Regulation of Mergers and Acquisitions in Terms of the South African Companies act 71 of 2008: an Overview

• Author: M. Phakeng
• Position: The Cape Bar, Society of Advocates (Cape Town, South Africa)
• Pages: 91-118

BRICS LAW JOURNAL Volume VII (2020) Issue 1

REGuLATIon oF MERGERS AnD ACQuISITIonS In TERMS

oF THE SouT H AFRICAn CoM PAnIES ACT 71 oF 2008:

An oVERVIEw

MADIMETJA PHAKENG,

The Cape Bar – Society of Advocates (Cape Town, South Africa)

https://doi.org/10.21684/2412-2343-2020-7-1- 91-118

The Companies Act 71 of 2008 (the 2008 Act) replaced the Companies Act No. 61 of 1973,

eective 1 May 2011. The 2008 Act was aimed at keeping pace with developments in

company law internationally. It is not intended to entirely replace the well-established

principles and has largely retained the pre-existing South African company law. The

mergers and acquisitions provisions are aimed at creating transparent, ecient, and

simple procedures. Dierent types of mergers and acquisitions are clearly dened as

“aected transactions” or “oers” in section 117. Section 118 provides for companies to

which the provisions apply. The reasons for regulating these transactions and powers

of the regulator – The Takeover Regulation Panel, have been reviewed, claried, and

improved. The previous section on disposal of all or greater part of assets or undertaking

of a company has been re-written. The 2008 Act further introduces a new type of aected

transaction in section 113, in the form of a “merger” or an “amalgamation.” The 2008

Act has retained the scheme of arrangement in section 114, but has changed its format

by removing compulsory court application and approval. The courts get involved under

certain prescribed circumstances. The 2008 Act has enhanced shareholder protection for

fundamental transactions in the form of section 164 – Appraisal Rights and section 115,

dealing with shareholder approval of fundamental transactions. Some scholars and

practitioners have criticised certain provisions. However, in general, the provisions have

received favourable commentary. They regarded as progressive and comparable with

others internationally.

Keywords: Companies Act 71 of 2008; aected transactions; oers; mergers; acquisitions;

Takeover Panel Regulation; provisions, regulation; South Africa.

BRICS LAW JOURNAL Volume VII (2020) Issue 1 92

Recommended citation: Madimetja Phakeng, Regulation of Mergers and Acquisitions

in Terms of the South African Companies Act 71 of 2008: An Overview, 7(1) BRICS Law

Journal 91–118 (2020).

Table of Contents

Introduction

1. The Regulatory Bodies Responsible to Regulate Mergers

and Acquisitions

2. A Brief Overview of the Powers of the Takeover Regulation Panel

3. A Brief Overview of the Reasons for Regulating Mergers and

Acquisitions

4. Companies That Are Subject to Mergers and Acquisitions Provisions

5. A Brief Overview of the Types of Mergers and Acquisitions Regulated

6. Specic Requirements for Fundamental Transactions

7. An Overview of Provisions Regulating the Conduct of Parties Involved

in Mergers and Acquisitions

8. A Brief Overview of the Provisions for Enforcement and the Remedial

Actions for Mergers and Acquisitions

9. A Brief Overview of Some of the Disclosure Regulations

for Mergers and Acquisitions

Concluding Comments

Introduction

A number of years have passed since the South African merger and acquisitions

(M&As) provisions in terms of the Companies Act 71 of 2008 (the 2008 Act) became

eective on 1 May 2011. The 2008 Act made comprehensive changes to the South

African company law. The Act repealed the Companies Act No. 63 of 1973 (the 1973

Act). Prior to promulgating the 2008 Act, the South African Department of Trade and

Industry (DTI), published a policy document titled “South African Company Law for the

21st Century: Guidelines for Corporate Law Reform” (the DTI Guidelines). The 2008 Act

is in line with the document and among others, seeks to make company law simple,

exible, transparent, predictable, and ecient. According to the Guidelines

…should attempt, where practically possible, to balance the competing

interests of economic actors and of society at large.1

1 S outh African Department of Trade and Industry, South African Company Law for the 21st Century:

Guidelines for Corporate Law Reform (May 2004), at 9 (Feb. 2, 2020), available at https://www.gov.za/

sites/default/les/gcis_document/201409/26493gen1183a.pdf.