THURSDAY, 11.00AM
The trade and industry department’s standing advisory committee on company law has called for public debate on the issue of low-voting N shares, with possible changes to the Companies Act and the Johannesburg Stock Exchange rules in the pipeline.
N shares are a type of security similar to ordinary shares, but with lower (usually 1%) voting rights. They have increased in popularity since the JSE banned non-voting shares in 1995. Companies use N share issues to increase their capital and equity base without increasing voting rights, thereby maintaining control despite an increased equity base. Critics argue that this is detrimental to the entry of new foreign investment.
Supporters of N shares argue that restricting or abolishing N share issues could slow future black empowerment. N shares were recently used ny New Africa Investments Limited to raise capital from small investors while retaining corproate control.
The standing committee has called for public responses until August 31, after which, if public opinion favours scrapping N shares, the committee will make recommendations to Trade and Industry Minister Alec Erwin. A committee member said public opinion is being canvassed on the issue “to open up a debate which already exists”.