When engaged in matters concerning takeovers and offers, it is essential to recognise that this domain of corporate law predominantly pertains to transactions that result in, or have the potential to result in, the alteration of control in a regulated company. It also pertains to transactions amounting to the disposal of all or the greater part of a regulated company’s assets or undertakings, a scheme of arrangement between a regulated company and its shareholders, acquisition of beneficial interest in securities of a regulated company, mandatory offers and compulsory acquisitions. includes It is further imperative to grasp and thoroughly comprehend the definitions associated with takeovers and offers, as outlined in the Companies Act No. 71 of 2008 (“Companies Act”).
This article aims to unpack and investigate such key definitions in more detail.
The legal framework governing takeovers and offers primarily resides in Parts B and C of Chapter 5 of the Companies Act, in conjunction with the Companies Act Regulations. The rationale behind these comprehensive provisions and the establishment of the Takeover Regulation Panel (“the Panel“) is to uphold market integrity, ensure fairness to security holders and grant them equitable access to information. Additionally, these provisions seek to prevent actions designed to obstruct or prevent a transaction or to hinder security holders from making informed decisions.
The foremost definition of significance pertains to what constitutes a “regulated company“. Section 117(1)(i), in conjunction with sections 118(1) and (2) of the Companies Act, defines a regulated company. A private profit company assumes the status of a regulated company if, within the 24-month period immediately preceding the date of the specific transaction or offer, more than 10% of its issued securities have been transferred, except through transfers between or among related or interrelated parties. This circumstance triggers the applicability of Parts B and C of Chapter 5 of the Companies Act and the Companies Act Regulations pertaining to a private company entering into an affected transaction.
An “affected transaction” is a transaction that results in a shift of control to one or more persons acting in concert, where control did not previously reside with such individuals. Alternatively, it involves the acquisition of all the securities of the company or all the securities of a specific class, or the acquisition of sole ownership of those securities. It further includes transactions amounting to the disposal of all or the greater part of a regulated company’s assets or undertakings, a scheme of arrangement between a regulated company and its shareholders, mandatory offers and compulsory acquisitions. It should be noted that, unless exempted, all fundamental transactions also fall under the purview of affected transactions and are subject to the jurisdiction of the Panel to the extent that a fundamental transaction involves a regulated company. Thus, a company may not implement an affected transaction unless the Panel has issued a compliance certificate in respect thereof or has exempted the affected transaction. Section 118(3) of the Companies Act makes an automatic exception if a fundamental transaction is conducted in compliance with an approved business rescue plan under Chapter 6 of the Companies Act.
The Companies Act defines an “offer“, within the ambit of Chapter 5, Part C of the Companies Act, as a proposal of any kind, including a partial offer, which, if accepted, would result in an affected transaction. The Companies Act Regulations also encompass a related term, “offeree regulated company“, referring to a regulated company that is the subject of an offer or whose securities are wholly or partially the subject of an offer.
“Acting in concert”:
In relation to the term “acting in concert“, the Companies Act, in section 117(1)(b), characterises it as any action executed pursuant to an agreement between two or more persons, where they cooperate for the purpose of entering into or proposing an affected transaction or offer. The Companies Act Regulations further clarify that a company, its directors, companies controlled by its directors, and trusts of which its directors are beneficiaries or trustees are presumed to be acting in concert. The identification of parties acting in concert is based on the fact that the acquisition and control of a company often involve collaborative efforts. Establishing to whom obligations and responsibilities are ascribed, and who is subject to the Panel’s jurisdiction, is of paramount importance. The phrase “for the purpose of” in the definition of “acting in concert” should be narrowly interpreted within the context of the Companies Act. Clarity and alignment of objectives among all parties involved in the transaction are crucial.
In conclusion, it is important to recognise and fully comprehend the specific definitions contained in the Companies Act when dealing with takeovers and offers as set out in sections 117 – 127. Such comprehension is vital, as it determines the specific provisions and requirements with which the transaction parties must comply in accordance with the Companies Act.
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Published 30 October 2023