| 6.1. |
The Commission notes that there may be instances where a firm does not acquire a majority shareholding. For example there may be instances where a minority shareholder may acquire control through veto rights or minority protections which confer control depending on the nature and the content of the veto rights or minority protection. The Commission may in these instances still require notification of a transaction resulting in a change of control of the Target Firm where minority shareholders acquire control. |
| 6.2. |
The Commission further notes that it may also require merger notification if a transaction results in the direct or indirect change and/or the acquisition of control rights by minority shareholders in terms of section 12(2)(g) of the Act, subject to the requisite financial thresholds being met. |
| 6.3. |
A clear distinction must be drawn between minority protections which confer control and those which do not confer control. Both types of protections are aimed at protecting the investment of a minority shareholder. |
| 6.4. |
Generally, a special resolution may be a form of Minority Shareholder Protection. Statutory special resolutions set out in the Companies Act do not confer control. We set out below the statutory special resolutions in terms of the Companies Act:18 |
“A special resolution is required to—
| (a) |
amend the company’s Memorandum of Incorporation to the extent required by section 16(1)(c) and section 36(2)(a); |
| (b) |
ratify a consolidated revision of a company’s Memorandum of Incorporation, as contemplated in section 18(1)(b); |
| (c) |
ratify actions by the company or directors in excess of their authority, as contemplated in section 20(2); (d) approve an issue of shares or grant of rights in the circumstances contemplated in section 41(1); |
| (d) |
approve an issue of shares or grant of rights in the circumstances contemplated in section 41(1); |
| (e) |
approve an issue of shares or securities as contemplated in section 41(3); |
| (f) |
authorise the board to grant financial assistance in the circumstances contemplated in section 44(3)(a)(ii) or 45(3)(a)(ii); |
| (g) |
approve a decision of the board for re-acquisition of shares in the circumstances contemplated in section 48(8); |
| (h) |
authorise the basis for compensation to directors of a profit company, as required by section 66(9); |
| (i) |
approve the voluntary winding up of the company, as contemplated in section 80(1); |
| (j) |
approve the winding up of a company in the circumstances contemplated in section 81(1); |
| (k) |
approve an application to transfer the registration of the company to a foreign jurisdiction as contemplated in section 82(5); |
| (l) |
approve any proposed fundamental transaction, to the extent required by Part A of Chapter 5; |
| (m) |
revoke a resolution contemplated in section 164(9)(c)” |
| 6.5. |
Whether or not control has been acquired by a minority shareholder is a factual question which must be determined on a case by case basis and all the rights that may be exercised by the minority shareholder will have to be considered in combination with each other in order to determine whether such a minority shareholder is able to influence strategic decisions and commercial strategies of a target firm. |
| 6.6. |
As indicated above, the Commission is not concerned with ordinary minority investment protections. A non-exhaustive list of examples of Minority Shareholder Protections which typically do not confer control is set out in Annexure A below. |
| 6.7. |
Transactions which result in the acquisition of Minority Shareholder Protections are likely to be of concern to the Commission, particularly if the transaction meets the requisite merger notification thresholds. A non-exhaustive list of Minority Shareholder Protections which are likely to confer control is set out in Annexure B below. |
| 6.8. |
Section 12(2)(g) of the Act, which sets out the test for determining whether a Minority Shareholder Protection is control conferring has been interpreted in case law as including an enquiry as to whether the minority protection(s) in question provide the minority shareholder with a right to steer a firm or to appoint persons to steer the firm.19 If parties are unsure on whether a minority protection confers control or not, they may approach the Commission for an advisory opinion in terms of the Regulations on Non-Binding Advisory Opinions, 2024. |
| 6.9. |
In assessing Minority Shareholder Protection rights, the Commission will generally adopt, inter alia, the following approach: |
| 6.9.1. |
assess whether the transaction would amount to a change of control or an acquisition of control in terms of section 12(2)(g) of the Act; |
| 6.9.2. |
assess the content of the right(s) in question and its (their) importance within the context of the specific business;20 |
| 6.9.3. |
analyse whether the Minority Shareholder Protection relates to strategic decisions of the firm or enables the minority shareholder to influence or constrain the strategic decisions of the firm; |
| 6.9.4. |
analyse whether the Minority Shareholder Protection is financial and is aimed at protecting the investment of the minority shareholder in a firm i.e. whether Minority Shareholder Protection extends beyond the purpose of protecting the minority shareholder’s investment in the firm; and |
| 6.9.5. |
analyse whether the Minority Shareholder Protection will materially influence the day-to-day running of the firm or its daily operations. |
| 6.10. |
The Commission will therefore only be interested in transactions which change and/or result in the acquisition of Minority Shareholder Protection rights in a firm that go beyond ordinary minority investment protections. |
| 6.11. |
The Commission notes that the nature, content and purpose of Minority Shareholder Protections are not the same and consequently each transaction will be assessed on its own merits. |
____________________________________
18 Section 65(11) of the Companies Act, as amended No 71 of 2008.
19 Caxton and CTP Publishers and Printers v Media 24 Proprietary Limited and Others (136/CAC/March 2015) [2015] ZACAC 5 para 45.
20 Commission Consolidated Jurisdictional Notice under council Regulation (EC) No.139/2004 on the control concentrations between undertakings para 68.
Employment Equity Act, 1998
