n Stellenbosch Law Review - The fundamental transactions under the Companies Act : a report back from practice after the first few years

Volume 25, Issue 2
  • ISSN : 1016-4359


The new regime relating to fundamental transactions and takeover law in the Companies Act 71 of 2008 ("the Act") has, in practice, presented a number of legal questions, the answers to which are not readily apparent from the Act itself. In my experience numerous views and practices have developed in the implementation of the Act. Whether a ratification of a disposal under section 112 is permissible, is unclear, although the deletion by the legislature of the express possibility of ratification from the initial version of the Act strongly suggests that ratification is now not possible. Regarding the time at which a "disposal" is deemed to occur under section 112, the stronger view is that this occurs when there is an unconditional obligation to transfer the property. The consequences of non-compliance with section 112 are not expressed in the Act; but it is fairly arguable that the view expressed in 2011 5 SA 1 (SCA) is still valid, namely that the disposal is not void but is unenforceable. With regard to schemes of arrangement under section 114 of the Act, the question is whether the requirement of an independent expert's report may be waived for share repurchases under section 48(8). Applying general principles on the waiver of statutory rights, it is arguable that such a waiver is competent. For amalgamations and mergers, questions arise as to the interpretation of "creditors" in section 116, the effect of mergers on anti-assignment clauses in contracts, and difficulties around the implementation of statutory mergers in wholly-owned group companies. The takeover laws present some practical considerations in the context of "shelf" companies. An important issue in practice is whether a share repurchase under section 48(8)(b) of the Act is in fact a scheme of arrangement, which determines whether the takeover laws apply in instances where the repurchasing company is a "regulated company".

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