The Takeover Regulation Panel (“TRP”) is a key South African regulatory body responsible for regulating certain types of transactions undertaken by companies in South Africa. In this article, we take a look at a few transactions that specifically need to be approved by the TRP and, in particular, the requirements to give notice of such transactions.

The functioning and legislative framework within which the TRP operates, is established by the Companies Act 71 of 2008 (“Act”) and the Takeover Regulations thereto (“Regulations”) which is applied to “affected transactions” undertaken by “regulated companies”.

In terms of section 118 of the Act, a “regulated company” is defined as a profit company (which is subject to an “affected transaction” or offer involving its securities) which includes – 

1. a public company;
2. a state-owned company, unless such company is exempted in terms of section 9 of the Act; or
3. a private company, provided that – 
a. the percentage of the issued securities of such company that have been transferred, other than by means of a transfer between related or inter-related parties, within a period of 24 months immediately preceding the date of an “affected transaction” or offer exceeds at least 10% of the issued securities of such company; or
b. the memorandum of incorporation of such company expressly provides that the company and its securities are subject to the provisions of the Act and the Regulations.

In terms of section 117(1)(c) of the Act, an “affected transaction” includes – 

1. the disposal of all or the greater part of the assets or undertakings of a regulated company; 
2. an amalgamation or merger involving at least one regulated company;
3. a scheme of arrangement between a regulated company and its shareholders;
4. the acquisition of, or the announced intention to acquire a beneficial interest in any voting securities of the company;
5. the announced intention to acquire a beneficial interest in the remaining voting securities in a regulated company, not already held by persons “acting in concert”;
6. a mandatory offer to shareholders of a regulated company as contemplated in section 123 of the Act; and
7. compulsory acquisitions as contemplated in section 124 of the Act.

There are certain types of affected transactions that the Act seeks to regulate strictly, which are known as “fundamental transactions”. A disposal of all or the greater part of the assets or undertakings of a regulated company, amalgamations or mergers, and a scheme of arrangement each constitute fundamental transactions. 

The primary reasons for the regulation of fundamental transactions are to ensure full disclosure in respect of the information provided to shareholders and fairness in respect of the treatment of shareholders.

An important requirement in respect of fundamental transactions is that notice of the proposed transaction must be given to the shareholders of the company before the transaction may be concluded. Therefore, where a regulated company either intends to dispose of all or the greater part of the assets or undertakings of the company, and enters into an amalgamation or merger or enters into a scheme of arrangement with its shareholders, the transaction must first be approved by a special resolution of the shareholders of the company as contemplated in section 115 of the Act. In order for the adoption of a special resolution to be valid, a 25% quorum must be present at the shareholders’ meeting.

Vitally, in the case of a merger, a special resolution must be adopted by each company to the merger. On the other hand, in the case of a disposal of the assets or undertaking, a resolution need only be adopted by the disposing company, in terms of which the shareholders of the company approve the transaction. The notice of the shareholders’ meeting must be delivered to each shareholder of the company within the prescribed time, and in the prescribed manner. Furthermore, the notice must be inclusive of or accompanied by a written summary of the detailed terms of the proposed transaction and must make reference to the provisions of sections 115 and 164 of the Act.

Further to the above, section 121 of the Act provides that any person making an offer must – 

1. comply with all reporting or approval requirements, except to the extent that the TRP has granted the person an exemption from such requirement; and
2. not give effect to an affected transaction unless the TRP has issued a compliance certificate or alternatively granted an exemption for the affected transaction. 

So, what discretion does the TRP have when it comes to “affected transactions”? In order to fulfil its mandate in terms of the Act and the Regulations, the TRP may –

1. require the filing, for approval or otherwise, of any document with respect to an affected transaction or offer;
2. issue compliance certificates;
3. initiate or receive complaints, conduct investigations, and issue compliance notices, with respect to any affected transaction or offer; or
4. issue a compliance notice which notice, may prohibit or require any action by a person; or order a person to divest of an acquired asset or account for profits.

Notwithstanding the above, even if a transaction is considered to constitute an “affected transaction”, the parties to such transaction may still lodge an application to the TRP to have the transaction exempted from the relevant provisions of the Act and the Regulations. Some instances where the TRP will grant the requested exemptions may include:

1. Instances where there is no reasonable potential of the affected transaction prejudicing the interests of any existing security holder of a regulated company.
2. Cases where the cost of compliance is regarded as disproportionate to the value of the transaction in question.

If you are involved in or contemplating entering into a transaction with characteristics similar to those discussed above, it would be advisable to reach out timeously to our M&A team to help you consider and if necessary, plan to comply with the applicable TRP requirements.


Disclaimer: This article is the personal opinion/view of the author(s) and is not necessarily that of the firm. The content is provided for information only and should not be seen as an exact or complete exposition of the law. Accordingly, no reliance should be placed on the content for any reason whatsoever and no action should be taken on the basis thereof unless its application and accuracy has been confirmed by a legal advisor. The firm and author(s) cannot be held liable for any prejudice or damage resulting from action taken on the basis of this content without further written confirmation by the author(s).