The Zimbabwe Stock Exchange (ZSE) has instituted bold reforms to its listing requirements which will, among other things, bar the appointment of executive chairpersons of the board and compel listed companies to make additional disclosures on executive directors and individual independent directors’ remuneration.
Chris Muronzi/Melody Chikono
Under the new rules, companies will also have to provide quarterly financial statements.
The new listing requirements were published in a Government Gazette last week under Statutory Instrument 134 of 2019 in a bid to enhance transparency and accountability in the governance of listed companies.
Listed companies will now have to produce financial statements every quarter in addition to the half-year and full-year financials and have been barred from either creating or appointing executive chairperson on their boards.
The move is seen bolstering better corporate governance systems in the economy.
The new rules, which were last reviewed in 2002, have been necessitated by significant changes in the local and foreign capital markets which had not been accommodated by the current rules.
Under the new rules, companies will now have to explain in their preliminary reports why they failed to publish their results within three months of the reporting date.
Under the amended rules, the ZSE may require an issuer to disclose information at the company’s disposal as the ZSE may determine.
Should the exchange be satisfied that the disclosure of the information to registered holders of the securities in question will be in the public’s interest, the ZSE may by notice in writing require the company to disclose the information within the period specified in the notice.
The ZSE may also require an issuer to publish or disseminate any further information not specified in these rules in such form and within such period as it considers appropriate.
“ If the company fails to comply with such a requirement, the ZSE may itself publish the information, after giving the company an opportunity to make representations in the matter, publish the information, and may recover the cost of publication from the company,” reads part of the document.
“ Within 45 days after the end of the first and third quarters of each financial year, issuers must publish their interim reports on their websites and submit the reports to the ZSE for publication on the ZSE Data Portal. Where an issuer fails to publish the results in terms of subsection (5), the issuer shall be liable to a penalty prescribed in Twenty-sixth schedule which shall be payable within 30 days from the due date.”
If an issuer has not distributed annual financial statements to all shareholders within three months after its financial year-end, it must publish in the press and distribute to all shareholders a preliminary report, in accordance with the times prescribed in Section 35, even if the information is unaudited.
Under the new amendments, if the ZSE determines that a company listed on its exchange has contravened these rules, it may, “suspend, terminate, censure the issuer by way of a written warning, or by public censure and publication, or both by notification seven days before”.
The rules also empower the ZSE should it feel that a listed company or any of its directors have contravened listing rules to “censure the company or the directors by means of private censure , censure the issuer or the directors or both, by means of public censure or disqualify the issuer’s directors from holding office as director of a ZSE-listed company for such period as it may determine”.
Also the ZSE has been empowered to take strong action such as terminating the accreditation of a sponsoring broker and remove the sponsoring broker from the ZSE list of sponsoring brokers should they be found to have not complied with set rules.
Additionally, disclosures of directors remuneration will be broken down to reflect each member’s annual payments. Chief executives who step down from their position have also been barred from quickly occupying the position of chairman until after two years have lapsed.
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.
“The chief executive officer of an issuer must not also hold the position of chairperson of the board of directors and may not be elected chairperson of the company’s board of directors within two years after leaving the post of chief executive officer,” the rules say.
The appointment of the board chairperson and the CE of a company must be done by the board.
“The total number of options granted or issued may not, except in the case of a mineral company as defined in Part XIII, exceed 20 per centum of the listed company’s issued capital unless offered to all shareholders in proportion to their existing shareholdings. If the committee considers that a listed company has contravened the listing requirements in any way, it may (without derogating from the powers of suspension and/or termination of the committee), censure that company by way of a written warning, or by public censure and publication,” part of the instrument reads.
Rights offers priced at above the ruling price require the approval of the committee.