When a company delists, very often shareholders are left in the dark.
We have all seen companies delist from the JSE Limited (the new name for the JSE Securities Exchange). They delist for many reasons, and reading the back pages of any December issue of the JSE Bulletin is most illuminating because it carries a record of all the companies that have delisted over the past 10 years.
The most frequent reason to delist is probably the termination of a listing as a result of a scheme or arrangement in which shareholders are paid out cash or other shares. A second common form takes the shape of an offer to minorities that is made once the terms have been agreed at a meeting of shareholders.
Not that long ago there was a spate of delistings as a result of the unbundling of assets, also known as a distribution in specie, when shareholders received shares in the underlying investments. In all of the cases mentioned above, shareholders have detailed information about what became of their investments before the companies delisted from the JSE.
Then there are the very untidy delistings such as Telemetric in April 1999 and Charter a year earlier. These companies had secondary listings on the JSE which were terminated when the companies felt that the expense of the listing was just not justified by the number of shares held in South Africa. The companies are still very much alive and well, but just no longer quoted on the JSE. They represent the ultimate nightmare for shareholders who elected to retain their shares as it is very difficult to deal with them now.
A horrible group of miscreants are companies that just seem to quietly disappear without so much as a "by your leave". The worst offenders here are those that are delisted by the JSE itself as a result of "failure to comply with JSE listings requirements" - very often shareholders never hear from these companies again. It would be very interesting to know what happens to these companies, the directors and the assets after this point. They are still public companies with shareholders, but all too often that is the end of the story. No real shareholder protection appears to exist in such cases.
There are clearly cases in which companies delist because they have failed as financial ventures and this is just bad luck and is a possibility in any investment.
Delisting as a result of "voluntary liquidation" creates scope for a real black hole where companies just disappear beneath the radar. Once delisted, the shareholders have no JSE protection and rely on the Companies Act to look after their rights. The JSE does still have a role to play in some of these cases - a role at which it is very good. When the listing of a company on the JSE is terminated and there is any prospect of shareholders extracting additional value, the JSE creates "frozen" positions in the books of its members - the stockbroking community. Any payments that are declared by the company to the JSE will result in the cash being correctly allocated to the "frozen positions" in the brokers' books. Own-name shareholders should also receive the cash payment directly from the company or its transfer secretary.
Honourable behaviour
Some companies that probably could delist due to ceasing operations or unbundling, elect the honourable behaviour of remaining listed. This affords shareholders the opportunity of either waiting for the final payments and holding the shares or the selling them on the market at any time. Gencor and Wooltru are two good examples of this approach being adopted. Yes, the company retains the expenses of being listed, but this is a small price to pay knowing that you are treating shareholders correctly.
The Premier Group was delisted in October 1999 as a result of a voluntary winding up. The company treated shareholders correctly and paid out four distributions culminating in the final payment of 21 cents a share in March 2005, before giving up the ghost six years after delisting. Rand Mines made a number of payments after it vanished from the JSE in 1997. Safmarine and Rennies also did itself proud by terminating its listing in July 2000 and paying out a number of distributions - and there is still a little cash in the till.
- David Sylvester is the chairman of the Shareholders' Association, telephone (021) 686 7567.
This article was first published in Personal Finance magazine, 4th Quarter 2005. See what's in our latest issue