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Companies Act, 2008 (Act No. 71 of 2008)

Chapter 5 : Fundamental Transactions, Takeovers and Offers

Part A : Approval for certain fundamental transactions

114. Proposals for scheme of arrangement

 

 

1) Unless it is in liquidation or in the course of business rescue proceedings in terms of Chapter 6, the board of a company may propose and, subject to subsection (4) and approval in terms of this Part, implement any arrangement between the company and holders of any class of its securities by way of, among other things—
a) a consolidation of securities of different classes;
b) a division of securities into different classes;
c) an expropriation of securities from the holders;
d) exchanging any of its securities for other securities;
e) a re-acquisition by the company of its securities; or
f) a combination of the methods contemplated in this subsection.

 

2) The company must retain an independent expert, who meets the following requirements, to compile a report as required by subsection (3):
a) The person to be retained must be—
i) qualified, and have the competence and experience necessary to—
aa) understand the type of arrangement proposed;
bb) evaluate the consequences of the arrangement; and
cc) assess the effect of the arrangement on the value of securities and on the rights and interests of a holder of any securities, or a creditor of the company; and
ii) able to express opinions, exercise judgment and make decisions impartially.
b) the person to be retained must not—
i) have any other relationship with the company or with a proponent of the arrangement, such as would lead a reasonable and informed third party to conclude that the integrity, impartiality or objectivity of that person is compromised by that relationship;
ii) have had any relationship contemplated in subparagraph (i) within the immediately preceding two years; or
iii) be related to a person who has or has had a relationship contemplated in subparagraph (i) or (ii).

 

3) The person retained in terms of subsection (2) must prepare a report to the board, and cause it to be distributed to all holders of the company’s securities, concerning the proposed arrangement, which must, at a minimum—
a) state all prescribed information relevant to the value of the securities affected by the proposed arrangement;
b) identify every type and class of holders of the company’s securities affected by the proposed arrangement;
c) describe the material effects that the proposed arrangement will have on the rights and interests of the persons mentioned in paragraph (b);
d) evaluate any material adverse effects of the proposed arrangement against—
i) the compensation that any of those persons will receive in terms of that arrangement; and
ii) any reasonably probable beneficial and significant effect of that arrangement on the business and prospects of the company;
e) state any material interest of any director of the company or trustee for security holders;
f) state the effect of the proposed arrangement on the interest and person contemplated in paragraph (e); and
g) include a copy of sections 115 and 164.

 

4) Section 48 applies to a proposed arrangement contemplated in this section to the extent that the arrangement would result in any re-acquisition by a company of any of its previously issued securities.