BOWMANS SOUTH AFRICA: JSE Consultation Paper to Reform Listings Framework
By Mili Soni (Senior Associate) and Charles Douglas (Co-Head of M&A), Bowmans, Johannesburg, South Africa. Bowmans is the 3rd Largest Law Firm in Africa as ranked in Africa Top 50 Law Firms in 2022, with over 400 specialist lawyers providing integrated legal services throughout Africa from eight offices (Cape Town, Dar es Salaam, Durban, Lusaka, Johannesburg, Kampala, Moka and Nairobi ) in six countries.
As part of the JSE’s active focus on remaining relevant and competitive in order to retain and attract more listings and capital markets activity, the JSE has released a further consultation paper considering the following proposals:
- Market segmentation: It is proposed that mid/low-cap companies be provided with regulatory relief by splitting the current two-tiered equities market from the Main Board and AltX into two segments at Main Board level and establishing a growth board (for SMEs to have an effective and appropriate level of regulation depending on the market cap and level of liquidity concerned).
- Dual class shares: The introduction of dual class shares is being proposed (i.e. low or high voting shares, being shares of different classes holding different numbers of votes per shares).
- Technology Board: The JSE would like to establish a Technology Board to invite tech IPOs to take place through more inclusive and adaptable listing rules to support technology and innovation enterprises. It is anticipated that this would allow, inter alia:
- dual class share structures;
- no profit or qualified audit opinion over the last two years;
- a lower threshold for subscribed capital;
- a lower level of equity shares in issue and a lower free float threshold; and
- broader ranges for cat 1 and 2 transactions and issue for cash authorities.
- Free float: The 20% free float threshold for a Main Board listing is a deterrent to listing and may be reconsidered, alongside reconsidering public spread criteria as applied to institutional investors.
- Depositary receipts: The JSE would like to allow African listed companies to access the JSE through depositary receipts to gain exposure to African listed securities.
- Simplification of the JSELR: The aim is to use plain language and reduce the volume of the JSELR.
- Auditor accreditation: This may be removed for applicants whose auditors are regulated by the Independent Regulatory Board for Auditors (IRBA).
- REIT expansion: The JSE is considering expanding its REIT offering beyond property (e.g. to include infrastructure).
- Review of SPACs: Further alignment with international leading markets is sought to ensure the attractiveness of SPACs.
- Financial Reporting Disclosures: The JSE aims to simplify these.
- Actively Managed Certificates and Actively Managed Exchange Traded Funds: Expansion of specialist securities offerings is in the pipeline.
- Specialist securities rejuvenation project: The JSE intends to remove administrative provisions and align the provisions with international best practice going forward.
- Repositioning the BEE segment: Simplification of the BEE Listings Requirements is sought to allow BEE companies to list on a stand alone basis, where trading will only be allowed between eligible BEE participants.
- Review of Secondary Listings Framework: The JSE would like to expand its list of approved and accredited exchanges to facilitate these (e.g. the Singapore Stock Exchange was added to the list in 2021 and also qualified for the fast-track secondary listing route).
The JSE invites comments by Monday 20 June, after which it will engage with the Financial Sector Conduct Authority (FSCA) for approval.
The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any subject matter. Follow this link to read the Original Article published in the Bowmans Website. The Copyright © for the article belongs to Bowmans and the Authors. For any further information or clarifications on the above matters, please contact: Charles Douglas and Mili Soni.
CR Advocates LLP is the Kenyan Law Firm to Watch in 2023 after Epic 2022
The year 2022 was a year of many firsts for CR Advocates LLP as the firm defied every theory of law firm growth to emerge as a top mid-size firm in Kenya. In the wake of its rise to the top, CR Advocates LLP scooped two top legal awards and earned its place in the law listings in the country among the Top 20 Law Firms in Kenya.
First, CR Advocates LLP as a firm came of age by emerging as the top recommended law firm in Kenya by highly-rated The Lawyers Global. CR Advocates LLP was the Winner of the Legal Award of The Lawyers Global ranking in Kenya based on reviews by clients and independent analysis by the directory. It beat top tier firms including Gikera & Vadgama Advocates and Walker Kontos Advocates to scoop the coveted award.
Second, CR Advocates LLP made a debut into THE LAWYER AFRICA Top 100 Law Firms in Kenya List which is based on headcount and reputation for excellence. The firm emerged among the TOP 20 LAW FIRMS IN KENYA by headcount having two dozen fee earners within its ranks. In this category, CR Advocates LLP stands shoulder to shoulder with many seasoned law firms including Mohamed Muigai LLP, Robson Harris LLP and Mboya Wangong’u and Waiyaki Advocates.
Third, CR Advocates LLP was shortlisted for the Nairobi SME Law Firm of the Year Award at Nairobi Legal Awards. The award recognizes the top mid-size law firms in the country. As if that was not too much already, CR Advocates LLP beat a dozen established law firms to emerge as the overall winner of the prestigious award with Igeria & Ngugi Advocates emerging as 1st Runners Up and McKay Advocates as 2nd Runners Up.
The overall result is that the firm of CR Advocates LLP begins the year 2023 as the top law firm in Kenya being the reigning award winner of both SME Law Firm of the Year Award 2022 and The Lawyer Global Legal Award Kenya 2022. In addition, the firm is now confirmed as being amongst the top 20 law firms in Kenya by THE LAWYER AFRICA.
The quick-paced upward trajectory of CR Advocates LLP which has earned it the reputation of disruptor in the corporate and commercial law scene is attributable to excellent client service and consistently efficient, reliable and cost-effective legal services. The firm boasts over 25 legal professionals most of whom are leaders and rising stars in their respective specialist practice areas.
CR Advocates LLP clientele ranges from established multinationals to state corporations and emerging SMEs and Startups as well as individuals clients. Founded in 2013 by Princess Caroline Mutisya, one of Kenya’s top Real Estate, Commercial and Corporate Law Attorneys, the firm is celebrating its 10th Anniversary this year as it pivots to embrace its new status as a leading law firm in the country and to set the stage to dominate the legal scene for the next decade.
There is no doubt CR Advocates LLP is the law firm to watch this year as every move the firm’s Managing Partner Princess Caroline Mutisya and her team makes is bound to shake the legal sector. The firm is admittedly a case study for legal services sector analysts seeking to seeking to unearth the secret of building a top law firm from the bottom up within a decade.
Bowmans Expands its Tax Practice in East Africa
Bowmans has made a substantial investment in its tax capacity in East Africa by expanding its Tax Practice in Nairobi with recruitment of four (4) associates. Senior Associates, Fredrick Ogutu and Patience Mbugua, joined the firm on 1 May 2022. This is in addition to Associates Lynet Mwangi and Bernard Kirii who joined the firm on 1 March 2022, adding further depth to the firm’s tax service offering.
Before joining Bowmans, Fredrick was a manager in the tax and legal department of audit firm Deloitte & Touche LLP. He has extensive experience in providing tax advisory on both local and international/cross – border tax issues, tax restructuring, tax support in mergers and acquisitions, tax due diligence, tax dispute resolution, tax compliance and assessment of tax risks across various sectors.
Patience Mbugua previously worked in the tax dispute resolution department of the Kenya Revenue Authority (“KRA”), where she gained considerable experience in handling tax disputes involving taxpayers in various sectors. Prior to that, she worked for an audit firm, PricewaterhouseCoopers (PWC) and has considerable experience in providing a wide array of tax services including direct and indirect tax compliance, tax reporting, tax advisory, KRA audit support, tax dispute and tax litigation.
Lynet previously worked in the tax and regulatory services department of audit firm, KPMG East Africa, as well as Dentons Hamilton Harrison & Matthews. She has wide experience providing tax services, including tax advisory and structuring, KRA audit support, tax dispute resolution and regulatory compliance. Bernard Kirii joined Bowmans from KPMG East Africa, where he specialized in tax dispute resolution services for clients; tax optimization; tax restructuring; and tax advisory services, including mergers and acquisitions.
According to Bowmans, the expanded tax team helps expand the firm’s tax offering especially by providing additional assistance in mergers and acquisition transactions, including undertaking tax due diligence reports; tax restructuring and optimization involving both local and international/cross border entities; assistance with KRA audits; and conducting tax health checks on all tax heads. These services are in addition to the current tax advisory and tax dispute resolution services provided by Bowmans.
“We are pleased that the team has chosen Bowmans as their new home, and we are confident that they will enhance the tax service that we offer our clients across our geographical footprint,” said Bowmans Tax Partner and Head of Tax Practice Alex Mathini. Alex has been ranked by Chambers & Partners for the last six (6) consecutive years and Chambers Global Guide 2022 ranks Alex among the Top 2 Lawyers in Tax Law in Kenya.
In addition to Alex and the four new associates, Bowmans Tax Practice in Nairobi includes Andrew Oduor (Tax Partner), Samuel Githanda (Senior Associate), Nelly Chepkoeach (Associate) and Maurice Muma (Associate). Andrew Oduor is a tax practitioner of sixteen (16) years who is active in tax litigation, tax compliance and tax advisory services. He is the Kenyan contributor to an annual Global publication by Thomson Reuters Practical Law on Tax Litigation in Kenya.
ALN Kenya: Banks’ Right to Set Off Allowed against Accounts held by Related Companies
By Sonal Sejpal and Wangui Kaniaru, Partners | ALN Kenya | Anjarwalla & Khanna, Kenya’s Member firm of ALN, An Alliance of Leading Corporate Law Firms with 74+ Partners and 290+ Lawyers in 16 Countries.
Banks often have standard terms and conditions with borrowers which entitle them to set off a borrower’s debts against amounts held in different accounts of the same borrower. The right to set off is typically provided for in well drafted loan documents but it is also an implied right that bankers have under banking law. In the context of a bilateral loan agreement, the implied right of set off does not extend to the bank accounts of anyone other than the borrower. This is also consistent with the common law principle of privity of contract which essentially means that a contract cannot bind anyone other than the parties who made the contract.
In a recent landmark ruling in the case of Embakasi Management Limited & 8 others v Imperial Bank Limited (In Receivership) & another  KECA 7 (KLR), the Court of Appeal applied a rather interesting exception to the doctrine of separate legal personality and privity of contract. It held that a bank may exercise rights of set off against related companies on the basis of common directorship and common shareholding, even though the related companies are not parties to the set off agreement between the bank and the borrower. The precedent-setting case reflects a dramatic departure from the standards applied when piercing the corporate veil. Previously, fraudulent or improper conduct was used as the trigger for piercing the corporate veil. This alert examines the Court’s ruling and considers its impact on corporate borrowers.
The nine Appellants were private limited liability companies which were related to Farm Africa Mills Investments Limited (the Borrower) by virtue of common shareholding and directorship, and held various current and fixed deposit accounts with Imperial Bank (in Receivership) (the Bank). The Borrower took out a hire purchase facility with the Bank. At the time of taking out the hire purchase facility, a Director of the Borrower (who was a common director and shareholder in all the related companies) signed a set off form allowing the Bank to set off any debts due from the Borrower, against the accounts of its related companies. The nine related companies were not party to the agreement with the Bank and other directors and shareholders in those companies claimed that they had never expressly agreed to the same.
The Borrower later defaulted on its payment obligations and because of the set off provision, the Bank proceeded to set off the Borrower’s debts against balances held in the accounts of the related companies. The related companies sued the Bank and the High Court ruled in favour of the Bank. The matter subsequently proceeded to the Court of Appeal.
The Appellants sought to have the High Court’s ruling struck out at the Court of Appeal. The basis of the Appellant’s argument was that the High Court had no legal grounds for upholding the Bank’s decision to set off the amounts due to it by combining and consolidating the accounts held by the related companies.
In a precedent setting decision, the Court of Appeal upheld the High Court ruling in favour of the Bank. We summarize some of the key insights from the decision below:
- In a case where a set off form is signed by one company which confirms that monies held by other related companies can be applied towards the debt due from it to the bank, the bank can go behind the corporate veil of the borrower to determine who controls it and which other companies are controlled by the same person(s).
- Further, the Appellants’ argument that they were not party to the set off agreement because they never signed it could not be allowed to stand, as they were expressly committed to the said agreement by their common director and shareholder. This is despite the fact that he was not the sole director or shareholder of the companies. The Court stated that the Appellants could not rely on the corporate veil to avoid their legal and contractual obligations having been found to be related companies to the Borrower.
- The Court of Appeal reiterated the cardinal principle that a company is distinct and separate from its shareholders citing the famous case of Salomon vs Salomon and Co. Ltd (1897) AC 22 HL but went on to qualify this position by stating that the corporate veil can be lifted if there is evidence that it is being used to shield fraud or improper conduct by the shareholders or controllers of a company. However, the decision of the Court of Appeal in the Embakasi case does not refer to any fraud or improper conduct on the part of any person, with the consequence that this ruling is a precedent from the position that the mere non-payment of debt by a borrower is sufficient to lift the corporate veil.
This decision is precedent setting and will send shockwaves in the debt and security market in Kenya. Even though the Court of Appeal’s rationale was premised on the fact that the set off agreement contained an express provision allowing the Bank to set off any debts due from the Borrower against the accounts of its related companies, it did not consider the absence of agreement of the related parties to the set off provision as relevant. The only fault of the Borrower here appears to be a failure to pay as there is no reference in the ruling to there being any evidence of fraud or other misconduct. The case, therefore, presents uncertainty for borrowers, as well as a significant increase in the risk of related corporate borrowers.
In the past, the Courts have been reluctant to lift the corporate veil unless it is found that the company was a mere instrumentality or alter ego of its directors and/or shareholders in any misconduct or if it was found that maintaining the corporate veil would sanction fraud or injustice.
The Court of Appeal, in this case, said that the Appellants could not argue that they were not party to the loan and set-off arrangement between the Borrower and the Bank because of the common director and shareholder, alluding to the analogy that it was akin to alleging that the right-hand does not know what the left hand is doing yet they are part of the same body and mind.
The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any subject matter. Follow this link to read the Original Article published in the ALN Website. The Copyright © for the article belongs to ALN and the Authors. For any further information or clarifications on the above matters, please contact: Sonal Sejpal or Wangui Kaniaru.
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