New ZSE Listings Rules abolish executive chairmanship; reporting to be done quarterly

 New ZSE Listings Rules abolish executive chairmanship; reporting to be done quarterly
Published: 09 June 2019
New Zimbabwe Stock Exchange Listing Rules will now prohibit the position of executive chairman as part of efforts to promote good corporate governance while companies will now be compelled to publish first and third quarter results.

In amendments to the rules, which were recently gazetted, ZSE is seeking enhance transparency, disclosures and accountability in the governance of listed companies in order to build up confidence in the manner in which the market is regulated and operated. Additionally, the revisions also aim to increase the protection of minority shareholders and improve the attractiveness of the market to dually listed companies.

The rules had not been comprehensively reviewed since 2002 but since then a lot of changes have occurred in terms of the legislative, economic and technological environment. Some of the changes which have occurred include; changes in reporting and functional currency in Zimbabwe in February 2009 and further affirmed the use of multiple currencies in policy pronouncements issued in early 2014. The current ZSE Listings Rules refer to the ZWD in certain parts thus making them redundant in light of the policy pronouncements.

There was also need to ensure that the ZSE rules are not in conflict with any other legislation that affects foreign investors as shareholders in listed companies.

Among some of the policy misalignments, the ZSE recognized the legislative loophole created by delistings through Schemes of Arrangement. Through legislation in the Companies Act that is sanctioned by the High Court, companies that choose to delist through schemes of arrangement evade any oversight from the ZSE on payments made to minority shareholders after the delisting. The bourse also pointed out was the need for clarity on the timeframes and shareholder actions when a listed company is placed under judicial management or declared insolvent.

The new rule comes amid general concern that a lot of minority investors are disenfranchised whenever a company delists from a stock exchange as there is no specific law that deals with rights of a shareholder after such an occurrence. In a direct sense, nothing happens to a shareholder when delisting occurs.

The shareholder still owns the same percentage of the company as before. However, in financial reality, the delisting of a company is usually a huge negative if there is no facility put in place. Most minority shareholders end up holding non-tradable shares while independent valuations are difficult to obtain. Companies that have delisted through schemes of arrangement include PG Industries and David Whitehead.

Some of the key amendments to the rules highlighted by the ZSE focus on the issue of financial statements and the audit process. This includes an increased reporting period frequency for interim reports which will require listed companies to publish, first and third quarter accounts in addition to half and full year reports. The preliminary and interim results both have to be reviewed by the issuers external auditors. Additionally, companies will have to explain in their preliminary reports why they failed to publish their results within 3 months of the reporting date.

The rest of the key amendments focus on corporate governance and the rules pertaining to directors and boards. Executive chairmanship has now been abolished and additionally the audit committee must be chaired by an independent non-executive director. On the ZSE currently, Meikles Limited is the only one with an executive chairman; John Moxon.

There will also be a two year cooling off period before a former CEO can assume a position on the board. This has happened in several companies such as BAT Zimbabwe where Lovemore Manatsa became chairman after his retirement as CEO of the company.

Additionally, all remuneration paid to the director whether executive or non-executive must be disclosed individually in the financial statement as opposed to the current practice of an aggregate amount for all the directors. Companies applying for listing will be required to disclose payments made to the directors as whole and to each individual director or proposed director during the last two financial years.

To strengthen its oversight on the market the ZSE will be able to disqualify any delinquent directors from holding the office of director in a listed company. Besides disqualification, the ZSE will also be able to name and shame the director concerned by publicly stating that the directors' retention of office is prejudicial to the interests of shareholders. The ZSE will also receive notifications of any changes in the contract between the listed company and its independent external auditors including appointment, termination and resignation of the auditors.

ZSE chief executive Justin Bgoni said the revised rules are a product of wide consultations with various stakeholders which include Government, the Securities and Exchange Commission, Issuers, investors and market participants.

"We have attempted after making wide consultations with the market to improve these essential pillars of corporate governance being fully aware that a market with well governed publicly listed companies has greater chances of drawing investments in its direction," he said.
- FinX
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