision and be useful to simplify the communication, making it
complexity of the event depends on the level of the wrong trading price has been used because the more understandable for the market so that there
automation. The JSE loads the event on BDA from the price has not been adjusted on the trading platform/s is no miscommunication or misinterpretation. It
suite of corporate action events. Once elections have after the subdivision, another trading risk is introduced is also useful to get the sponsors, issuers and all
been captured and the event released from BDA, it to the broker and the clients as well. It causes invalid interested parties into a central venue to iron out
will create the entries on the clients’ accounts. If any trades. This happens from time to time. the event processing for complex events, once the
manual steps are required, the JSE will inform brokers announcement is in the public domain. In terms of
to add them. It would look at the portfolio pricing and Settlement risk is a key concern, often due to complex restrictions on participation in an event, some brokers
the taxation, including dividend tax. Spreadsheets corporate actions and various parties that are unable to say it is up to the client to decide whether they are
are created from this data and sent through to commit to transactions timeously. A trade may go into restricted or not and the client should have the final
CSD Participants, if required. In the brokers’ realm, compulsory or voluntary reverse substitution, which say in this regard.
everything happens in BDA, driven by the JSE. Client comes at a cost to the broker. Lenders of securities
elections are executed by the broker. often recall securities when complex corporate events
are close to record date, thereby creating shortages

36 | Corporate Actions Handbook

For brokers, spreadsheets are critical when there often complex, especially the proportioning of the Taxation is often so complex that clarification is
is rounding on the event. If the broker calculates original costs across counters without triggering any required. When one ends up with different and
entitlement on a consolidated total of securities, tax events. CGT must be considered for shareholders, conflicting tax opinions on the same corporate event,
but has many odd lot holders, rounding will create as a corporate event may have unintended CGT tax may have become too complex to administer.
shortages and ultimately losses for the broker. This is implications. Rebalancing of portfolios may trigger
amplified when securities prices are high. Depending CGT. “The problem is explaining to the man or woman One broker believes their role is to provide information
on the requirements of the spreadsheet, in some in the street why they must pay CGT but did not initiate to their clients, perform reconciliation of control
instances it contains account numbers, in other the sale of securities,” according to one broker. accounts, client accounts and proprietary accounts
cases it contains names and personal information. and fulfil the client mandate to ensure that elections
Circumstances will dictate what information is needed. Asked if security entitlements should only be tradable are honoured and implemented. One of the top
from payment date, rather than from ex-date, an three brokers in South Africa by size, said the events
Corporate event information is not necessarily esteemed member of the Institute of Stockbrokers with more complex options are the riskier events.
distributed to all broker clients. It depends on whether said it is not a good idea to lock somebody out the Where events do not conform to Strate timelines
the client has a discretionary or non-discretionary market. According to Warren Buffet, markets are and directives, it becomes a problem explaining to
portfolio. For the discretionary portfolio the client is bipolar and locking shareholders out of the trading clients why they have a shorter timeline than usual
not actively involved, and the investment manager process for even a day is problematic. Time is money. to provide elections. The view is that events requiring
takes all decisions on the client’s behalf. In contrast, Deviations from the timeline impacts brokers who spreadsheets are the biggest challenge, especially
a non-discretionary investment account involves must capture elections when dictated by the event. the Balance of Payments spreadsheets as it contains
the client, and the broker will send corporate event Many brokers outsource their administration, so there onerous amounts of client details.
information to the client. Clients with standing is a buffer in-between with administrators having a
instructions will also not receive event communication different cut-off time. Having various cut-off times If elections can be provided post record date once all
unless the broker opts to send confirmation to the becomes challenging to manage the event. When there trades have settled, it would reduce risk on complex
client that the standing instruction or default option is a change in timelines, especially where it does not events. Balancing events will become simpler as
has been applied. align to the trading settlement process, the resultant movements between last day to trade and record date
cash or securities are needed to settle another will not impact elections that are due on the same
Asked what types of corporate events in the broker’s transaction. If a client is selling securities on ex-date date. If entitlements on complex elective events are
world pose the biggest risk, the unanimous answer and expects the proceeds to become due on payment only tradeable from payment date, it would reduce
was anything that has tax complexity or changes the date to settle another purchase, and that timeline has risk, especially where scale back is applicable on the
base cost of a security. If portfolios must be changed changed, the client may be short of securities and will event.
to reflect a different base cost, it becomes complex. have to enter into an SLB arrangement to settle the
This necessitates changes to client taxation certificates transaction.
which are usually produced from a different stream.
Tax has become very intricate and often complicates
simple corporate events. Events that have no CGT
implication or effect a change to the value of portfolios
are normally simpler. Dividend in specie events are

37 | Corporate Actions Handbook

The role of CSD Participants ii) an issuer information about the n) must, on a daily basis, ensure that its
securities issued by that issuer and securities accounts and central securities
An extract of the functions of CSD Participants accounts do not show a debit balance;
according to the Financial Markets Act 19 of 2012 is i) must have a central securities account o) may not alienate, invest, pledge,
listed below: with a central securities depository, and hypothecate, encumber or otherwise
may- make use of securities held for or on
1. A Participant must conduct its business in a fair behalf of its clients, except with the
and transparent manner with due regard to the i) deposit securities with or withdraw client’s express consent;
rights of its clients securities from that central p) must make adequate arrangements for
2. A participant – securities the safeguarding of clients’ ownership
ii) transfer, pledge or cede an interest rights, including, but not limited to
c) must, if securities are deposited with the in securities through that central I insolvency proceedings
participant, deposit them with a central account q) must notify the registrar and central
securities depository unless the client securities depository as soon as it
expressly directs otherwise in writing; j) must exercise the rights in respect of commences an insolvency proceeding or
d) must maintain a securities account for a securities deposited by it with a central an insolvency proceeding is commenced
client in respect of securities deposited; securities depository in its own name on against it; and
e) must reflect the number or nominal value behalf of a client when so instructed by r) may perform securities services to the
of each kind of securities deposited in a the client; and extent necessary to perform the duties
securities account; k) must balance and reconcile the aggregate referred to in this subsection.
f) must administer and maintain a record of the securities accounts with the central
of all securities deposited with it in securities accounts daily; Conduct of the Participant
accordance with the depository rules: l) must correct discrepancies which are
g) must record all securities of the same revealed in the reconciliation of the In performing their functions in terms of section 4 of
kind deposited with it in a sub-register if aggregate of its securities accounts with the Strate Rules, Participants must:
so required by the depository rules; the central securities depository and the
h) must disclose to clients and issuers the participant must make good or provide 4.1.1 carry out their business in a prudent
fees and charges required by it for its any reconciled shortfall for which there manner and with due regard to the rights
services; are reasonable grounds for concluding of other Participants, Clients, Issuers and
i) must notify a client in writing or as that the participant is responsible; Strate;
otherwise agreed to by the client of an m) must deposit securities held by it for its 4.1.2 act with integrity, proper skill, care, diligence,
entry made in the client’s securities own account and those held for or on and due regard to the rights of other
account; behalf of its clients in separate securities Participants, Clients, Issuers and Strate;
j) must on request disclose to- accounts and must ensure that securities 4.1.3 maintain knowledge of and comply with the
held for or on behalf of its clients are Act, the Strate Rules and Strate Directives;
i) the registrar information about the segregated and identifiable as belonging and
securities recorded in a securities to a specific person;

38 | Corporate Actions Handbook

4.1.4 not participate or assist in any acts in firewalls often block spreadsheets, which is a big risk Most CSD Participants are aligned that the challenges
violation of the Act, Strate Rules and Strate in time-critical events. Consolidating spreadsheets in corporate actions cannot be solved by one party
Directives and all applicable laws relating to received from various nominees and brokers can be alone. All CSD Participants must work together to
securities services and report any suspicion automated successfully but is not currently in place at achieve the ideal state. Several CSD Participants are
of, or contraventions of the Act, Strate Rules most CSD Participants. Some CSD Participants have in the process of a system upgrade or replacement,
and Strate Directives to the Controlling developed powerful tools to address the automation which puts additional pressure on staff. Some CSD
Body. aspect of spreadsheets to mitigate risk. Most CSD Participants intend to focus on implementing an
Participants highlighted the nominee structure in interface which allows for integration of systems
The functions of Strate Participants are enforced the market and the various beneficial shareholder between them and Strate as soon as possible.
by Strate as a regulatory institution. Some CSD levels as problematic and adding complexity when
Participants expressed the view that they carry full disclosure is required. CSD Participants do not CSD Participants believe that a more effective market
most of the risk in the market. This is largely due to have sight of underlying client details of brokers and and greater efficiency can be achieved by eliminating
deviations from the agreed processes governed by nominees. Verification of identity and tax numbers manual processes in corporate actions. There are
the Strate Directives. Miscommunication in terms of of underlying clients by CSD Participants is not several initiatives currently underway in the market to
timelines or processing is regarded as a major risk. As possible. Various market discussions are underway to reduce manual intervention. Information on tax is a
all processing is timeline driven, any deviation from the address the problems of spreadsheets. It is not clear contentious matter. CSD Participants receive a lot of
timelines and Strate Directives introduces risk. When at this stage whether the answer lies in automation queries on taxation, and some say that responses to
corporate events are announced and information is of processes or enabling the market to have a enquiries about tax are often vague. Apportionment
incomplete, it affects the turnaround to clients. To transparent view of client registers. ratios on spin-off events is normally received quite
CSD Participants, turning information around and late. CSD Participants are comfortable to comply from
getting it to the beneficial shareholder or the next Late notification of crucial information means delays in a DWT as well as an STT point of view as regulated
level of shareholders is critical. If a client obtains event client elections or clients having to cancel instructions intermediaries, but information must be publicly
information from another source other than their and re-elect. It creates additional work because it available. If there is any responsibility resting on the
primary service provider, it increases reputational raises many questions and anxiety from the clients CSD Participant, it must be known in order to manage
risk. Clients provide scorecards relating to service who continually enquire whether a response was it and ensure successful execution.
experience to CSD Participants on a regular basis. received from the issuer. For some CSD Participants,
Time to market and completeness of information are restrictions on events is not a major concern as these Uniformity in processing events is preferable but
part of the measurements and adherence to service are normally detailed in the circular. Because the where there are deviations from market practice for
level directives. Incomplete information opens CSD enrichment of corporate event information is part specific reasons, the overwhelming majority of CSD
Participants up for queries and incorrect interpretation of their client offering, they consult the circular in all Participants say they will accommodate it. Most event
of event. cases for elective corporate events. processing happens in a straight through processing
manner as it stands.
With any manual intervention, there’s the risk that The inconsistent handling of fractions is a concern
mistakes can be made as it is not part of automated mentioned by a several CSD Participants. Even though
processes. CSD Participants are united in the belief that fractions may be immaterial in most cases and rarely
the market should look to what extent it can do away taxable, clear communication is vital and should
with some of the spreadsheet requirements. Internal include whether fractions are taxable or not.

39 | Corporate Actions Handbook

One CSD Participant said there should be a checklist A CSD Participant whose processing hub for corporate secretaries on record date, is regarded as a concern
when the issuer or sponsor announces an elective actions is in Europe, advised that the risks for them by most CSD Participants as it causes staff to work late
event. One of the key questions on this checklist lie in the communication that is not via SWIFT as hours without due notice. The impact of settlements
should be whether there are restrictions on the event. email communication must be monitored and can and SLB is also not a major concern for most as this is
This information should be provided from the source, be missed. Distribution lists are often updated, and generally well managed.
which is the issuer, from where it flows to the exchange it causes risk when names are added and deleted.
and the broader market. When expected information Their second frustration is elections that are due on To be able to elect post record date on elective events
is not provided it results in CSD Participants having record date, which leaves them with insufficient time would be a game changer and a great advantage,
to ask Strate. This is avoidable and a checklist for for reconciliation. Having the market deadline date on according to most CSD Participants. Moving the
various events may be a simple tool to avoid this record date puts a lot of pressure on them because of election deadline post record date will mirror most
from happening. Many CSD Participant clients do pending trades. Even one problematic trade adds a lot of the international markets. South Africa is one of
scrubbing of events and receive information from of risk on their side and makes it difficult to align to the the few in the world where the record date and the
multiple sources. When pertinent information such Strate Directive and meeting the deadline. Processing market deadline are on the same day. Many CSD
as restricted domiciles is not present, clients question is challenging and human resource intensive on a day Participants cite this risk as major, and some have
their service provider’s ability to provide the required when there are reconciliation problems. suffered financial losses because of the limited time
service. for reconciliation.
When information flow is based on email and not
The interplay and the interdependency between standardised, creating intelligent workflow tools or
settlements and corporate actions is critical. With an application to eliminate human intervention is
corporate actions at the tail end of the custody value challenging. There is not any one event type that CSD
chain, they are affected by all settlements taking place Participants view as riskier than others; it depends
on record date. Those holdings are used to calculate entirely on the characteristics of the event. Late
the client’s entitlement and it is imperative that the notification of events often requires additional work
settlements team are on top of their game. If a client from their side. Mandatory events with no options to
does not cancel an invalid transaction on record date, elect, are easier to manage. When it is an elective event,
that transaction remains in the system on record clients must be notified, and deadlines extended.
date and the corporate actions module calculates It often leaves insufficient time for clients to elect,
entitlements on those invalid transactions. Securities creating pressure. Ordinarily, CSD Participants can set
lending and borrowing also impacts corporate actions up an event and pay it on the same day if required.
and sometimes introduces risk with the return of
securities. It is critically important for settlement Delays from transfer secretaries with regards to
departments to clear all invalid trades on record allocations, impacts on CSD Participants end of day
dates of events to ensure corporate actions are processing. If processing is extended to the following
not negatively impacted. Vendors must sometimes day, it impacts on the system dates. In addition,
manually execute certain batch runs or manipulate system batches must be triggered manually and
systems to achieve a specific outcome, which adds to risk acceptance sign-off must be obtained. Delays
risk. in receiving allocation spreadsheets from transfer

40 | Corporate Actions Handbook

The Role of Administrators informed by the deadline date of the custodians. If way to process trades in such a way that it does not
there is no election required, they don’t engage with overstate the market values when calculating net
Many investment management companies entrust the the clients. asset values between ex-date and record date. Once
administration of their assets to administrators. The the pertinent details become available on record date,
administrator’s duty is to take care of and effectively Administrators have advised that information is it must reprocess the entire event which is frustrating.
manage the investment administration of clients. sometimes communicated quite late on complex The other aspect that exacerbates this problem is
Duties include capturing events on their systems and events. They sometimes need to phone the when the above scenario cuts across a month-end
receiving elections from clients. The administrator company secretary to request information about and clients have received their month-end reporting.
must effectively respond to requests and provide a corporate event. That should not be necessary, If RD-2 was in a particular month and RD in another,
instructions to the issuer via their custodian. In doing and the information should be available. Sometimes it creates a bigger issue because the administrator
this, they must ensure the right accounting and tax asset management firms will obtain the required cannot delete the original event. It must process
outcome. The top priority with any corporate action, is information via a phone call or an email, but it is not opposite entries to remove it from the system and
to obtain a complete understanding of the event. Two an official source or part of the approved processes. then process the new entries to create a new event.
of the large administrators often struggle with detailed Annual audits become problematic on those events. If Its clients in turn have downstream clients and late
information about a corporate event and the resultant auditors request the source information, one cannot reporting has a knock-on effect.
accounting and tax treatment thereof to ensure provide information from the company secretary or
correct net asset values and portfolio valuations. The a major shareholder because that is not the official Another risk highlighted is determining whether an
general view is that the issuer initiates the corporate process to obtain information. Administrators often event will attract dividend withholding tax or capital
action, and they must ensure that they provide all need to phone around and decipher what is official gains tax. Comments from administrators indicate
required information. All downstream parties are and what is not. that corporate event circulars are very onerous to
required to respond within the stipulated timeframe, analyse and interpret. One administrator suggested
and must ensure that they have the means, systems The application of tax on events is a major source a published table with not only dates, but all tax
and processes in place to respond. of frustration for administrators. One administrator information and unbundling ratios to mitigate risk
outsourced its tax services to a specialist company, in the industry. They consider any event that is not
The administrators who were interviewed rely on the but must still interpret the tax outcome correctly for a dividend as risky. Where an election is required or
JSE Corporate Actions schedule and summary reports all the different taxable entities. It has several funds where different options are presented, there is risk of
on specialised products, which are published weekly, with different tax treatments, including CIS funds, mistakes occurring when there is manual processing.
for event information. That provides them with the and must ensure that the processing on its systems Asset managers and administrators typically require
heads-up for upcoming events. Details of events provides them with the correct tax and accounting clear guidance from an accounting perspective on
from local custodians are scrubbed to ensure that outcome. Ex-date is typically when problems present whether unbundled securities are derived from
everybody is communicating the same information on themselves. The team mentioned the example of contributed tax capital or from the income statement.
pertinent dates. This ensures a golden copy for each a recent unbundling event. The newly unbundled This is often not clear on the circulars. If it is derived
event. If there is an elective option on an event, the securities started trading from ex-date. The market from both capital and income, the apportionment
administrator would reach out to their clients, advise price will adjust itself, but the final apportionment ratio of capital and income must be stipulated as it
them of their positional data and request them to ratios and prices will only be available on record date affects the tax treatment.
provide an election. The deadline date to clients is at close of business. Its challenge is having to find a

41 | Corporate Actions Handbook

When the administrators were asked for an opinion be rebalanced to reflect the new net asset values. If The information on the BOR is also not viewed as
about trading in securities entitlement from payment manually calculated apportionment values are used detailed enough and should be enhanced to provide
date rather than ex-date, the teams were indifferent because information was not available in the market more transparency and make it useful. A seasoned
initially but believe the market release of positions at the time, the administrator will have to resolve any industry expert said that CSD Participants may have
on ex-date will be useful. Some CSD Participants trading errors. If information is released to the market to relook the account set-up and record keeping and
provide this information to clients, but it is not done late, administrators would not take ownership for the construct of having nominees within nominee
by all. If an administrator’s allocation of securities to wrong net asset values but would still need to rework accounts is flawed. It creates various layers of
a portfolio is not one hundred percent correct, and figures and calculations. complexity. ASISA agrees that the nominee structure
trading occurred on the portfolio, they could end up creates a lack of transparency and is the reason why
with debit positions. Administrators do not have the For the administrator, the settlement impact on issuers do not know who is on their register. The
ability to reconcile securities immediately and rely on corporate actions mostly relates to unsettled trades nominee structure unnecessarily complicates the
information from their CSD Participant. If an event is that may affect their reconciliations. Some clients are market resulting in inefficiencies. The unanimous
processed incorrectly, there will be a knock-on effect provided with a real-time feed of account information. view from administrators was that an SOR model for
from the first trade onwards. A comment regarding Their system will automatically settle the cash including equities should be considered.
trading in entitlement from payment date only, was bank balances for all trades on a specific settlement
that from a processing perspective, it would be hugely date. If a trade did not settle for any reason, the Asset managers need to process a set of accounting
beneficial for administrators. All processing would automated feed to clients will reflect incorrect cash records for a retirement fund, a life company or a CIS
be done on RD+1 using the final values published balances. If the client uses the cash balance position investment. This affects the daily net asset values.
on record date. The view was that if it eases the to trade, it may result in overdrawn accounts. They need all the information structured in a certain
process, it should be done. If trading before payment way to be able to process this correctly. It cannot be
date creates administrative complexity, it should be Securities lending and borrowing does not have a major processed late because of the daily unit trust price
addressed. Trading in entitlements before payment impact on corporate actions at the administrators as that must be provided. There is a regulatory impact
date does not align to global practices in Europe or most clients recall securities before ex-date. Issues when prices have not been published or are incorrect.
the US, due to the South African settlement model. may arise with international securities where the All asset managers need to apply the accounting
dividend in specie does not settle on payment date records in a consistent manner, irrespective of the
When reprocessing of events must be done after and is sometimes only credited to the holder a day system they use. If a compensation fund appoints
record date once all information has been released, later. This is not regarded as a major problem that Investment manager A to manage a certain portion of
all trades on that ISIN must be deleted, as the build-up occurs often. the portfolio and Investment manager B, to manages
needs to be in a particular order. Deletions must be another portion of the portfolio, the investment
done manually and cannot be done via an automated A member of ASISA said of the manual processes in managers may have different administrators. If
process. Whether or not the transfer secretary or corporate actions that digitisation should be enabling Administrator X processes transactions on behalf of
sponsor provides the market with information they for all other processes. Automated processes must clients of Investment manager A while Administrator
require only on record date, the administrator still be developed for manual tasks that are currently Y processes transactions on behalf of Investment
needs to process the event using the information performed. In a highly digitised environment with manager B, processing must produce the same
at hand, as they must state daily net asset values lightning speed processing capability, it is unthinkable outcome.
on all portfolios. In a spin-off event, the unbundled that some custodians manually produce spreadsheets
mother security price will drop. All portfolios must to provide beneficial shareholder information.

42 | Corporate Actions Handbook

If both investment managers possess a similar ISIN on The role of institutional investors growth and value. If asset values decrease, the portfolio
which a corporate event occurred, both administrators manager must reassess and redefine the fund’s goals.
need to process it in the same way as ultimately The Association for Savings and Investment South Some fund managers specialise in specific securities,
it belongs to the same client – the compensation Africa (ASISA) represents the collective interests of such as technology or industrial securities.
fund – which expects the same outcome. Different the country’s asset managers, collective investment
interpretations of an event do happen, and this scheme management companies, linked investment Many fund management institutions outsource their
creates problems. If a process must be rolled back service providers, multi-managers and life insurance processing to professional administrators, which
two or three days later, it has a huge impact on prices companies. ASISA enables the financial services relieves them from the duties of having to balance
and portfolio values. industry, which is the custodian of the nation’s savings portfolios and a multitude of administrative tasks. One
and investments, to speak with one voice. ASISA’s of the key tasks is administering corporate actions.
Among the administrators, a distribution group mission is to ensure that the industry and its members One large asset manager that was interviewed has an
has been set up for those that are responsible remain relevant and sustainable by promoting a administrator performing the administration while the
for processing events to engage where there is culture of savings and investment. Its website www. team performs an oversight role. It has team members
uncertainty or different interpretations on an event. ASISA.org.za provides a wealth of information. in Cape Town, London, New York and South Asia. It
Virtual meetings are scheduled to discuss event has had heated discussions with certain clients about
complexities. Administrators state that they must Institutional investors are responsible for 90% of the processing of some corporate events and says the
often challenge the Final Notice of Events from some trading on local exchanges in South Africa (See Andile cause is mostly insufficient information.
CSD Participants and that is a problem from a direct Nikani and Mike Holland – Annexure 11). Institutional
client relationship perspective. Most custodians use investors, also known as asset management One fund management institution which performs
the same custody platform and must comply with institutions, employ fund managers who are this function in-house, says the quality of information
the same standards. CSD Participants all use the responsible for implementing a fund’s investment they receive on complex events is often sub-
same SWIFT generator components, yet the format strategy and managing its trading activities. They standard. Interpretation becomes a problem, and a
of the data provided to clients differs. Administrators oversee mutual funds or pensions, manage analysts, fundamental question that arises within the industry,
believe some CSD Participants rely heavily on manual conduct research and make important investment is whether the proceeds of an event is of a capital
intervention in populating some information. This is decisions. Fund managers make decisions about or income nature. Incorrect processing can lead to
indeed correct. Some custodians rely on high levels of which securities to buy and sell. This requires in- incorrect tax application, which leads to a multitude
straight through processing while others manipulate depth research of equity, bonds and money market of other problems, such as incorrect tax certificates,
information or enrich information as part of the client securities. Investment is driven by multiple data sets, shareholder queries and re-processing of events.
offering. The effect is that notification from custodians derived from analysing dividends, price-to-earnings Many of the fund managers have discussions in the
on the same event, may provide different information, ratios, earnings, sales and price trends. market about similar topics.
although the pertinent details should be constant.
The risk with manual intervention is the room this Fund managers may personally place buy and sell
creates for error and interpretation by a staff member orders, but normally manage a team of traders. Fund
manipulating the information. managers work closely with industry analysts to stay
on top of market trends. The portfolio manager makes
the final trading decisions and sets goals for income,

43 | Corporate Actions Handbook

Most asset management industry clients are pension client statements are despatched. The performance teams. The coordination of a complex transaction
funds and retirement funds, which are exempt from teams normally submit their weekly figures to the is not simple. Clear communication on whether a
dividend withholding tax. Some clients, however, are performance evaluation committees, and this is distribution is a local or a foreign dividend is critical for
liable for dividend withholding tax. When it comes to usually due on Mondays. Complex corporate events fund distributions and has different tax implications
complex event information, they prefer to get all parties always impact this team when reprocessing must to clients and unit holders. The tax implications affect
in one room to address issues, thereby ensuring that occur, and it affects the performance figures. From the value of the dividend that will be paid to the
nothing is lost in translation. Major risks in their view a trading risk perspective, it is not possible to block shareholder. Accrual for dividends takes place from
are spin-off events, or events incorporating cash and trading on specific securities when institutional ex-date but payment effectively occurs on payment
securities entitlements. Exchange announcement investors are awaiting corporate event information. date. Any discrepancies between accrued and actual
and circulars need to be clear and unambiguous to There have been instances where a portfolio manager valuations, create rework and reprocessing.
prevent queries about interpretation. If a corporate placed orders in the market only to find there is an Recommendations:
event is interpreted incorrectly, it has downstream event at the back of it, leading to failed trades.
impact and can result in financial losses. Fund managers require the following:
The view from the institutional investors interviewed is
They want the market to actively pursue efficiency and that the implication of tax is an aspect that issuers do ✓ Full information on the declaration
automation. Fund managers as a collective sometimes not pay enough attention to. Any information that is not announcement of a corporate event
decide how to process and event, but they expressed available by ex-date, causes problems for institutional ✓ No ambiguity on the interpretation of an event
concern that some institutions still deviate from investors. Uniformity in the way that issuers provide to ensure clear understanding by all in the
agreed processes and that causes problems. They do information to the market is required. In the last market
not receive many queries, but apportionment costs couple of years, there have been several schemes ✓ Whether entitlement is of an income of capital
are often problematic. Trading happens continuously of arrangement where the communication received nature, and if from both, the ratio must be
and when apportionment costs are only announced relating to tax implications of the event has not been provided
on record date, it affects all trading that has occurred made available to the wider market, resulting in fund ✓ Apportionment costs are crucial and must be
to that point. Apportionment costs must be published managers accounting for transactions differently. That communicated by last day to trade to ensure
on last day to trade to prevent rework. Unbundling should not be the case. All asset managers should accurate unit pricing
and rights take-up events are viewed as riskier than account for a corporate event in the same way. ✓ The desire is for one system where clients
others. can vote for local and international meetings
In one asset manager’s view, the exchange as the rather than multiple online systems offered by
The biggest risks are complex events where fund regulator must enforce minimum information required custodians
managers do not have all the information at hand, and to account correctly for an event. Another asset ✓ Tax treatment must be clear as it affects
they mostly wait for record date to get the complete manager said that piecemeal release of information portfolio valuations
picture. Dividends where only a portion of the income is a major frustration. After they make enquiries to an ✓ Reinvestment prices must be provided where
is taxable must often be reversed and reprocessed issuer, they find more information is then released to applicable
because of late information. Reprocessing must the market. The ideal is to have information upfront,
be done and if it occurs over month-end when but complex transactions normally involve multiple
the accounting period closes, it is problematic as jurisdictions, exchanges, transfer secretaries and legal

44 | Corporate Actions Handbook

The role of the legal fraternity applies to the event, legal firms will assist with obtaining Asked about views on potentially moving the
approval from the SARB. If the corporate action is equities market to an SOR model, one legal firm
Most issuers make use of legal firms with solid regarded as an affected transaction, they will assist reiterated that securities are essentially a bundle of
experience when they plan a complex corporate action. issuers and sponsors with Takeover Regulation Panel rights. The three predominant rights are the right to
Some legal firms are brought into the conversation approval. Sequencing of all relevant documentation is distributions, the right to vote and the right to capital
early in the process with issuers, especially where critical and needs to be in the correct order to ensure appreciation or depreciation on a realisation. These
they have long-standing relationships. However, in final approval is obtained to proceed with the corporate rights do not necessarily reside with one party only
most instances, they become involved once the issuer action. Legal firms file notices with the Competition and that is a complication that must be factored into
has had discussions with the investment banks and Commission when the transaction requires this. a solution regarding ownership, if there is envisaged
the financial aspects have been cleared. Some legal These teams are often involved in the sale and finance change. There are currently proposed changes to the
firms have built up a solid reputation for their ability agreements to be drawn up between parties. New Companies Act to have multiple beneficial holders for
to work alongside the market to enable the execution shareholder agreements must often be drafted. If a one security. This is an aspect that must be considered
of complex transactions. new legal entity is the effect of an amalgamation or to determine who has what rights and to what end if
take-over, the legal team, in consultation with senior the amendment is promulgated.
Besides legal and tax insights and expertise, some staff of the company, will draft a new memorandum of
legal firms say they are able to create opportunities for incorporation (MOI) and lodge it at the Companies and With a seemingly increasing burden resting on
businesses by ensuring that the highest environmental, Intellectual Properties Commission (CIPC) together issuers to know who is on the company register, the
social and governance (ESG) standards are adhered with the relevant documents. rationale for a greater push for transparency is clear.
to. Corporate actions are also evaluated in terms of It is important to still align with international markets
ESG standards. Environmental criteria consider how Legal views confirm that several challenges arise and not introduce unreasonable administrative
a company safeguards the environment, including because of the differences in settlement cycles burdens in the process. The quality of the information
corporate policies addressing climate change, as between local and international markets. When on the BOR was raised by several stakeholders as
an example. Social criteria examine how it manages multinational issuers propose big transactions, insufficient. The legal views confirmed that the quality
relationships with shareholders, employees, suppliers, there are always timetable challenges, and you must of the information at the disposal of the issuer should
customers and the communities in which it operates. prevent opportunities for arbitrage to ensure that be investigated to ensure an acceptable industry
Governance deals with a company’s leadership, all shareholders across jurisdictions are treated standard. It is also possible that behind a person or
executive remuneration, audits, internal controls and fairly and equitable. Closer alignment of the various entity in the restricted jurisdiction is another person in
shareholder rights. market settlement models would resolve a number a non-restricted jurisdiction. The complex tax system
of these challenges according to some views. When found in South Africa is arguably the driving force
Most legal firms say their wealth of experience, a corporate action is devised that spans multi- behind the push for greater transparency.
combined with the benefit of having solid relationships jurisdictional markets, it will inevitably involve various
with listing authorities and regulators, are factors regulators and legal teams.
that are crucial to the successful implementation
of a corporate event. Legal firms assist issuers and
sponsors to obtain formal sign-off from exchanges
for a corporate event. If exchange control regulation

45 | Corporate Actions Handbook

6. Types of corporate events and complexities
Definitions Corporate action events and messaging despatched
by Strate align to Strate Volume A documentation –
A corporate action is an event or action taken by an refer to Annexure 2 for a classification of events based
issuer or any other entity or third party which affects on the above definitions.
the owners of securities in terms of entitlements
or notifications. Typically, corporate actions can be For every corporate event where restricted
considered voluntary, mandatory and/or mandatory entitlements must be sold, the correct cash rate must
with a choice. For some corporate events, there is be communicated after the sale is completed. The
no participation required from the shareholders payment date must be advised timeously. It is also
(mandatory) while for others, shareholders may be imperative for the designated cash account of the
required to make an election (mandatory with choice) issuer to be funded timeously for the onward payment
or choose whether to participate or not (voluntary). of funds.

Mandatory events - A non-elective event is an action Event types

undertaken by the company which does not require
a shareholder to make an election. The shareholder Events can all be classified in terms of the below
becomes a passive participant in the event. These definitions. Definitions of all corporate events and
events include cash dividends, bonus issues, name corporate action timelines will align with JSE Schedule
changes, stock splits, reverse stock splits, mergers or 2, Form H – Refer Annexure 1. For details about
delisting events. the message structures, reference can be made to
Annexure 10, the Security Market Practice Group
Mandatory with Options (Choice) event – Corporate Events Templates SR 2022. Complex
Shareholders have the option to choose between corporate events may necessitate an adjustment in
alternatives. A typical example is a dividend option the timeline in consultation with the exchange.
where the shareholder can elect to receive either cash
or securities. A default will be announced by the issuer
if no election is received from the shareholder, which
will be applied on the closing date of the event.

Voluntary events – Shareholders have the option

whether to participate or not. Typical examples
include meetings, rights offers and tender offers. An
event default (no action) will be set by the issuer failing
any action taken by the shareholder.

46 | Corporate Actions Handbook

1 Partial redemption

Definition Processing risk:

Partial redemptions are common in bonds and less so in equities. Partial
redemptions can occur on preference securities where the issuer redeems ✓ There is always a risk that the custodian submits an incorrect election.
part of the outstanding preference securities in exchange for cash, securities, ✓ A client or custodian missing or not meeting the deadline date for
or a combination of cash and securities. instructions and the default is applied.
✓ If the issuer does not fund the settlement or corporate action account
timeously, available funds in the account may be insufficient to effect
Category Voluntary
payment to CSD Participants and clients.
Risk Medium ✓ The percentage or number of securities for buy-back must be correctly
Timelines Page 4 JSE Schedule 2, Form H captured on the custodians’ systems to ensure correct processing.
Message format Page 24 - 29 SMPG Event Template ✓ All trading in securities to be redeemed must be monitored to ensure
that no potential debit balances of securities arise post redemption
If the event is a cash event, the following minimum information must be present in where the owner of securities is unable to deliver securities.Restrictions
the declaration announcement: must be incorporated in the declaration announcement.
VOLUNTARY CASH
ISIN NUMBER
SALIENT DATES
OFFER CONSIDERATION
CURRENCY CONVERSION RATE (IF APPLICABLE)

47 | Corporate Actions Handbook

2 Full redemption

Definition Processing risk:

The issuer redeems the full outstanding securities and listing is terminated.
The consideration is mostly cash or no payment value. ✓ The biggest risk is that the funds are not available in the nominated
account of the issuer for onward distribution to CSD Participants and
clients.
Category Mandatory
✓ All trading in securities to be redeemed must be monitored to ensure
Risk Low that no potential debit balances of securities arise post redemption
Timelines Page 4 JSE Schedule 2, Form H where the owner of securities is unable to deliver securities.
Message format Page 24 - 29 SMPG Event Template
If the event is a cash event, the following minimum information must be present in
the declaration announcement:

MANDATORY CASH
ISIN NUMBER
SALIENT DATES
CASH RATE
CURRENCY CONVERSION RATE (IF APPLICABLE)
SUSPENSION DATE
DELISTING DATE

48 | Corporate Actions Handbook

3 Redemption – with/without election

If the event is a securities event, the following minimum information must be

Definition
present in the declaration announcement:
With election – an event where an issuer repays the redeemable preference
securities capital in full to the holder. The holder has the option to elect MANDATORY SECURITIES
either a cash repayment or new securities. ISIN NUMBER
SALIENT DATES
Without election – an event where an issuer repays the redeemable
ROUNDING PRINCIPLE
preference securities in full to the owner, in cash or new securities, or
a combination of cash and securities stipulated by the issuer prior to FRACTION RATE
finalisation date (RD – 8). SECURITY RATIO
NEW SECURITY ISIN
Mandatory/Mandatory
Category Processing risk:
with choice
Risk Medium
✓ There is always a risk that the custodian submits an incorrect election.
Timelines Page 4 JSE Schedule 2, Form H
✓ A client or custodian missing or not meeting the deadline date for
Message format Page 24 - 29 SMPG Event Template
instructions and the default is applied.
If the event is a cash event, the following minimum information must be present in ✓ The biggest risk is that the funds are not available in the nominated
the declaration announcement: account of the issuer for onward distribution to CSD Participants and
clients.
MANDATORY CASH ✓ All trading in securities to be redeemed must be monitored to ensure
that no potential debit balances of securities arise post redemption
ISIN NUMBER
where the owner of securities is unable to deliver securities.
SALIENT DATES
CASH RATE
CURRENCY CONVERSION RATE (IF APPLICABLE)
SUSPENSION DATE
DELISTING DATE

49 | Corporate Actions Handbook

4 Capitalisation issue/Bonus issue

Definition Processing risk:

This is also referred to as a bonus issue. An issue of fully paid securities

✓ From a market perspective, there is a processing risk when the issuer
capitalised from a company’s share premium, capital redemption reserve
does not provide all the required details in the Exchange News Service
fund or reserves (or combination thereof) to existing holders of securities in
or declaration announcement, and it creates back and forth queries.
proportion to their holdings at a specific date free of payment.
✓ Fraction ratios must be clearly announced to enable correct processing.
✓ A risk is that the funds for fractional payments are not available in
Category Mandatory
the nominated account of the issuer for onward distribution to CSD
Risk Low Participants and clients.
Timelines Page 5 JSE Schedule 2, Form H ✓ If the bonus issue is paid from the share premium account and reserves,
Message format Page 18 - 23 SMPG Event Template the tax treatment must be clearly communicated to avoid ambiguity.
✓ Restrictions must be incorporated in the declaration announcement.
Capitalisation issues are mandatory security events, and the following minimum
information must be present:
This event type seldom presents any problems. Entitlements can be traded
MANDATORY SECURITIES from LDT +1.
ISIN NUMBER
SALIENT DATES
ROUNDING PRINCIPLE
FRACTION RATE
SOURCE OF INCOME
SECURITY RATIO
NEW SECURITY ISIN
RESTRICTIONS (IF APPLICABLE)

50 | Corporate Actions Handbook

5 Cash dividends, REIT, special dividends and interest payments

Definition Processing risk:

Cash dividends, interest and REIT payments are payments made by an issuer
to its shareholders normally out of the issuer’s current or accumulated ✓ From a market perspective, there is a processing risk when the issuer
earnings in proportion to their holdings. A special dividend is a cash payment does not provide all the required details in the Exchange News Service
that is separate from the typical recurring dividend cycle. or declaration announcement, and it creates back and forth queries.
✓ An issuer needs to state whether a dividend should be treated as capital
or income distribution.
Category Mandatory
✓ Tax treatment must be clearly communicated.
Risk Low
✓ The biggest risk is that the funds are not available in the nominated
Timelines Page 5 JSE Schedule 2, Form H
account of the issuer for onward distribution to CSD Participants and
Message Format Page 100 - 111 SMPG Event Template
clients.
The above events are all mandatory cash events and must contain the below ✓ Exclusions not factored in or advised late may lead to overpayment and
minimum information. subsequent processes to recover funds.
✓ Exclusions must be notified by latest LDT – 5.
MANDATORY CASH ✓ If an issuer changes bank accounts without providing Strate with an
ISIN NUMBER updated mandate, it will cause a delay in payment.
SALIENT DATES
DIVIDEND TYPE DWT is not applicable on interest events.
GROSS DIVIDEND RATE
DIVIDEND TAX RATE
NET DIVIDEND RATE
FOREIGN DIVIDEND / LOCAL DIVIDEND
CURRENCY CONVERSION RATE AND DATE (IF APPLICABLE)
SOURCE OF INCOME

51 | Corporate Actions Handbook

6 ETF distribution

Definition Processing risk:

Exchange traded fund or ETF means a fully funded (unleveraged) security

✓ From a market perspective, there is a processing risk when the issuer
listed on the JSE which tracks the performance of a specified security or
does not provide all the required details in the Exchange News Service
other assets, which include, but are not limited to, indices, commodities,
or declaration announcement, and it creates back and forth queries.
currencies or any other asset acceptable to the JSE.
✓ An issuer needs to state whether a dividend should be treated as
capital or income distribution.
Category Mandatory ✓ Tax treatment must be clearly communicated.
Risk Low ✓ The biggest risk is that the funds are not available in the nominated
Timelines Page 6 JSE Schedule 2, Form H account of the issuer for onward distribution to CSD Participants and
clients.
Message format Page 100 - 111 SMPG Event Template
✓ If an issuer changes bank accounts without providing Strate with an
ETF distributions are mandatory cash events and must contain the below minimum updated mandate, it will cause a delay in payment.
information.

MANDATORY CASH
ISIN NUMBER
SALIENT DATES
DIVIDEND TYPE
GROSS DIVIDEND RATE
DIVIDEND TAX RATE
NET DIVIDEND RATE
FOREIGN DIVIDEND / LOCAL DIVIDEND
CURRENCY CONVERSION RATE AND DATE (IF APPLICABLE)
SOURCE OF INCOME
COUNTRY OF INCORPORATION (IF APPLICABLE)
PORTFOLIO COSTS (IF APPLICABLE)

52 | Corporate Actions Handbook

7 Consolidation/Reverse stock split

Definition Processing risk:

Consolidation results in a reduction in the number of securities issued with

✓ Consolidation events are mandatory securities events and generally
a corresponding increase in the par value, such that the value of the issued
simple to administer.
capital remains the same.
✓ From a market perspective, there is a processing risk when the issuer
does not provide all the required details in the Exchange News Service
Category Mandatory or declaration announcement, and it creates back and forth queries.
Risk Low The new ISIN must be advised in time.
Timelines Page 6 JSE Schedule 2, Form H ✓ With the ISIN change it is important to coordinate trading to ensure
no trades are committed to after LDT of the old ISIN and that trades
Message format Page 217 SMPG Event Template
booked from ex-date are reported on the new ISIN. If the effective
The following minimum information is required: termination date of the old ISIN and first trading date of the new ISIN are
not synchronised, there is a market risk where trades may be rejected,
MANDATORY SECURITIES fail or introduce systemic risk.
ISIN NUMBER ✓ It may also lead to a debit balance of securities that will initiate an in-
SALIENT DATES depth investigation by Strate Supervision.
NEW ISIN (IF APPLICABLE) ✓ At the CSD Participant it may occur that once the static data changes
have been done, and an urgent trade must be committed to on RD-1
FRACTION RATE
for SLB purposes, that data must be changed on the data tables to
SECURITY RATIO
ensure that the trade can be committed to and settle on the previous
ISIN.
✓ Risk is centred around trading in the old versus new ISIN on the relevant
dates.

53 | Corporate Actions Handbook

8 Conversion

Definition Processing risk:

Holders of securities receive new securities in place of all or part of the

✓ From a market perspective, there is a processing risk when the issuer
old securities. Generally there are no elections required and all affected
does not provide all the required details in the Exchange News Service
securities are converted. This is generally not an event type that causes
or declaration announcement, and it creates back and forth queries.
uncertainty.
The new ISIN must be advised in time.
✓ The designated bank account must be funded by the issuer for the cash
Category Mandatory
fractions on payment date.
Risk Medium ✓ Risk is more centred around trading to ensure no securities must be
Timelines Page 6 JSE Schedule 2, Form H delivered post conversion of the old ISIN.
Message format Page 46 - 51 SMPG Event Template ✓ With the ISIN change it is important to coordinate trading to ensure no
trades are committed to after LDT of the previous ISIN and that trades
The following minimum information is required: booked from ex-date are reported on the new ISIN.
✓ At the CSD Participant it may occur that once the static data changes
MANDATORY SECURITIES have been done, and an urgent trade must be committed to on RD-1
ISIN NUMBER for SLB purposes, that data must be changed on the data tables to
SALIENT DATES ensure that the trade can be committed to and settle on the previous
NEW ISIN (IF APPLICABLE) ISIN.
FRACTION RATE ✓ If the effective termination date of the old ISIN and first trading date of
the new ISIN are not synchronised, there is a market risk where trades
may be rejected or may fail.
✓ It may also lead to a debit balance of securities that will initiate an in-
depth investigation by Strate Supervision.

54 | Corporate Actions Handbook

9 Liquidation dividend– advanced/final/interim

Definition Processing risk:

Payment of cash takes place to holders of securities on the winding up of

✓ Where the liquidation process of the issuer is drawn out, the operational
the company and subsequent delisting from the exchange.
risk extends to other departments including corporate actions.
✓ Queries often arise from internal teams such as Finance teams with
regards to invoicing where issuer accounts are payable.
Category Mandatory ✓ Register Services often enquires whether physical certificates are still
Risk Medium good for delivery.
Timelines Page 7 JSE Schedule 2, Form H ✓ Settlement Services normally enquire whether off-market transactions
are permissible on ISINs where liquidations are in progress.
Message format Page 159 - 163 SMPG Event Template
✓ SLB and Collateral Services may need to close out positions urgently to
The following minimum information is required: mitigate risk.
✓ The ISIN and the BPID of the issuer must be de-activated to avoid
MANDATORY CASH further invoices to the issuers.
ISIN NUMBER ✓ The details of the event should be communicated to all stakeholders
SALIENT DATES timeously as this event type often leads to many queries.
DIVIDEND TYPE ✓ Events may cover multiple years as the process of winding up the
company can take several years to finalise.
GROSS DIVIDEND RATE
✓ Communication on these events is generally poor and brokers and
DIVIDEND TAX RATE
CSD Participants must initiate enquiries with liquidators, legal teams,
NET DIVIDEND RATE curators and CIPC. Once the ISIN has delisted from the exchange,
FOREIGN DIVIDEND / LOCAL DIVIDEND proper market communication becomes erratic and is often a source
CURRENCY CONVERSION RATIO AND DATE (IF APPLICABLE) of frustration.
SOURCE OF INCOME

55 | Corporate Actions Handbook

10 Name change

Definition Processing risk:

This is a corporate event where the registered name of a company is

✓ Generally this has a low processing risk.
changed. At some institutions this is dealt with as a static data update,
✓ From a market perspective, there is a processing risk when the issuer
especially when the ISIN remains unchanged. If there is a name and ISIN
does not provide all the required details in the Exchange News Service
change, a CHAN (Name Change event) is published and executed.
or declaration announcement, and it creates back and forth queries.
✓ With the ISIN change it is important to coordinate trading to ensure no
Category Mandatory trades are committed to after LDT of the previous ISIN and that trades
Risk Low booked from ex-date are reported on the new ISIN.
Timelines Page 7 JSE Schedule 2, Form H ✓ At the CSD Participant it may occur that once the static data changes
have been done, and an urgent trade must be committed to on RD-1
Message format Page 39 - 40 SMPG Event Template
for SLB purposes, that data must be changed on the data tables to
The following minimum information is required: ensure that the trade can be committed to and settle on the previous
ISIN.
MANDATORY SECURITIES ✓ If the effective termination date of the old ISIN and first trading date of
ISIN NUMBER the new ISIN are not synchronised, there is a market risk where trades
SALIENT DATES may be rejected or may fail.
NEW ISIN (IF APPLICABLE) ✓ Risk is centred around trading on the correct ISIN number.

56 | Corporate Actions Handbook

11 Odd lot offer

Definition Processing risk:

An odd lot offer is an event where a listed company intends eliminating odd
✓ These events are generally not complex and don’t usually have
lot holdings to reduce administrative costs and offers all holders of odd lots
restrictions. The complexity arises if there is tax involved. If DWT is
the option of electing to:
applicable, the net rate must be published.
✓ Missing the event deadline is a risk from CSD Participants and clients.
• retain their odd lot holding; or
✓ Incorrect election on the part of custodians.
• sell their odd lot holding.
✓ A risk is that the funds are not available in the nominated account of the
issuer for onward distribution to CSD Participants and clients.
Category Voluntary ✓ If the issuer does not fund the settlement or corporate actions account
Risk Low timeously, available funds in the account may be utilised or the account
Timelines Page 8 JSE Schedule 2, Form H may be overdrawn.
Message format Page 172 - 174 SMPG Event Template
If the source of the offer prices is considered a dividend, the gross dividend,
The following minimum information is required: DWT and net cash rate are required.

VOLUNTARY EVENT
ISIN NUMBER
SALIENT DATES
OFFER PRICE /GROSS DIVIDEND RATE
DIVIDEND TAX RATE (IF APPLICABLE)
NET DIVIDEND RATE (IF APPLICABLE)
CURRENCY CONVERSION RATE (IF APPLICABLE)
SOURCE OF INCOME
FRACTION RATE (IF APPLICABLE)
SPREADSHEETS REQUIREMENTS
RESTRICTIONS (IF APPLICABLE)

57 | Corporate Actions Handbook

12 Offer to shareholders – unconditional

Definition Processing risk:

On these events a cash or securities settlement is offered to shareholders.

✓ Taxation effects must be clarified upfront and communicated clearly.
An election is required from shareholders which introduces risk. If beneficial
✓ Part-elections are normally not allowed on a beneficial holder level. If it
shareholder elections are required by the issuer, risk increases exponentially
is allowed in terms of the offer, this must be explicitly communicated.
because of spreadsheet requirements.
✓ If the offer is made for a prolonged period, multiple events are loaded
with weekly record dates. A rolling settlement timetable must be
Category Voluntary
provided. All acceptances are communicated for the specific week.
Risk High ✓ Clients normally wait for certainty around the event before they submit
Timelines Page 8 JSE Schedule 2, Form H their election, which is irrevocable.
Page 113 – 127; ✓ Custodians may receive requests to retract an irrevocable election and
Message format SMPG Event Template
219 - 221 this will often not be permitted in terms of the offer.
✓ Some offerors ask for disclosure of shareholders that have accepted the
The following minimum information is required:
offer on an ongoing basis.
✓ Offers can become very complex if there is maximum number of
VOLUNTARY EVENTS
securities the offeror can acquire or if shareholders can only accept the
ISIN NUMBER
offer on a certain percentage of their holdings.
SALIENT DATES ✓ In some instances, excess applications will be permitted or scaling back
OFFER CONSIDERATION (FOR OFFERS) OR GROSS DIVIDEND RATE may be applicable. This can result in onerous spreadsheet requirements
DIVIDEND TAX RATE (IF APPLICABLE) and scaling back. Due to the manual nature of this process, it introduces
NET DIVIDEND RATE (IF APPLICABLE) risk.
FOREIGN DIVIDEND / LOCAL DIVIDEND ✓ Issuers may want to avoid being compelled to make a mandatory offer
CURRENCY CONVERSION RATIO (IF APPLICABLE) to all shareholders and need to constantly monitor offer acceptances.
✓ Spreadsheet requirements for disclosure purposes should be advised
SOURCE OF INCOME
early in the process, by latest finalisation date (RD – 8) to ensure that the
SECURITY RATIO (IF APPLICABLE)
required client education can be planned.
ROUNDING PRINCIPLE
✓ Requests for late submission of elections are sometimes received after
NEW ISIN (IF APPLICABLE) the default option has already been applied on the event. This introduces
FRACTION RATE (IF APPLICABLE) risk when processing must be undone to accommodate a client at a CSD
CASH RATE FOR SALE OF RESTRICTED ENTITLEMENTS Participant. After deadline date and time, the CSD and CSD Participant
SPREADSHEET REQUIREMENTS are unable to amend/accept amended elections without putting the
RESTRICTIONS (IF APPLICABLE) entire corporate event at risk and potentially impacting all clients. In
terms of the Strate Directives, this is not allowed.

58 | Corporate Actions Handbook

12 Offer to shareholders – unconditional

Processing risk (continued)

✓ Processing can be administratively intensive due to the manual processing involved.

✓ The biggest risk is that the funds are not available in the nominated account of the issuer for onward distribution to CSD Participants and clients.
✓ General enquiries from shareholders are mostly around the formulae used to allocate excess applications and scale back of entitlements. The formulae must
be communicated with the results announcement.
✓ Restrictions must be incorporated in the declaration announcement and must form part of the minimum requirements.
✓ For high-risk corporate events, where spreadsheets are required, the issuer and/or the corporate sponsor should approach the exchange to extend the
deadline date to RD+1. Payment date should be extended to RD+2. This may have an impact on trading in the entitlement, however, the risk associated with
the manual processing should be considered, as well as trading in entitlements prior to settlement of the securities.

If the source of the offer prices is considered a dividend, the gross dividend, DWT and net cash rate are required.

59 | Corporate Actions Handbook

13 Offer to shareholders – conditional

Definition Processing risk:

On these events a cash or securities settlement is offered to shareholders,

✓ Taxation effects must be clarified upfront and communicated clearly.
but it is conditional on the fulfilment of certain criteria, usually involving
✓ Part-elections are normally not allowed on a beneficial holder level. If
the TRP or the Competition Commission. An election is required from
allowed in terms of the offer, this must be explicitly communicated.
shareholders. If beneficial shareholder elections are required by the issuer,
✓ Clients normally wait for certainty on the event before they submit their
risk increases exponentially because of spreadsheet requirements.
election, which is irrevocable.
✓ Custodians may receive requests to retract an irrevocable election and
Category Voluntary this will often not be permitted in terms of the offer.
Risk High ✓ Some offerors ask for disclosure of shareholders that have accepted the
offer on an ongoing basis.
Timelines Page 9 JSE Schedule 2, Form H
✓ Offers can become very complex if there is maximum number of
Page 113 – 127;
Message format SMPG Event Template securities the offeror can acquire, or if shareholders can only accept the
219 - 221
offer on a certain percentage of their holdings.
The following minimum information is required: ✓ In some instances, excess applications will be permitted or scaling back
may be applicable. This can result in onerous spreadsheet requirements
VOLUNTARY EVENTS and scaling back. Due to the manual nature of this process, it introduces
ISIN NUMBER risk.
SALIENT DATES ✓ Spreadsheet requirements for disclosure purposes should be advised
OFFER CONSIDERATION (FOR OFFERS) OR GROSS DIVIDEND RATE early in the process, by latest LDT-5 to ensure that the required client
DIVIDEND TAX RATE (IF APPLICABLE) education can be planned.
✓ Requests for late submission of elections are sometimes received after
NET DIVIDEND RATE (IF APPLICABLE)
the default option has already been applied on the event. This introduces
FOREIGN DIVIDEND / LOCAL DIVIDEND
risk when processing must be undone to accommodate a client at a CSD
CURRENCY CONVERSION RATIO (IF APPLICABLE) Participant. After deadline date and time, the CSD and CSD Participant
SOURCE OF INCOME are unable to amend/accept amended elections without putting the
ROUNDING PRINCIPLE entire corporate event at risk and potentially impacting all clients.
SECURITY RATIO (IF APPLICABLE) ✓ Processing can be administratively intensive due to the manual
NEW ISIN (IF APPLICABLE) processing involved.
FRACTION RATE (IF APPLICABLE) ✓ The biggest risk is that the funds are not available in the nominated
account of the issuer for onward distribution to CSD Participants and
SPREADSHEET REQUIREMENTS
clients.
RESTRICTIONS (IF APPLICABLE)
✓ Rate to be applied on calculation of STT must be included in the
ROLLING SETTLEMENT TIMETABLE (IF APPLICABLE)
Exchange News Service announcement.
✓ General enquiries from shareholders are the formulae used to allocate
excess applications and scale back of entitlements.

60 | Corporate Actions Handbook

14 Renounceable rights/Clawback offer

Definition Processing risk:

An offer of renounceable rights to subscribe/purchase securities in an

✓ Restricted jurisdictions may apply in terms of participating in the event.
applicant (usually a subsidiary) by an issuer to the issuer’s securities holders,
✓ Uncertainty whether the issuer agent/any appointed party will be selling
pro rata to their holdings in the issuer, by means of the issue of renounceable
entitlements for restricted shareholders. It should be communicated in
LAs. Renounceable rights may be transferred and sold or lapsed if not taken
the declaration announcement that a third party will be appointed to sell
up. The event is processed in two parts and normally extends over a period
the restricted shareholders rights/entitlement.
of 15 days. The rights distribution event is mandatory, and the rights take-
✓ Investor letters may be required for QIBs or SILs.
up event, voluntary.
✓ Contact details, delivery address and deadline for submission of Investor
Letters must be clearly communicated.
Mandatory/
Category ✓ BOP reporting is always required for foreign issuers due to the offshore
Voluntary
repatriation of funds.
Risk Medium
✓ Incorrect elections may cause financial losses when errors must be
Timelines Page 10 - 11 JSE Schedule 2, Form H corrected, especially when securities must be bought in.
Message format Page 205 - 210 SMPG Event Template ✓ Not meeting deadline for instructions introduces risk of default of all
The following minimum information is required for the rights distribution event: clients under a nominee.
✓ Granting requests for late submission of elections to CSD Participants
MANDATORY/ MANDATORY WITH CHOICE introduces market risk as it has a knock-on effect on timelines that
ISIN NUMBER impacts all stakeholders.
SALIENT DATES ✓ General enquiries from shareholders are the formula used to allocate
excess applications.
SECURITY / LA RATIO
✓ Spreadsheets may be required for excess applications.
CASH RATE FOR SALE OF RESTRICTED ENTITLEMENTS
RESTRICTIONS (IF APPLICABLE)
ISIN FOR LAs
The following minimum information is required for the rights take-up event:

VOLUNTARY EVENTS
ISIN NUMBER
SALIENT DATES
SUBSCRIPTION PRICE (FOR RIGHTS OFFERS)
SPREADSHEET REQUIREMENTS

61 | Corporate Actions Handbook

15 Non-renounceable rights offer/Claw-back offer

Definition Processing risk:

An offer of non-renounceable rights to an issuer’s securities holders, pro

✓ Restricted jurisdictions may apply in terms of participating in the event.
rata to their holdings in the issuer, to subscribe for securities in the issuer.
✓ Investor letters may be required for QIBs or SILs.
These rights can only be taken up or lapsed but cannot be sold. The rights
✓ Contact details, delivery address and deadline for submission of Investor
distribution event is mandatory and the rights take-up, voluntary. The event
Letters must be clearly communicated.
is processed in two parts and normally extends over a period of 15 days.
✓ BOP reporting is always required for foreign issuers due to outflow of
The rights distribution event is mandatory, and the rights take-up event,
funds.
voluntary.
✓ Incorrect elections may cause financial losses when errors must be
corrected, especially when securities must be bought in.
Mandatory/
Category ✓ Not meeting the deadline for instructions introduces risk of default for all
Voluntary
clients under a nominee.
Risk Medium
✓ Granting requests for late submission of elections to CSD Participants
Timelines Page 11 - 12 JSE Schedule 2, Form H introduces market risk as it has a knock-on effect on timelines that impact
Message format Page 205 - 210 SMPG Event Template all stakeholders.
The following minimum information is required for the rights distribution event:

MANDATORY/ MANDATORY WITH CHOICE

ISIN NUMBER
SALIENT DATES
SECURITY / LA RATIO
RESTRICTIONS (IF APPLICABLE)
ISIN FOR LAs

The following minimum information is required for the rights take-up event:

VOLUNTARY EVENTS
ISIN NUMBER
SALIENT DATES
SUBSCRIPTION PRICE
SPREADSHEET REQUIREMENTS

62 | Corporate Actions Handbook

16 Scheme of arrangement, mergers or amalgamations

Definition Processing risk:

A scheme of arrangement is a court-approved agreement between a

✓ Eligibility to participate is often restricted for certain domiciles.
company and its shareholders or creditors. It may affect mergers and
✓ Tax treatment is crucial information that must be clearly communicated
amalgamations and may alter shareholder or creditor rights. These events
upfront.
are seldom complex and risky, but depends on the requirements.
✓ Part-elections on beneficial holder level is normally not permitted; if it is
allowed in terms of the offer, it must be stated as this is often an enquiry
Mandatory /
at broker and CSD Participant level.
Category Mandatory with
choice ✓ In some Scheme events shareholders may have an option to elect to
receive cash or securities or a combination of both.
Risk Medium/High
✓ Processing can range from simple to highly complex, depending on
Timelines Page 12 JSE Schedule 2, Form H
requirements.
Message format Page 166 - 169 SMPG Event Template ✓ When elections involve percentages, the challenge is to transpose that
The following minimum information is required: into a correct number for correct processing.
✓ If scale back is applicable, there is a risk of debit balance of securities if
MANDATORY/MANDATORY WITH CHOICE EVENTS shareholders trade their full anticipated position.
ISIN NUMBER ✓ The cash rate for the sale of restricted entitlements will be provided by
DIVIDEND TYPE the issuer agent if applicable.
SALIENT DATES ✓ Shareholders mostly require the formulae applied on scaling back of
entitlements as well as excess applications to inform underlying clients.
SCHEME CONSIDERATION OR GROSS DIVIDEND RATE
✓ Adjustments on entitlements must normally be done through manual
DIVIDEND TAX RATE
processing or back-end processing.
NET DIVIDEND RATE ✓ Unlisted securities in physical format are sometimes issued and can be
FOREIGN DIVIDEND / LOCAL DIVIDEND either in the form of statements or immobilised securities. This must be
CURRENCY CONVERSION RATIO (IF APPLICABLE) communicated upfront or by no later than RD-8.
SOURCE OF INCOME ✓ Requests for a take-on spreadsheet is administratively intensive and
SECURITY RATIO should be discouraged.
NEW ISIN (IF APPLICABLE) ✓ A risk is that the funds are not available in the nominated account of the
FRACTION RATE issuer for onward distribution to CSD Participants and clients.

RESTRICTIONS (IF APPLICABLE)

If the source of the offer prices is considered a dividend, the gross dividend,
DWT and net cash rate are required.

63 | Corporate Actions Handbook

17 Securities dividend/Dividend option

Definition Processing risk:

When a company offers its shareholders a securities dividend, dividends
✓ Eligibility to participate is often restricted for certain domiciles.
can be received in the form of additional securities or in cash – it is also
✓ If QIBs are required, the document must be available and instructions
referred to as a dividend option. Securities dividends are not taxable at the
clear.
time of receipt of dividend, but will be taxable at the time of sale of the
✓ Tax treatment is crucial information that must be clearly communicated
securities. Capital gains tax will be applicable to securities dividends unless
upfront.
extraordinary circumstances prevail.
✓ If part-elections on beneficial holder level is permitted, it must be stated as
this is often an enquiry at broker and CSD Participant level and balancing
Mandatory with
Category an event becomes more challenging with greater risk for errors.
choice
✓ Shareholders may have an option to elect to receive cash or securities or
Risk Medium to High
a combination of both.
Timelines Page 12 - 13 JSE Schedule 2, Form H ✓ Processing can range from simple to highly complex depending on
Message format Page 105 - 110 SMPG Event Template requirements.
The following minimum information is required: ✓ When elections involve percentages, the challenge is to transpose that
into a correct number of securities.
MANDATORY WITH CHOICE ✓ If scale back is applicable, there is a risk of debit balance of securities if
ISIN NUMBER shareholders trade their full anticipated position.
DIVIDEND TYPE ✓ The cash rate for the sale of restricted entitlements will be provided by
the issuer agent if applicable.
SALIENT DATES
✓ Adjustments on entitlements normally involves manual or back-end
GROSS DIVIDEND RATE
processing, depending on internal processing.
DIVIDEND TAX RATE
✓ Fractions are normally not taxable but if it is, it must be clearly
NET DIVIDEND RATE communicated.
FOREIGN DIVIDEND / LOCAL DIVIDEND ✓ Available date for trading in new securities must be provided.
CURRENCY CONVERSION RATE AND DATE (IF APPLICABLE) ✓ If scale back is applicable, the issuer or its corporate sponsor should
SOURCE OF INCOME consider approaching the exchange to extend the timeline for election to
SECURITY RATIO RD+1 and Payment Date to RD+2.
FRACTION RATE ✓ A risk is that the funds are not available in the nominated account of the
issuer for onward distribution to CSD Participants and clients.
SPREADSHEET REQUIREMENTS
RESTRICTIONS (IF APPLICABLE)

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18 REIT re-investment

Definition Processing risk:

A real estate investment trust distributing a dividend with an option to

✓ Eligibility to participate is often restricted for certain domiciles.
reinvest.
✓ If QIBs are required, the document must be available and instructions
clear.
Mandatory with
Category ✓ Tax treatment is crucial information that must be clearly communicated
choice
upfront.
Risk Medium to High
✓ If part-elections on beneficial holder level is permitted, it must be stated as
Timelines Page 13 JSE Schedule 2, Form H
this is often an enquiry at broker and CSD Participant level and balancing
Message format Page 108 - 111 SMPG Event Template an event becomes more challenging with greater risk for errors.
The following minimum information is required: ✓ Processing can range from simple to highly complex depending on
requirements.
MANDATORY WITH CHOICE ✓ Adjustments on entitlements must normally be done involving manual or
ISIN NUMBER back-end processing depending on internal processing.
SALIENT DATES ✓ Fractions are normally not taxable but if it is, it must be clearly
GROSS DIVIDEND RATE communicated.
DIVIDEND TAX RATE ✓ Available date for trading in new securities must be provided, it is normally
REINVESTMENT PRICE from payment date only.

NET DIVIDEND RATE

FOREIGN DIVIDEND / LOCAL DIVIDEND
CURRENCY CONVERSION RATE AND DATE (IF APPLICABLE)
SOURCE OF INCOME
SECURITY RATIO
FRACTION RATE
SPREADSHEET REQUIREMENTS
RESTRICTIONS (IF APPLICABLE)

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19 Section 124 acquisition

Definition Processing risk:

If an offer for the acquisition of securities under an affected transaction

✓ These events are generally not complex and don’t have restrictions.
involving the transfer of securities or any class of securities of a company to
✓ Tax treatment must be clearly communicated. If DWT is applicable, the
an offeror has, within four months after the date of the making of such offer,
net rate must be published.
been accepted by the holders of not less than nine-tenths of the securities
✓ A risk is that funds are not available in the issuer’s nominated account for
or any class of securities whose transfer is involved (other than securities
onward distribution to CSD Participants and clients.
already held at the date of the issue of the offer by, or by a nominee for, the
offeror or its subsidiaries), the offeror may at any time within two months
after the date of such acceptance give notice in the prescribed manner to
any holder of such securities who has not accepted the said offer, that he or
it desires to acquire his or its securities, and where such notice is given, the
offeror shall be entitled and bound to acquire those securities on the same
terms, which under the affected transaction the securities of the holders
who have accepted the offer, were or are to be transferred to the offeror.

Category Mandatory
Risk Low
Timelines Page 13 JSE Schedule 2, Form H
Page 113 – 127
Message format SMPG Event Template
and 219 - 221
The following minimum information is required:

MANDATORY CASH OR SECURITIES OR COMBINATION

ISIN NUMBER
SALIENT DATES
GROSS DIVIDEND RATE
DIVIDEND TAX RATE
NET DIVIDEND RATE
FOREIGN DIVIDEND / LOCAL DIVIDEND
CURRENCY CONVERSION RATE (IF APPLICABLE)
SOURCE OF INCOME
OFFER CONSIDERATION

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20 Share repurchase pro rata offer

Definition Processing risk:

The company buys securities directly from the market or offers its
✓ Domicile restrictions must be clearly communicated.
shareholders the option of tendering their securities directly to the company
✓ If spreadsheets are required, this must be communicated early to allow
at a fixed price, commonly known as repurchase offers.
for client engagement.
✓ Tax treatment must be clearly communicated to avoid queries.
Category Voluntary
✓ The biggest risk is that the funds are not available in the nominated
Risk High account of the issuer for onward distribution to CSD Participants and
Timelines Page 14 JSE Schedule 2, Form H clients.
Page 113 – 127 ✓ Shareholders or custodians not meeting the market deadline date and
Message format SMPG Event Template
and 219 - 221 time.
The following minimum information is required: ✓ Shareholders mostly require the formulae applied on scaling back of
entitlements as well as excess applications to inform underlying clients.
VOLUNTARY EVENTS
✓ If the offer is extended over several weeks, a rolling settlement timetable
ISIN NUMBER must be provided.
SALIENT DATES
CURRENCY CONVERSION RATE (IF APPLICABLE)
SOURCE OF INCOME
OFFER CONSIDERATION (FOR OFFERS)
FRACTION RATE (IF APPLICABLE)
SPREADSHEET REQUIREMENTS (IF APPLICABLE)
RESTRICTIONS (IF APPLICABLE)
DIVIDEND TAX RATE (IF APPLICABLE)
SECURITIES TRANSFER TAX (IF APPLICABLE)

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21 Subdivision/Stock split

Definition Processing risk:

A listed company may adjust its capital structure by splitting its securities into
✓ Generally, these events pose low processing risk.
units of lesser value. This results in an increase in the number of securities
✓ From a CSD perspective, there is a processing risk when the issuer does
issued with a corresponding reduction in the par value per security such
not provide all the required details in the Exchange News Service or
that the issued capital and the shareholders percentage interest in the
declaration announcement, and it creates back and forth queries.
company remain the same. It is referred to as stock split events.
✓ The new ISIN must be advised in time for the instrument to be created on
stakeholder systems.
Category Mandatory ✓ With the ISIN change it is important to coordinate trading to ensure no
Risk Low trades are committed to after LDT of the previous ISIN and that trades
Timelines Page 14 JSE Schedule 2, Form H booked from ex-date are reported on the new ISIN.
Message format Page 215 - 216 SMPG Event Template ✓ At the CSD Participant it may occur that once the static data changes have
been done, and an urgent trade must be committed to on RD-1 for SLB
The following minimum information is required: purposes, that data must be changed on the data tables to ensure that
MANDATORY SECURITIES the trade can be committed to and settle on the previous ISIN.
ISIN NUMBER ✓ Risk is centred around trading; if the effective termination date of the old
ISIN and first trading date of the new ISIN are not synchronised, there is a
SALIENT DATES
market risk where trades may be rejected or may fail.
SECURITY RATIO
NEW ISIN
FRACTION RATE

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22 Unbundling with/without accompanying cash payment – termination of mother security – with/without election

Definition Processing risk:

With election – where a holding company is listed on the exchange. The

✓ The nature of the distribution affects the tax treatment and must be clear.
holding company has investments in subsidiaries, cash, unlisted companies
✓ Liability for STT is generally paid by the offeror, but must be clearly
and/or listed companies. After unbundling, the holding company is dissolved
communicated.
and the shareholders will receive, proportionately to their initial holdings in
✓ Events becomes complex if more than one security ISIN is being disbursed
the holding company: (a) securities in the subsidiaries (listed or private); or
on the unbundling.
(b) cash; or (c) a combination of the above.
✓ Apportionment ratios must be provided to enable correct portfolio
valuations from ex-date.
Without election – where a holding company is listed on the exchange.
✓ These events are mostly mandatory, but may become mandatory with
The holding company has one or more subsidiaries. After unbundling, the
choice if shareholders must make an election.
holding company is dissolved, and the shareholders will receive securities
✓ The cash rate for the sale of restricted entitlements will be communicated
in the subsidiaries (listed or private) proportionate to their initial holdings in
by the issuer agent if applicable.
the holding company.
✓ A risk is that the funds are not available in the nominated account of the
Mandatory /Mandatory issuer for onward distribution to CSD Participants and clients.
Category
with choice
Risk Medium
Timelines Page 15 JSE Schedule 2, Form H
Message format Page 213 - 214 SMPG Event Template

MANDATORY SECURITIES / CASH

ISIN NUMBER
SALIENT DATES
GROSS DIVIDEND RATE
DIVIDEND TAX RATE
NET DIVIDEND RATE
FOREIGN DIVIDEND / LOCAL DIVIDEND
CURRENCY CONVERSION RATIO AND DATE (IF APPLICABLE)
SOURCE OF INCOME
SECURITY RATIO
ROUNDING PRINCIPLE
NEW ISIN
FRACTION RATE
RESTRICTIONS (IF APPLICABLE)

69 | Corporate Actions Handbook

23 Termination of listing without payment to shareholders

Definition Processing risk:

The removal of the ISIN from trading on the JSE. It is also referred to as a
✓ All trading in securities to be redeemed must be monitored to ensure that
delisting event.
no potential debit balances of securities arise post redemption where the
owner of securities is unable to deliver securities that have ceased to
Category Mandatory exist.
Risk Low ✓ If the company remains as an unlisted entity, custodians must close the
positions on the existing ISIN/share code and reopen it in an unlisted
Timelines Page 16 JSE Schedule 2, Form H
form.
No page refer-
✓ Spreadsheet are sometimes required from issuers when the company will
Message format ence in SMPG SMPG Event Template
Template remain as an unlisted entity to obtain a complete register on termination
of the listed ISIN.
The following minimum information is required: ✓ A company may terminate listing on the exchange, but can opt to remain
as an unlisted entity on the CSD platform.
MANDATORY SECURITIES
ISIN NUMBER
SALIENT DATES
SUSPENSION DATE
DELISTING DATE
SPREADSHEET REQUIREMENTS (IF APPLICABLE)

70 | Corporate Actions Handbook

7. Industry problems highlighted
Flow of information on all continents and in multiple jurisdictions across consequences if made public. In devising a corporate
different time zones, must communicate any changes action, issuers take their cue from the Companies
Early engagement is a theme that the corporate to events to all clients. Where there is insufficient time Act and corporate law. Signing of non-disclosure
action work group and market has been speaking to manage the communication, any risks that arise agreements does not necessarily offer the required
about for a long time. All stakeholders must prepare because of late notification is directed to downstream confidentiality and the risk of information leakage
to execute the issuer’s intension in a manner that stakeholders. becomes greater. There is no legal basis to insist that
does not put the market at risk. Early engagement all parties in the corporate action chain of events must
would allow custodians sufficient time for testing Several years ago, a process was in place that enabled provide input. As it stands currently, CSD Participants
to adhere to risk governance protocols. When the consultation between the issuers, sponsors, JSE and are not necessarily privy to that information before the
market receives information at the last moment, it the CSD Participant representatives before complex public. In the initial discussions for corporate events,
introduces risk. Early engagement must be defined. corporate action events were published. This proved the JSE, and Strate on occasion, are consulted in the
From interviews with the issuers, it became clear that to be beneficial, especially to the CSD Participants as process. As industry regulators, they provide input,
engagement with external parties during the period they were able to provide issuers with valuable input which in turn is disseminated to all CSD Participants.
when the information is not yet in the public domain, that could be used in devising terms of a corporate Both regulators arrange market meetings as soon
is something that they will not consider. action. The standard approach at the time was that as practically possible to reach consensus with the
those who were involved had to sign non-disclosure issuers and sponsors on complex events.
The quality of the information and its early flow to agreements. This allowed CSD Participants to influence
all parties is crucial. Once an announcement of a the process to align with processes and systems and According to the issuers interviewed, they always try to
corporate event has been made and is in the public aimed to achieve the highest possible levels of straight provide information timeously, but acknowledge that
domain, custodians receive enquiries. Because through processing. This practice has fallen by the it might not always be made available by last day to
foreign shareholders rely heavily on their custodians wayside for several reasons. In the discussion with trade minus five. Some of the data information might
for information, the expectation is to receive all issuers, the question posed was why this could not be not be available because of delayed court approval or
pertinent information from the custodians once the considered by issuers going forward. They provided Takeover Regulation Panel delays that neither the issuer
event is announced. Often this cannot be achieved. a few reasons, but primarily that when a sensitive nor the sponsor have control of. By last day to trade,
Circulars with pertinent information may be published corporate action is planned, leakage of information the market must have consensus and understand
only later, creating a challenge to respond to enquiries may jeopardise the event. The protection of personal exactly what is required and how processing will be
and provide accurate, concise feedback. information is legislated, and any breaches may executed. Information that is provided after that time
have serious reputational and potentially, financial increases risk and puts pressure on the processing
The general rule is that all information must be available implications. timelines. As a market, the inter-connectedness
by latest last day to trade minus five. Where domicile means that everyone is impacted when information is
restrictions are confirmed later than LDT-5, this Issuers often spend vast amounts of money on legal late or unclear. If a service provider is unable to meet
creates risk for several reasons. Client relationships advisors to ensure the letter of the law is adhered an operational objective, it can have reputational or
and obligations to underlying clients then become a to in all respects of a corporate event. Leakage of financial impact, or both.
risk to manage. Global custodians that serve markets any information, however small, may have severe

71 | Corporate Actions Handbook

The information that is generally regarded as It is well documented and reviewed periodically, with Spreadsheets
insufficient covers the following aspects:s: a view to ensure that the best possible practices
are applied. In certain instances, market practice This subject is very topical in the industry and a source
✓ Whether entitlements are of a capital or income documents have been agreed and signed off by the of discontent. Spreadsheets used to be required in
nature market. When an issuer approaches the JSE to discuss exceptional circumstances, but seem to have gained
✓ Taxation matters a planned corporate event, the pertinent details of the traction and are required for almost all events that
✓ Domicile restrictions corporate event and the different steps that apply, have the distribution of security entitlement and
✓ Apportionment ratios for unbundling events must be adhered to. It is especially important due to where shareholders need to make an election. While
the inherent risk associated with corporate actions, to most custodians can generate spreadsheets from
ensure that risk and exception management is tightly their core systems, CSD Participants do not have the
Adherence to market practice managed by the various downstream stakeholders in detail of underlying clients for the nominee accounts
the process. and need to request this from the registered owner
Market practice is aligned to Strate Rules and Directives.
The South African MI and financial institutions use of the securities. Some CSD Participants have multiple
Any deviation from market practice and introduction nominee accounts. Many of these accounts belong to
the SWIFT messaging network to securely transmit
of manual tasks and processes must be avoided as global custodians with footprints in multiple markets.
information and instructions through a standardised
far as possible as this requires manual oversight. To the global custodian it is an onerous task to request
system of codes. Most of the corporate events for
In a highly automated environment, the ideal is to spreadsheet information from the various markets,
equities, bonds and money market securities are
adhere to standard market practices and processes, collate it and provide this in a consolidated format to
communicated, processed and paid via SWIFT. SWIFT
especially for complex events. While more than 99% the CSD Participant.
has been adopted as part of market practice for
of corporate actions are fully automated, a corporate
corporate actions in general.
event may occasionally require manual intervention. To the custodians that have dozens of nominee
The requirement for spreadsheets is particularly risky accounts, the challenge is to scrutinise the
Securities Market Practice Group standards have
as this is mostly manual with significant room for error. spreadsheets for accuracy and ensure all required
also largely been accepted as market practice. While
Where corporate events are announced that require fields are populated. While spreadsheet validation
SMPG encourages the implementation of the market
manual intervention, risk increases exponentially. can be performed systematically with great success
practices it develops, it is up to the financial institutions
Where the event timelines adhere to standard and even be incorporated into a master spreadsheet,
within each market to implement the market practices
timelines and all relevant information is known, risk this requires time and effort to finalise the planning
according to their needs and agreements with their
is mitigated. Where non-standard market practice or and testing to ensure successful execution. While the
business counterparts, to support their businesses as
event timelines are required, the necessity for testing need for spreadsheets must be revisited, automation
efficiently as possible.
event outcomes become crucial to mitigate risk. can be achieved with great success thereby reducing
In addition to the above, the JSE Schedule 2 Form risk for all stakeholders.
H, provides detail in terms of the standard market
practice followed in the industry for corporate actions.
This form can be found on www.JSE.co.za , and
provides the detail for each of the corporate events.

72 | Corporate Actions Handbook

During the past two years, the frequency of requests spreadsheets onto a single spreadsheet. Depending
for spreadsheets by issuers has increased. Initially on the appetite for development, the process can
spreadsheets were required only in exceptional be fully automated with the required workflow tools.
circumstances where there was potential for While some intermediaries may argue that a cost
unintended losses by intermediaries or beneficial benefit analysis need to be done, the risk and financial
shareholders due to rounding differences at a impact should be the deciding factor.
registered versus beneficial owner level. Custodians
must distribute security entitlement to underlying The following are some of the problems experienced
shareholders. Receiving entitlements on an with the use of spreadsheets:
omnibus level opens up the custodian and broker
to risk. Where securities have a high market value, ▷ Often excessive information is required to be
custodians and brokers could end up losing funds filled in on spreadsheets;
when the need arises to buy in fractional differences. ▷ It is a manually intensive process in terms of
Some CSD Participants say there is no benefit for time and resources;
international clients operating omnibus accounts to ▷ Spreadsheet formats are often complex;
complete spreadsheets because they regard potential ▷ Transmission of confidential information in a
fractional losses as small differences. Their belief is secure and standard format is risky;
that international clients should not be requested to ▷ Copy and paste errors are common in the
populate spreadsheets. market;
▷ Client education to ensure accuracy of
With market changes in recent years, the standard completion is often required; and
rounding principle has been substituted for the ▷ Clients at times submit spreadsheets to
rounding down principle in most cases. In theory this intermediaries that contain formulae or special
was aimed at reducing the need for spreadsheets. characters that compromise accuracy.
However, it did not address the issue of the nominee
structure, which is a major contributor to the ongoing
requests for information down to beneficial owner
level. While spreadsheets are a market tool that have
been used for over two decades, their manual nature
introduces as much risk as it solves for the disclosure
element. There have been ongoing efforts by most
CSD Participants to automate as much of this process
as possible. This includes aspects such as validating
completeness and accuracy of information received
from intermediaries on spreadsheets. In addition,
the process can be further refined to consolidate all

73 | Corporate Actions Handbook

Currently the following event types require spreadsheets:

Event type Description

CSD Participants are required to complete a take-on spreadsheet with shareholder details for the issuer agent to have a register of the shareholders
Delisting events
in the unlisted company and to issue share certificates or statements.

DRIPS CSD Participants are required to provide spreadsheets with net amounts to be re-invested at beneficial owner level for dividend reinvestment plans.
CSD Participants are required to provide spreadsheets with elections if there is maximum number of entitlements that can be allocated because
Distribution in
of scaling back. If there is scale back, the sponsor/issuer performs the calculations on the spreadsheets and the issuer agent sends it to the CSD
specie/Merger/
Participants with revised entitlements to be issued. Strate receives a pivot table with revised entitlements and adjusts the entitlements per CSA for
Dividend option
payment. In some instances, manual payments are done depending on the complexity of the event, but it is not the norm.
CSD Participants currently email odd lot offer spreadsheets to the issuer agent reflecting CSA, number of clients and number of securities elected on
Odd lot offers
retained, sold and default sales options.
Specific offers/
Disclosure is required on some of the events. CSD Participants send MT565 messages and disclose shareholders who have accepted the offer.
Voluntary offers

On some offers, there is a maximum amount of cash or securities to be paid out to shareholders or it can be made up of a split between a guaranteed
amount and excess allocations. CSD Participants are required to provide spreadsheets with elections if a maximum number of entitlements to be
Tender offers/
issued is exceeded, and scale back must be applied. If there is scaling back, the sponsor/issuer does the calculations on the spreadsheets and the
Exchange offers
issuer agent sends it back to the CSD Participants with revised entitlements to be issued. Strate receives a pivot table with revised entitlements and
adjusts the entitlements per CSA for payment. In some instances, manual payments are done depending on the complexity of the event.

Spreadsheets with excess applications are required for scaling back if the securities are oversubscribed. If there is scaling back, the sponsor or the
issuer does the calculations on the spreadsheets and the issuer agent sends it back to the CSD Participants with revised entitlements to be issued.
Rights offers Strate receives a pivot table with revised entitlements and adjusts the entitlements per CSA for payment. In some instances, manual payments are
done depending on the complexity of the event. BOP spreadsheets are also required on rights offers by foreign companies if the funds raised on the
rights offer will be repatriated offshore.

Mergers/
A table with restricted entitlements to be sold is provided to the issuer agent.
unbundlings

It was acknowledged that spreadsheets will be CSD Participants have repeatedly requested that the The attached templates are the standard templates
required in the following two instances: ratio or basis for allocation on a scale back must be used in the market:
announced in the market and has stated that Strate
✓ DRIPs; and must insist on this, but the issuer’s Memorandum of
✓ where there would be scale-back, for example Incorporation will govern this decision. It is sometimes
excess rights subscriptions offers. stated in the offer circular that the company has
discretion to allocate securities, especially for excess Partial Offer SPREADSHEET BOP balance of
spreadsheet.xlsx TEMPLATE 1.xlsx payments - Sarb
applications.

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Disclosure of personal and Automation of manual processes Corporate action timelines
confidential information
All stakeholders in the industry are focused on the Corporate action timelines are well entrenched in the
The purpose of the Protection of Personal Information automation of manual processes. This is largely because SA market. Schedule 2 Form H published by the JSE,
Act (POPI Act) is to protect personal information, to the industry has advanced significantly over the past documents the various corporate action timelines in
strike a balance between the right to privacy and the two decades. Exchanges, the CSD, CSD Participants, detail. All issuers and the market are bound by the
need for the free flow of, and access to information, and brokers, fund managers and global custodians are all timelines.
to regulate how personal information is processed. attempting to reach the highest levels of automation
It also ensures that an entity is held accountable to ensure straight through processing. Where manual CSD Participants, broker and fund manager systems
should it abuse or compromise personal data in any or user intervention can be eliminated, risk is reduced. are mostly rule-driven and sometimes hard-coded to
way and protects the personal information of people While straight through processing can be achieved for align to the timelines published by the JSE and Strate.
as well as the information of businesses and other most events, it is unlikely to be the case for all events.
organisations. Lack of compliance in this regard, may Manual intervention must be limited to guard against The effect of this is twofold – any deviation from the
have serious reputational and financial implications undue risk. Because the CSD Participants collate timeline implies that if the system is hard-coded,
for custodians who are found to be in breach. information of a large and mostly varied client base, it cannot accommodate any deviation with ease,
risk is concentrated. Again, the playing field is not which leads to manual intervention. Alternatively, if
Submission of shareholder information in response even. Some CSD Participants are more advanced and the system is rule-driven, rules can be configured to
to issuer requests has become another challenge further down the road in terms of automation. This accommodate the event but in terms of governance
for corporate actions departments. Most of the covers areas such as procedures, require testing and sign-off from various
information flows via email and attachments are parties, notably the risk and compliance departments.
password protected with encryption in place. While ✓ client notification, which is virtually instantaneous; This does create a conundrum for the SA market as
most institutions use email as a delivery mechanism, ✓ client elections via portals thereby reducing interests need to be balanced. What needs to be
there have been requests from various parties to manual intervention; considered are the risks introduced when standard
develop more secure means of delivery of large client ✓ consolidation of client information on a master timelines are not adhered to. Deviation from timelines
files containing thousands of shareholders’ personal spreadsheet; and standards within our systems and processes
and sensitive information. There are currently market ✓ auto-send of elections to the CSD on record date/ introduces risk in one way or another. Corporate
discussions on this topic to find alternative solutions. election deadline date; and events over the past two decades have shown this is
✓ DWT processing and reporting. not something that the market will be able to avoid
completely. As a market serving and enabling clients,
every stakeholder’s function is to translate the issuer
and shareholder decision into a workable transaction.

75 | Corporate Actions Handbook

It is ultimately about a balance of interests. If regulators a small trade-off to contain risk and ensure efficiency
are too restrictive and prescriptive, this might have in the industry.
unintended consequences and more issuers could
delist. The JSE as the primary exchange in South Taxation
Africa has the vision to be the best global platform in
emerging markets – this is informed by its central role Taxation on most corporate events is clear, but
and the need to build a strategy and a business that is questions often arise about tax implications on
sustainable. Foreign direct investment (FDI) on the JSE complex events. Taxation becomes more complex
has played a considerable role in the development of when an issuer straddles multiple jurisdictions, and
the South African economy, although in recent years South Africa has the additional burden of exchange
FDI has remained at relatively low levels compared control regulation. Different entities are taxed at
with other emerging market countries. South Africa different rates, which is further exacerbated by
needs to encourage and accommodate FDI through double tax treaties with most countries that are not
balancing the regulatory requirements for issuers, static. This results in a different outcome for different
which are often cumbersome, with the need for sets of shareholders because the tax consequences
investment and growth. While certain fundamentals will differ between jurisdictions.
need to be enforced, it is crucial to be pragmatic
and achieve a balanced approach, especially when Withholding tax agents require clarity about tax
deviations from timelines are required. implications for events as they must comply with
regulatory requirements imposed by South African
Trading in entitlements Revenue Service. Similarly, asset managers need
to provide portfolio valuations daily and need
Trading in entitlements from ex-date on very complex certainty about tax treatment on every corporate
events, especially where multiple jurisdictions are event. Most issues arise from not knowing whether
involved, is risky. On certain events in the past, where an entitlement is of a capital or income nature. The
securities had to settle in accounts on payment date complexity of taxation in South Africa puts pressure
of the event, there were delays causing a knock-on on all stakeholders to provide detailed information
effect on the delivery of securities. In almost all these where possible. Reprocessing of events is a frequent
cases, there was no liquidity in terms of available occurrence at asset managers when tax treatment
securities as lenders tend to recall securities when is not forthcoming before the last day to trade. In
there are high-risk events. All corporate events could the interest of the market, this information must be
potentially be risky, but there are seldom more than provided as soon as possible as unit pricing occurs
five high-risk corporate events per annum. For these from ex-date.
events, consideration must be given to start trading
in entitlements from payment date only, especially
if scale back is applicable. Special dispensation for a
small number of corporate events per annum may be

76 | Corporate Actions Handbook

8. CASE STUDY
Company X announced a merger event via PNOE (Preliminary Notice of Event). Strate :98A::ANOU//20210323
disbursed the below MT564 message to all CSD Participants based on the information :98B::EFFD//UKWN
received from the SENS announcement of the JSE. Based on the published circular :98B::RDTE//UKWN
the restricted domiciles were the United States, any relevant member state, Canada, :98B::TSDT//UKWN
Australia, Japan or Hong Kong, UK, member states of the European Economic Union, :98B::GUPA//UKWN
and any other jurisdiction where Offer Securities or Letters of Allocation may not :22F::ADDB//SCHM
be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, :16S:CADETL
directly or indirectly, within such jurisdictions and to do so might constitute a :16R:CAOPTN
violation of local securities laws or regulations. All the restrictions were not clearly :13A::CAON//001
communicated from the initial publication by the issuer/sponsor. There were no :22F::CAOP//CASH
spreadsheet requirements communicated by the issuer/sponsor of the event on the :22F::DISF//STAN
PNOE – Refer to Field 70E – Additional Text. :11A::OPTN//ZAR
:17B::DFLT//N
{1:F01STRAZAJ2XXXX0000000000} :98B::MKDT//UKWN
{2:O5641654210507STRAZAJ2AXXX00000000002105071654N} :16R:SECMOVE
{3:{108:00150271SS11P002}}{4: :22H::CRDB//DEBT
:16R:GENL :35B:ISIN ZAE000030999
:20C::SEME//2105071654395855 COMPANY X
:20C::CORP//2021404040 :98B::PAYD//UKWN
:23G:NEWM :16S:SECMOVE
:22F::CAEP//REOR :16R:CASHMOVE
:22F::CAEV//MRGR :35B:ISIN ZAE000030999
:22F::CAMV//CHOS COMPANY X
:98C::PREP//20210507165439 :16R:ACCTINFO
:25D::PROC//PREC :97C::SAFE//GENR
:16S:GENL :16S:ACCTINFO
:16R:USECU :16S:USECU
:35B:ISIN ZAE000030999 :16R:CADETL
COMPANY X :98A::ANOU//20210323
:16R:ACCTINFO :98B::EFFD//UKWN
:97C::SAFE//GENR :98B::RDTE//UKWN
:16S:ACCTINFO :98B::TSDT//UKWN
:16S:USECU :98B::GUPA//UKWN
:16R:CADETL :22F::ADDB//SCHM

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:16S:CADETL :16R:ADDINFO
:16R:CAOPTN :70E::ADTX//Shareholders will receive one Company X Holdings share for every one
:13A::CAON//001 Company X share held. Implementation of the scheme is subject to fulfilment of
:22F::CAOP//CASH conditions precedent.
:22F::DISF//STAN :70E::COMP//The Company X Holdings Securities will not be admitted to trading on
:11A::OPTN//ZAR any trading venue, exchange or multilateral trading facility, in Switzerland. The Offer
:17B::DFLT//N Securities are not intended for circulation or distribution in or into the UAE, other
:98B::MKDT//UKWN than to persons who are Qualified Investors. The Offer Securities will not be offered
:16R:SECMOVE or sold, directly or indirectly, in Japan or to, or for the account or benefit of, any
:22H::CRDB//DEBT resident of Japan. The Offer Securities will not be and have not been registered under
:35B:ISIN ZAE000030999 the US Securities Act of 1933 and may not be offered or sold in the United States
COMPANY X absent registration or an applicable exemption from the registration requirements.
:98B::PAYD//UKWN QIBs required.
:16S:SECMOVE :16S:ADDINFO
:16R:CASHMOVE -}
:22H::CRDB//CRED
:98B::PAYD//UKWN When the Final Notice of Event (FNOE) was published it did not contain the full list of
:92K::GRSS//UKWN restricted domiciles as contained in the circular. All countries in the EU and the UK
:16S:CASHMOVE were listed as excluded from participation in the offer. The SWIFT MT564 is provided
:70E::ADTX////DLST/UKWN below.
This option is for the restricted shareholders
:16S:CAOPTN 1:F01STRAZAJ2XXXX0000000000}
:16R:CAOPTN {2:O5641247210907STRAZAJ2AXXX00000000002109071247N}
:13A::CAON//002 {3:{108:00100248SS11P002}}{4:
:22F::CAOP//SECU :16R:GENL
:22F::DISF//STAN :20C::SEME//2109071247551245
:17B::DFLT//Y :20C::CORP//2021404040
:98B::MKDT//UKWN :23G:REPL
:16R:SECMOVE :22F::CAEP//REOR
:22H::CRDB//DEBT :22F::CAEV//MRGR
:35B:ISIN ZAE000030999 :22F::CAMV//CHOS
COMPANY X :98C::PREP//20210907124755
:98B::PAYD//UKWN :25D::PROC//COMP
:16S:SECMOVE :16R:LINK
:70E::ADTX////DLST/UKWN :20C::PREV//2108051439569798
:16S:CAOPTN :16S:LINK

78 | Corporate Actions Handbook

:16S:GENL This option is for the restricted shareholders
:16R:USECU :16S:CAOPTN
:35B:ISIN ZAE000030912 :16R:CAOPTN
COMPANY X :13A::CAON//002
:16R:ACCTINFO :22F::CAOP//SECU
:97C::SAFE//GENR :22F::DISF//STAN
:16S:ACCTINFO :17B::DFLT//Y
:16S:USECU :98C::MKDT//20210917130000
:16R:CADETL :16R:SECMOVE
:98A::ANOU//20210323 :22H::CRDB//CRED
:98A::EFFD//20210920 :35B:ISIN ZAE000298253
:98A::RDTE//20210917 COMPANY X
:98A::TSDT//20210915 :92D::NEWO//1,/1,
:98A::GUPA//20210914 :98A::PAYD//20210920
:22F::ADDB//SCHM :98A::AVAL//20210915
:70E::WEBB//www.companyx.co.za :16S:SECMOVE
:16S:CADETL :16R:SECMOVE
:16R:CAOPTN :22H::CRDB//DEBT
:13A::CAON//001 :35B:ISIN ZAE000030912
:22F::CAOP//CASH COMPANY X
:22F::DISF//STAN :98A::PAYD//20210920
:11A::OPTN//ZAR :16S:SECMOVE
:17B::DFLT//N :70E::ADTX////DLST/20210920
:98C::MKDT//20210917130000 :16S:CAOPTN
:16R:SECMOVE :16R:ADDINFO
:22H::CRDB//DEBT :70E::ADTX////LDDR/20210914
:35B:ISIN ZAE000030912 Implementation of the scheme is subject to fulfilment of conditions precedent. Own
COMPANY X name shareholders are required to complete the application and surrender form to
:98B::PAYD//UKWN receive the Company X scheme consideration. Email completed forms to corporate.
:16S:SECMOVE [email protected] by no later than 12:00 on 17 September 2021.
:16R:CASHMOVE
:22H::CRDB//CRED
:98B::PAYD//UKWN
:92K::GRSS//UKWN
:16S:CASHMOVE
:70E::ADTX////DLST/UKWN

79 | Corporate Actions Handbook

Termination of listing on the JSE is with effect from commencement of trade on 21
September 2021. The XXX Holdings Securities will not be admitted to trading on
any trading venue, exchange or multilateral trading facility, in Switzerland. The Offer
Securities are not intended for circulation or distribution in or into the UAE, other
than to persons who are Qualified Investors. The Offer Securities will not be offered
or sold, directly or indirectly, in Japan or to, or for the account or benefit of, any
resident of Japan. The company has however obtained exemptions and therefore,
the restricted jurisdictions will be able to receive the XXX Holdings securities. The
Offer Securities will not be and have not been registered under the US Securities
Act of 1933 and may not be offered or sold in the United States absent registration
or an applicable exemption from the registration requirements. QIBs required. A
template of the Investorletter can be obtained from [email protected].
Email completed investor letter to [email protected] by no later than 27
August 2021. Failure to submit investor letter by the deadline date will result in such
US shareholder being deemed to be a restricted foreign shareholder and will receive
the cash remittance. Email spreadsheets to Corporate.Actions@transfersecretary.
co.za, copy Strate by no later than 13h00 on 17 September 2021.

80 | Corporate Actions Handbook

The MT564 FNOE contained further requirements in terms of QIB letters and spreadsheet requirements. Two days prior to record date, the sponsor confirmed at a special
market meeting that the UK and EU were no longer excluded from participation in the offer. The only exclusion was the USA. This caused confusion as this contradicted the
published circular and was confirmed late in the process. As many CSD Participants having global custodians and large foreign asset management firms in various jurisdictions
with different time zones, this caused major problems for CSD Participants with droves of enquiries and having to schedule emergency meetings with clients. This created
huge risk for the event and its execution. It must be noted that some CSD Participants suffered financial losses on this event, and it sparked a letter to Strate on the issues
that were experienced on this event. The content of the letter covered the following points:

1. “Although the Sponsor attempted to engage the market in good time to reach a consensus on the nuanced processing requirements, the flow of information was late
(and vague too) and the claim process for securities defaulted to the issuer nominee account was confirmed on the evening before market deadline and record date.
Generally, engagement with CSD Participants is too late in the process.
2. The application of jurisdiction restrictions, especially for the UK, was clarified 2 days before record date. The sponsor was not certain how they would apply restrictions,
i.e., would it be at beneficial owner level or registered level.
3. The spreadsheet (disclosure) requirements were confirmed late in the process.
4. Event processing deviated from market and best practice. The sponsor believed that the market practice did not align to the law (their opinion) however legal counsel
on other events ratified and agreed with market practice – this is confusing as interpretation is not consistent.
5. CSD Participants were required to conduct urgent testing which does not confirm to good change management governance.
6. The market made good progress in eliminating form submissions and in this case, forms were required to confirm that the shareholder “read” the circular. This (“read”)
is implied when a client/shareholder makes an election and thus a form submission would be a mere tick box exercise.
7. CSD Participants were required to provide data extracts of holdings as Strate could not provide the BOR on the date/s required by the sponsor. The BOR should be
enhanced to meet the issuer/sponsor requirements for corporate actions.
8. Allowing trading in entitlement of the new COMPANY X Holding securities from ex-date when entitlements are only confirmed on record date introduces huge risk in
the market as there is no certainty that entitlements will be received for certain jurisdictions which may create debit/short positions in the market and possibly failed
trades too.
9. Entitlement allocations (spreadsheets) were due to be received from the issuer at 17:00 as agreed in the market meetings however the spreadsheet was sent to CSD
Participants after 22h00.
10. At very short notice CSD Participants had to extend EOD batch processing times and this caused huge risk for downstream processes with client statements, and cash
processing etc.
11. Staff had to perform the required adjustments on the weekend, which was not planned, and this brings about additional costs for CSD Participants as well as risks.
12. There were huge volumes of client queries on this event which is an indication of the uncertainty many investors were faced with.
13. Required form of processing restriction exceptions, especially for our shareholders that hold their position in omnibus structure caused additional efforts from our
clients and their processing teams. We received an increased number of enquiries from our clients, concerned by the late announcement of the restrictions and record
date set on the deadline day.
14. We also would like to raise a concern in relation to lack of MT566 messaging for withdrawal of securities from CSD Participant accounts to the transfer secretary
technical account, that was conducted after initial MT566 messaging that confirmed allocation securities on our accounts.
15. Although understandable to a certain degree, but the request for information at beneficial owner level increases the size of spreadsheets significantly, impacting of the
operational time and efforts required to reconcile and accurately complete the spreadsheet.

81 | Corporate Actions Handbook

16. We would be remiss if we do not ultimately acknowledge and recognise the affect this manner of processing has on our the most important stakeholders i.e., our clients.
This caused a lot of frustration, confusion, and uncertainty. This also resulted in instructions being received late due to the delayed flow of final information related to
the QIBs etc. Depending on how the related queries are managed it may negatively impact on our scorecards and client relationship.
17. As with the COMPANY Y and COMPANY X event the deadline times are not aligned to the QIB deadline vs the surrender form deadline vs the spreadsheet and MT565
deadline were all different. This added pressure to manage and meet multiple deadlines.
18. With the COMPANY Y event a very distinct nuance was that the issuer looked at the tendered position as well as the RD position to determine final eligibility. This was
out of the ordinary as normally the tendered position would be utilised to determine final eligibly. Where holders provided their information at BO level some did not
take this into consideration and ended up disenfranchised.
19. Why was the default option reserved for investors who returned a QIB letter? This question was raised during one of the meetings, but the sponsor never gave a direct
answer.
20. Strate is no longer updating the narrative of the event, i.e. deadline for returning QIB letters was extended but the event was not updated. Extension of the deadline for
the return of the QIB letter was only announced by email.
21. Full list of the restricted jurisdictions which the company had obtained exemptions for and were able to receive the COMPANY X holdings securities were not updated
in the narrative of the event i.e. Canada, Australia, UK, European Economic Area.
22. The amount of information required to fill in the spreadsheet was a challenge for the CSD Participants to gather: Beneficial Ownership details and record date position
of each Beneficial Owner. This generated a volume of queries from clients and chasing from the CSD Participants side to get clients to provide the required information,
which added more pressure on the CSD Participants especially when CSD Participants rely on clients to provide the details as CSD Participants would not know the
underlying beneficiaries of the clients. CSD Participants can only process client instructions in good faith but in the end risk exposure is still high on CSD Participants side
23. Manual processes - we must evaluate our processing touchpoints and identify all market processes that have no STP and require manual processing/intervention as
these introduce a high degree of operational risk to our businesses. Among these will be spread sheets and emails which have been mentioned as a major issue by all.
Overall, there is a need to promote automation and STP to mitigate operational risk and promote efficiency of execution in the market.
24. Transmission of confidential information - As CSD Participants we are more than just custodians of clients securities, we are also custodians of confidential client
personal information. Current legislation places a huge responsibility on those that hold and process confidential client personal information under the POPI Act.
25. Alignment of issuer objectives to CSD Participant business operations - CSD Participants are increasingly being called upon to make resources available outside of
normal working hours and this goes beyond just ourselves and our staff, but also includes vendors and other GT resources that manage different interfaces for our
custody systems to operate efficiently. The implications here from human resource management, financial and operational risk perspectives are big for custodians. As
much as we directly or indirectly serve the Issuers, CSD Participants are also businesses in our own right and for that reason there is a need to align the objectives of
the Issuers to those of CSD Participants to ensure we are not compromising our businesses by operating outside of normal business hours. Issuer objectives should
not put CSD Participants in a compromising position where we have to make trade-offs in terms of our usual processes/operational models. We require better, fair and
clearer rules of engagement that consider the interests of all market participants in the value chain. “

82 | Corporate Actions Handbook

9. GLOSSARY OF TERMS
Term Description

A2X A2X (Pty) Ltd, registration number 2014/147138/07

ABS Asset Backed Securities are secured by a pool of financial assets that generate cash flows from debt such as loans, leases and receivables.
A transaction, or series of transactions, pursuant to an agreement between two or more companies, resulting in— (a) the formation of one or more
new companies, which together hold all of the assets and liabilities that were held by any of the amalgamating or merging companies immediately
Amalgamation / before the implementation of the agreement, and the dissolution of each of the amalgamating or merging companies; or (b) the survival of at least one
Merger of the amalgamating or merging companies, with or without the formation of one or more new companies, and the vesting in the surviving company
or companies, together with such new companies, of all of the assets and liabilities that were held by any of the amalgamating or merging companies
immediately before the implementation of the agreement.
Actively Managed Certificate Issuers – AMCs are structured products that allows active management of a chosen instrument strategy via an index,
AMCI
normally involving derivatives to gain exposure to a basket of shares.
A notice regarding rights accruing to owners of securities, which is published by an issuer by means of the news service of an exchange, as well as
Announcement company reports and circulars where these are provided to Strate for distribution. In respect of unlisted securities, announcement means any notice
regarding rights and other benefits accruing to owners of securities which is provided by an issuer to Strate.
ASISA Association for Savings and Investment South Africa
means Broker Dealer Accounting system, the JSE system that facilitates trade confirmation, clearing and settlement of trades between member firms
BDA
and their clients as well as back-office accounting. It also compiles client portfolio statements.
The right or entitlement of a person, through ownership, agreement, relationship or otherwise, alone or together with another person to— (a) receive
or participate in any distribution in respect of the company’s securities; (b) exercise or cause to be exercised, in the ordinary course, any or all of
Beneficial interest the rights attaching to the company’s securities; or (c) dispose or direct the disposition of the company’s securities, or any part of a distribution in
respect of the securities, but does not include any interest held by a person in a unit trust or collective investment scheme in terms of the Collective
Investment Schemes Act, 2002 (Act No. 45 of 2002).
A person having a beneficial interest in a security but whose name is not entered in the register of members of a company as the holder of that
Beneficial Owner
security.
BOR Beneficial Ownership Register, the register of beneficial owners disclosed to Strate and provided to issuers and issuer agents.
Broker or
An authorised user, being a person authorised by an exchange in terms of the exchange rules to perform such securities services as the exchange
Authorised User or
rules may permit.
Member
Certificated
Securities which are not dematerialised, title to which is represented by a security certificate or other document of title.
Securities
Certificated
Registered holders of certificated securities.
Shareholders

83 | Corporate Actions Handbook

 Term Description

Capital Gains Tax that arises when an asset is disposed of on or after 1 October 2001 for proceeds that exceed its base cost. The relevant legislation
CGT
is contained in the Eighth Schedule to the Income Tax Act 58 of 1962.
CIPC Companies and Intellectual Property Commission established in terms of section 185 of the Companies Act.
Circular The circular posted by an issuer to its shareholders detailing the terms and mechanics of the corporate event.
CIS A Collective Investment Scheme established in terms of the Collective Investment Schemes Control Act 45 of 2002.
Common Monetary
Collectively, the Republics of South Africa and Namibia, and the Kingdoms of Lesotho and Eswatini.
Area
Companies Act The Companies Act, 2008 (Act No. 71 of 2008), as amended from time to time.

Company Register The register required to be established by the Commission in terms of section 187(4) of the Companies Act.
Competition Act The Competition Act, 1998 (Act No. 89 of 1998), as amended from time to time.
The Commission established pursuant to chapter 4, part A of the Competition Act or the tribunal established pursuant to chapter 4, part B of the
Competition Competition Act or the appeal court established pursuant to chapter 4, part C of the Competition Act or the Constitutional Court, as the case may be,
Commission and any competition authority in any other jurisdiction (outside of South Africa) whose approval or consent may be required for the implementation
of a restructuring or scheme of arrangement or any portion thereof.
A client or an account holder on whose behalf a client is acting, whose funds and uncertificated securities are under the control of a broker or whose
Controlled client
settlements take place via the CSDP of a broker.
Corporate Action or
An action taken by an issuer or any other entity or third party which affects the owners of securities in terms of entitlements or notifications.
Corporate event
CSA Central Securities Account
A person who constitutes, maintains and provides an infrastructure for holding uncertificated securities which enables the making of entries in re-
CSD
spect of uncertificated securities, and which infrastructure includes a securities settlement system.
CSDP or CSD A participant, as defined in section 1 of the Financial Markets Act, being a person authorised by a licenced central securities depository to perform
Participant custody and administration services or settlement services or both in terms of the central depository rules.
Debit balance of
A negative balance in a securities account or a CSA
securities
The broad category of debt securities based on certain common fundamental characteristics underlying the different types of securities issued. The
four categories are:
· Category 1 – discount securities;
Debt securities
· Category 2 –fixed coupon rate; fixed maturity date;
· Category 3 – variable coupon rate; fixed maturity date; and
· Category 4 –variable coupon rate; variable maturity date (optional).
Declaration
The firm intention announcement published on an exchange news service by the issuer via its sponsor.
Announcement

84 | Corporate Actions Handbook

 Term Description

Default option The election option announced by the issuer or issuer agent that is applied to the client’s holdings if the client fails to make an election.

Delisting The delisting of securities from an exchange.

Dematerialisation The process of converting certificated securities into uncertificated securities.
Documents of Title Share certificates, certified transfer deeds, balance receipts or any other documents of title to certificated securities acceptable to the issuer.
DRIP Dividend Reinvestment Plan

DWT Dividend Withholding Tax

Election deadline date 13h00 on RD or such other date and time as may be contained in the Announcement sent by Strate.

A corporate action that takes place with action required on the part of the holder of the security, and where the benefits that accrue to owners of
Elective event
securities are not automatically disbursed by the issuer but require an election to be made in line with the terms of the corporate action.
Excess application Unallocated offer securities applied for by holders in excess of their rights.
Exchange Control The South African Exchange Control Regulations, promulgated in terms of the South African Currency and Exchanges Act, 1933 (Act No. 9 of 1933),
Regulation as amended from time to time.
Exchange traded
A security listed on an exchange that tracks the performance of a specified security, basket of securities, or other asset(s).
funds
The date from which any transaction in that security excludes the right to receive entitlements relating to the relevant corporate action. Ex-date is
Ex-date
equal to LDT+1.
Financial Markets Act The Financial Markets Act, 2012 (Act No. 19 of 2012), as amended from time to time.
Financial market infrastructure and can include each of the following:
(i) licensed central securities depository
FMI (ii) licensed exchange
(iii) licensed clearing house
(iv) licensed trade repository
An entity incorporated outside South Africa, irrespective of whether it is— (a) a profit, or non-profit, entity; or (b) carrying on business or non-profit
Foreign company
activities within South Africa.
Shareholders that are registered in a jurisdiction outside of South Africa, or who are resident, domiciled or located in, or who are citizens of a ju-
Foreign shareholders
risdiction other than South Africa.
The Financial Sector Conduct Authority is a financial institutions market conduct regulator and a successor agency to the Financial Services Board
FSCA
in South Africa’s Twin Peak regulatory model.
The general meeting of shareholders to be convened for the issuer’s shareholders to consider and, if deemed fit, to pass, with or without modifica-
General meeting
tion, the resolutions required to give effect to the issuer’s corporate action.

85 | Corporate Actions Handbook

 Term Description

Income Tax Act The Income Tax Act, 1962 (Act No. 58 of 1962), as amended from time to time.

Interest payment An income payment due to the holders of securities.

ISIN International Securities Identification Number, a unique international securities identification number.
JSE Listings Require-
The listings requirements of the JSE.
ments
JSE means JSE Limited, registration number 2005/022939/06;

LDT Last day to trade, which is the last business day that anyone can trade on-market to qualify or participate in a corporate action.

LDT + X Last day to trade plus X business days, ‘X’ being the number of business days stipulated in an announcement or in the relevant Strate Directive.

Letter of Allocation A renounceable/non-renounceable nil paid letter of allocation issued by the issuer to shareholders, generally conferring on the holder thereof a
(LOA) renounceable right to subscribe for one offeror share for every one letter of allocation held on the relevant record date.
The document, as amended from time to time— (a) that sets out rights, duties and responsibilities of shareholders, directors and others within and
Memorandum of in relation to a company, and other matters as contemplated in section 15 of the Companies Act; (b) by which— (i) the company was incorporated,
Incorporation (MOI) as contemplated in section 13 of the Companies Act; or (ii) a pre-existing company was structured and governed before the later of— (aa) the
effective date; or (bb) the date it was converted to a company in terms of schedule 2 of the Companies Act.
A person approved under section 76 of the Financial Markets Act 19 of 2012, to act as the holder of securities or of an interest in securities on
Nominee
behalf of other persons.
A client or an account holder on whose behalf a client is acting, who has appointed his/her/its own CSDP to settle transactions in securities on his/
Non-controlled client
her/its behalf.
Non-resident A person whose normal place of residence, domicile or registration is outside of the Common Monetary Area.
Offer The offer by the offeror to qualifying shareholders, or their renouncees or transferees, to participate in the corporate action.
Off-market A transaction in securities which is effected without using an exchange.
On-market A transaction in securities which is effected through an exchange.
Payment date or PD The date on which entitlements are paid.
means the payment date plus X business days, ‘X’ being the number of business days stipulated in the announcement or in the relevant Strate
PD + X
directive;

86 | Corporate Actions Handbook

 Term Description

Information relating to an identifiable, living, natural person and where it is applicable an identifiable, existing juristic person including, but not
limited to-
(a) information relating to the race, gender, sex, pregnancy, marital status, national, ethnic or social origin, colour, sexual orientation, age, physical
or mental health, well-being, disability, religion, conscience, belief, culture, language and birth of the person;
(b) information relating to the education or the medical, financial, criminal or employment history of the person
(c) any identifying number, symbol, email address, physical address, telephone number, location information, online identifier or other particular
Personal Information assignment to the person;
(d) the biometric information of the person;
(e) the personal opinions, views or preferences of the person
(f) correspondence sent by the person that is implicitly or explicitly of a private or confidential nature or further correspondence that would reveal
the content of the original correspondence
(g) the views or opinions of another individual about the person; and the name of the person if it appears with other personal information relating
to the person or if the disclosure of the name itself would reveal information about the person.
Qualified Institutional Buyer; based on United States law and finance, it is a purchaser of securities that is deemed financially sophisticated and is
QIB
legally recognised by securities market regulators to need less protection from issuers than most public investors.
Record rate or RD The date on which the holdings, upon which a corporate action entitlement is based, are ascertained.
RD + X The record date plus X business days, ‘X’ being the number of business days stipulated in the announcement or in the relevant Strate Directive
RD - X The record date minus X business days, ‘X’ being the number of business days stipulated in the announcement or in the relevant Strate Directive.

Register The securities register of the issuer.

REIT Real Estate Investment Trust, a company that owns, operates, or finances income-producing properties;

Rematerialisation ‘Withdrawal’, as contemplated by the Financial Markets Act, being the process of converting uncertificated securities to certificated securities.
(a) A compulsory reverse substitution or a voluntary reverse substitution where a purchase or sale has been booked to a non-controlled client
and where the non-controlled client fails to meet its obligations, the broker assumes the obligation to settle the transaction through such broker’s
Reverse substitution
Participant, or (b) means a sale transaction that has been booked to a controlled client where the controlled client fails to meet its obligations, the
broker assumes the obligations to settle the transaction through such broker’s Participant.
SAMOS The South African Multiple Option Settlement system, the monetary payment system operated by SARB.
SARB The South African Reserve Bank
SARS South African Revenue Service
Scale back Reduction in number by a constant proportion across the board.

87 | Corporate Actions Handbook

 Term Description

Settlement or S Settlement date, the day on which a transaction in a particular security is settled through Strate.

Shareholder The holder of a share issued by a company and who is entered as such in the certificated or uncertificated securities register, as the case may be.

Sophisticated Investor Letter; a sophisticated investor is an investor with a special status under financial regulation laws. Generally, accredited
SIL investors include high-net-worth individuals, banks, financial institutions, and other large corporations who have access to complex and higher-
risk investments such as venture capital and hedge funds;.

Securities lending and borrowing arrangement in terms of which a person (lender) lends securities to another person (borrower) subject to
the borrower agreeing to return the loaned securities within an agreed time period. Once the loaned securities have settled, ownership of the
SLB securities is transferred to the borrower. The borrower has the right to sell or on-lend the securities during the life of the loan. In return, the
borrower agrees to compensate the lender for any corporate events in respect of the securities which that lender would have been entitled to
receive during the period of the loan had the arrangement not been entered into.

SMPG Securities Market Practice Group

SOR Securities Ownership Register

STP Straight through processing of transactions electronically, as opposed to manual intervention.

Strate Strate (Pty) Ltd, registration number 1998/022242/07;

STT Securities transfer tax applicable in terms of the Securities Transfer Tax Act No. 25 of 2007 or any replacement Act.

SWIFT Society for Worldwide Interbank Financial Telecommunications

Transfer secretary An entity performing transfer secretarial services, also referred to as issuer agent

TRP Takeover Regulation Panel established in terms of section 196 of the Companies Act No 71 of 2008 as a juristic person.

The record of uncertificated securities administered and maintained by a participant or central securities depository, as determined in accordance
Uncertificated
with the rules of a central securities depository, and which forms part of the relevant company’s securities register established and maintained in
Securities Register
terms of part E of Chapter 2 of the Companies Act.

Unlisted security A security that is not listed on any exchange.

88 | Corporate Actions Handbook

10. ACKNOWLEDGEMENTS 1 A2X Exchange Brett Kotze; Gary Clarke
Monica Leshabane, Rene van
2 Absa CSD Participant
Rensburg, Abdul Banoo
The following people and institutions are acknowledged for their
3 Allan Gray Asset manager Zunaid Saloojee; Grant Godsell
constructive engagement and views without which a detailed reflection
Johan van Tonder; Gill Raine,
of the market would not have been possible. I want to sincerely thank 4 ASISA Association
Paul Ferreira, Alex Hunt
the following people who have made this project possible and who have
5 Cape Town Stock Exchange Exchange Estelle de Jager
supported me on this journey.
Saikiran Pinnapala; Mateusz
6 Citibank CSD Participant
Madetko; Sonia Zwolinska
A special word of thank you to Beverley Furman, Head of Operations and
7 Computershare CSD Participant Mubeen Akojee; Nazeer Sali
Change at Strate who commissioned this project and without whose help
and assistance this final product would not have been possible. It has been 8 Computershare Transfer secretary Gavin Davis, Bruno Billings
an immense pleasure working with you Bev – thank you for your support, 9 CTSE Registry Services Transfer secretary Estelle de Jager
guidance and assistance. To Margaret Mcrae, Charmaine Nardhamuni, Karen Edwards; Vicki Kruger;
10 Curo Fund Services Administrator
Jesca Tanyanyiwa and the Corporate Actions team at Strate, your passion Melissa Londt
and commitment to corporate actions is a joy to experience. To Strate 11 Deutsche Bank Sponsor Letitia Chiman
management and staff, I have felt welcome from the first day, thank you Institute of Stockbrokers of
12 Association Erica Bruce
and long may this culture endure. South Africa
Monique Otto; Monica
To Brett Kotze - a legend in his own time in the custody industry - whom 13 Investec Sponsor Mianowski; Masesthaba
we all know and respect, thank you for your insights and for your valuable Mabaso
input and comments. 14 Java Capital Sponsor Jean Tyndale-Biscoe
Edzard Erasmus; Moerida
All the people connected to the custody industry who have given me 15 JSE Investor Services CSD Participant Israel; Thabo Mphego; Thabiso
their valuable time – you have been phenomenal, and it was a pleasure Monyane
interacting with each of you. Your insights and knowledge of this industry 16 JSE Investor Services Transfer secretary Hloni Mohlala
is remarkable. The insights gained from all over the industry will help us to Annalie De Bruyn; Chris Grove,
17 JSE Exchange
all move in one direction and address the challenges our market faces. A Carike Palmer, Sharon Nair
BIG thank you to all the institutions and people listed below for your time 18 M&G Asset Management Asset manager Shireen Rawoot; Marc April
and insights! 19 Maitland Fund Services Administrator Paul Ferreira
Gillian Kisbey-Green; Toni-Lee
20 Naspers Issuer
To Gillian Jones, for your incredible attention to detail and language skills, Lutz
and Max Ndlovu, for your graphic design skills and abilities, you have 21 Navigare Broker Erica Bruce
excelled yourself. 22 Nedbank Capital Sponsor Michelle Benade
23 Nedbank CSD Participant Njabula Maseko
To the various colleagues in the industry for your unwavering support and
Nedbank Private Wealth Sulette Jenner; Anna-Mart
encouragement – you know who you are, thank you. Marcus Steyn. 24 Broker
Stockbrokers Oberholzer

89 | Corporate Actions Handbook

 Ninety-One Asset
25 Asset manager Alex Hunt; Faika Solomon; Renaldo Erasmus; Shameez Eksteen
Management
26 Northam Platinum Issuer Trish Beale
27 One Capital Sponsor Taryn Carter
28 Prosus NV Issuer Gillian Kisbey-Green; Toni-Lee Lutz
29 Questco Sponsor Sharon Owens; Done Hattingh
30 Resilient Properties Issuer Hluke Mthombeni
31 Reunert Ltd Issuer Karen Louw
32 RMB CSD Participant Sanjeev Jayram
33 RMB Sponsor Karien Strydom
34 Sanlam Ltd Issuer Atang Matebesi; Sana-Ullah Bray
35 Sappi Ltd Issuer Ami Mahendranath
36 Spur Corporation Issuer Donfrey Meyer
Standard Bank
37 Broker Devesh Manilal; Kabelo Lebepe; Kim Benjamin
Stockbrokers
38 Standard Bank CSD Participant Dirk Redecker
39 Standard Chartered CSD Participant Jody Kleinhans, Felicity Radebe, Thandeka Mpungose, Pooja Sita
40 STANLIB Asset manager Jerilee Stolz; Masenki Khomba; Tatenda Mukurati; Keitumetze Moiloanyane
Beverly Furman; Andrew Henderson; Beverley Hickman; Samantha Cooper; Margaret Mcrae; Charmaine
41 Strate CSD
Nardhamuni; Jesca Tanyanyiwa; Carol Thorson; Steven Ingleby; Max Ndlovu
42 Truworths Ltd Issuer Chris Durham
43 Vukile Property Fund Issuer Johan Neethling
44 Vodacom Issuer Karen Robinson; Sameera Khan; Mustafa Bagus; Lebo Ngcobo
45 Werksmans Attorneys Legal Kevin Trudgeon
46 ZAR X Exchange Graeme Wellstead

90 | Corporate Actions Handbook

11. ANNEXURES
https://www.jse.co.za/sites/default/files/media/documents/listing-applications/
1. Schedule 2 Form H
Schedule%202%20Form%20H%20Final%20Feb%202021%20CLEAN.pdf
Event Classification : https://www.strate.co.za/wp-content/uploads/2022/12/
2. Event Classification
Mandatory.pdf

https://www.strate.co.za/wp-content/uploads/2022/08/Directive-SC.4-Processing-of-
3. Strate Corporate Action Directives
Corporate-Actions-Equity-Securities-JSE-and-Unlisted-Securities.pdf

Spreadsheet template : https://www.strate.co.za/wp-content/uploads/2022/12/

Spreadsheet-Template.xls
4. Spreadsheet Samples Partial Offer spreadsheet :https://www.strate.co.za/wp-content/uploads/2022/12/
Partial-Offer-spreadsheet.zip
Balance of payments : https://www.strate.co.za/wp-content/uploads/2022/12/BOP.zip

5. Companies Act 71 of 2008 https://www.gov.za/sites/default/files/gcis_document/201409/321214210.pdf

6. Financial Markets Act 19 of 2012 https://www.gov.za/sites/default/files/gcis_document/201409/36121a.pdf

https://www.jse.co.za/sites/default/files/media/documents/2019-04/JSE%20
7. JSE Listings Requirements
Listings%20Requirements.pdf

https://www.jse.co.za/sites/default/files/media/documents/2021-02/The%20Issu-
8. JSE Issuer Regulation Guide Feb 2021
er%20Regulation%20Guide%20Feb%202021_0.pdf

Impact of the Shareholder Rights Directive II –

9. https://www.strate.co.za/wp-content/uploads/2022/12/SRDII-1.pdf
PWC July 2020

https://www.smpg.info/fileadmin/documents/1_Corporate%20Actions%20WG/A_
10. SMPG Event Template 2022
Final%20Market%20Practices/1_SMPG_CA_GMP_Part_1_SR2022_v1_0_ISO20022.pdf

Why do public companies go private – Andile

11. https://ssrn.com/abstract=4215503
Nikani and Mike Holland

12. References https://www.strate.co.za/wp-content/uploads/2022/12/References.pdf

Questions during engagements with

13. https://www.strate.co.za/wp-content/uploads/2022/12/Questions.pdf
stakeholders

91 | Corporate Actions Handbook

92 | Corporate Actions Handbook