{"id":707048,"date":"2023-07-26T15:37:35","date_gmt":"2023-07-26T13:37:35","guid":{"rendered":"https:\/\/businesstech.co.za\/news\/?p=707048"},"modified":"2023-07-26T15:37:35","modified_gmt":"2023-07-26T13:37:35","slug":"new-laws-to-help-businesses-in-south-africa-get-funding-are-coming","status":"publish","type":"post","link":"https:\/\/businesstech.co.za\/news\/business\/707048\/new-laws-to-help-businesses-in-south-africa-get-funding-are-coming\/","title":{"rendered":"New laws to help businesses in South Africa get funding are coming"},"content":{"rendered":"\n

\u200b\u200b\u200b\u200b\u200b<\/em>The Prudential Authority (PA) has published draft proposals to amend the laws on commercial paper issuance for public comment. <\/p>\n\n\n\n

A commercial paper is a type of unsecured, short-form debt, and is mainly used by large companies to pay their payrolls, inventories and other short-term liabilities. <\/p>\n\n\n\n

According to Dawid de Villiers, Karen Couzyn and Mateen Memon from Webber Wentzel, the new amendments will include new definitions, a minimum size for issuers and a new regulatory system. <\/p>\n\n\n\n

The PA said that draft amendments to the Commercial Paper Exemption Notice, 1994 (CP Exemption Notice) will improve the safety and the health of the commercial paper market. <\/p>\n\n\n\n

The CP Exemption Notice looks at the provisions of section 11(1) of the Banks Act, which states that no person may conduct the “business of a bank” unless they are a public company and registered, according to the Banks Act, as a bank.<\/p>\n\n\n\n

The PA can also designate certain actions as not being the “business of a bank” for purposes of the Banks Act. <\/p>\n\n\n\n

One such activity is taking money from the public against the issue of commercial paper as per the CP Exemption Notice. <\/p>\n\n\n\n

“The CP Exemption Notice aims to enable corporates to access the domestic capital market by issuing commercial paper to raise short-term funding from other institutional investors to fund their business\/operational activities,” the experts said. <\/p>\n\n\n\n

Currently, the CP Exemption Notice states that a commercial paper is largely a written acknowledgement of debt. <\/p>\n\n\n\n

This applies regardless of whether the maturity is fixed or notice-period based, whether the rate is fixed or floating, and debentures (debt instruments not backed by collateral) or any interest-bearing written acknowledgement of debt has been issued for a fixed term. <\/p>\n\n\n\n

Since 2018, the PA has been consulting on ways to amend the CP Exemption Notice, seeking to create a safer and stabler commercial paper market for market participants. <\/p>\n\n\n\n

One such amendment is the enhancement of the definition of “commercial paper,” which would decrease the term structure of commercial paper issuances to 364 days – in line with international best practice and the main intention of the CP Exemption Notice. <\/p>\n\n\n\n

“The draft amendment has introduced the requirement for all issuers, other than the central government or issuers where the CP is backed by a central government guarantee, to have net assets exceeding R100 million at a point in time no earlier than 18 months prior to the proposed issuance, as certified by the issuer\u2019s auditors,” the experts explained. <\/p>\n\n\n\n

Another key amendment would require new issuers to acquire regulatory approval for placing documents from the PA before issuance. <\/p>\n\n\n\n

The PA also suggested that state-owned companies and municipalities could be named as juristic persons that could potentially issue CPs while also recommending improved disclosure requirements for placing documents. <\/p>\n\n\n\n

The deadline for public comments is 15 August 2023, and the Position Paper on the Draft Amendments to the CP Exemption Notice<\/a> can be found below: <\/p>\n\n\n\n