Employment Equity Act, 1998
R 385
Competition Act, 1998 (Act No. 89 of 1998)NoticesGuidelines on Minority Shareholder Protections4. Legislative Framework |
| 4.1. | Where parties are not sure as to whether a transaction involves the acquisition of Minority Shareholder Protections which confer and/or relate to the acquisition of control, the Commission will undertake a control assessment in order to determine whether the right in question constitute control and accordingly a merger in terms of section 12 of the Act.2 |
| 4.2. | A merger is defined in section 12(1)(a) of the Competition Act, as occurring “when one or more firms directly or indirectly acquire or establish direct or indirect control over the whole or part of the business of another firm.” Section 12(1)(b) provides for the various ways in which such an acquisition of control may be achieved. |
| 4.3. | Section 12(2) specifies various instances of control and specifically states that: |
“A person controls a firm if that person—
| (a) | beneficially owns more than one half of the issued share capital of the firm; |
| (b) | is entitled to vote a majority of the votes that may be cast at a general meeting of the firm, or has the ability to control the voting of a majority of those votes, either directly or indirectly or through a controlled entity of that person.” |
| (c) | is able to appoint or to veto the appointment of the majority of the directors of a firm; |
| (d) | is a holding company, and the firm is a subsidiary of that company as contemplated in section 1(3)(a) of the Companies Act, 1973; |
| (e) | in the case of a firm that is a trust, has the ability to control the majority of the votes of the trustees, to appoint the majority of the trustees or to appoint or change the majority of the beneficiaries of the trust; |
| (f) | in the case of a close corporation, owns the majority of members’ interest or controls directly or has the right to control the majority of members’ votes in the close corporation; or |
| (g) | has the ability to materially influence the policy of a firm in a manner comparable to a person who, in ordinary commercial practice, can exercise an element of control referred to in paragraphs (a) to (f)." |
| 4.4. | The CAC has previously held that “…the purpose of merger control envisages a wide definition of control, so as to allow the relevant competition authorities a wide range of transactions which could result in an alteration of the market structure and in particular reduce the level of competition in the relevant market”.3 If a transaction falls within the ambit of any one of the instances listed in section 12(2) of the Act, it will constitute a merger and will trigger the investigative powers of the Commission, subject to the monetary thresholds for notifiable mergers being met.4 |
| 4.5. | The CAC in Distillers confirmed the position previously taken by the Tribunal that different forms of control as set out in section 12(2) of the Act can co-exist and that the list in section 12(2) is not to be viewed as an exhaustive list of instances where there is a change in control.5 Accordingly there can be a situation where more than one party simultaneously exercises control over the company.6 |
| 4.6. | When parties to a particular transaction contemplate whether a transaction involving a Minority Shareholder Protection confers control, the Minority Shareholder Protections must be broadly considered in terms of section 12(2)(g) of the Act. The CAC has also held that in terms of section 12(2)(g) of the Act, the term “…‘ability’ found in (g) can be viewed as a power derived from an agreement in the same way that powers in (a) to (d) are sourced from instruments such as a shareholders agreement…the influence [which] the provision speaks of must be over ‘the policy of the firm’. ‘Policy of the firm’ typically relates to strategic or important decisions of a firm such as budgets, business plans, major investments and/or appointment of senior management...”7 |
| 4.7. | In terms of section 12(2)(g) of the Act, the acquisition or establishment of control also relates to the ability of a firm to exercise material influence over a company or firm in a manner comparable to a person who, in ordinary commercial practice, can exercise an element of control referred to in paragraphs 12(2) (a) to (f) of the Act. In relation to material influence, the CAC has held that “…[t]he range of influence, so required however, need not be as extensive as that which is exercised directly by shareholders in general meetings or indirectly through the board by the person with power to appoint directors, it must though, as in both instances be ‘reasonably extensive since otherwise it will not be comparable to the influence exercised by a person with control contemplated in paras (a) to (d)…”8 (emphasis added) |
| 4.8. | A minority shareholding in a company does not automatically entitle a shareholder to exercise control over a firm. However, in terms of section 12(2)(g) of the Act, a minority shareholder may be regarded as having acquired control for notification purposes if the minority shareholder has the ability to materially influence the company’s policies in a manner comparable to a person that enjoys the economic or political benefits of ownership as contemplated in terms of section 12(2)(a) to (d). |
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2 African Media Entertainment Ltd v Lewis NO and Others (68/CAC/MAR/07) [2008] ZACAC 4 para 16.
3 Distillers Corporation (SA) Ltd and Another v Bulmer (SA) (Pty) Ltd and Another (08/CAC/May01) [2001] ZACAC 4 page 24. .
4 Competition Commission v Hosken Consolidated Investment Ltd and Another [2019] ZACC 2 para 45.
5 See Bulmer SA (Proprietary) Limited & Ano v Distillers Corporation (SA) & Others (CT 94/FN/Nov00 and 101/FN/Dec00) at p12-14 and Caxton and CTP Publishers and Printers Limited v Naspers and Others (CT16/FN/Mar04) at para 23 where the Tribunal said “Previous decisions of the Competition Appeal Court and the Tribunal have indicated that this list (section 12(2)(a)-(g)) is not to be viewed as exhaustive of all the possibilities for acquiring control, but rather in the language of the Court (CAC), that it lists ‘instances’ of where there is a change of control. There is thus room to argue that a change of control has taken place even where it has followed a form not provided for in section 12(2).”
6 Caxton and CTP Publishers and Printers Limited v Naspers and Others (CT16/FN/Mar04) para 25.
7 Caxton And CTP Publishers And Printers Limited and Others v Multichoice Proprietary Limited and Others (140/CAC/MAR16, 08/36380) [2016] ZACAC 2 para 73-74.
8 Caxton And CTP Publishers And Printers Limited and Others v Multichoice Proprietary Limited and Others (140/CAC/MAR16, 08/36380) [2016] ZACAC 2 para 75.
