n Stellenbosch Law Review - Putting appraisal rights into perspective

Volume 25, Issue 2
  • ISSN : 1016-4359


Appraisal rights were included in the Companies Act 71 of 2008 in accordance with the Department of Trade and Industry's stated objectives of enhanced protection for minority shareholders and development of the Act in line with international company law trends. However, appraisal rights are traditionally underutilised in other jurisdictions where they have existed for many years, most notably the United States and Canada. The reason for this is that they can be complex, expensive and time-consuming to enforce. Furthermore, as a result of the often uncertain outcome of appraisal rights litigation, there is an argument to be made that the enforcement of these rights is open to abuse and that they may be used to stifle legitimate deal activity. Given the challenges and complexity of appraisal rights enforcement, South African courts (and legal practitioners) will have to look to foreign jurisdictions for guidance as to how to interpret and apply this novel, foreign concept. Fortunately it seems that the Act does allow for this. Recently there has been a spate of appraisal rights litigation amidst renewed levels of merger activity in the United States which poses some interesting questions around the proper use of appraisal rights and the attitude of the courts in this regard. Although South African courts have not yet heard any appraisal rights disputes it seems clear that, because this remedy is so complex and internationally relevant, we should keep abreast of legal developments in foreign jurisdictions which may ultimately impact on the understanding, interpretation and application of appraisal rights in the South African context.

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