SOUTH AFRICA Law and Practice Contributed by: Michael Katz, Matthew Morrison, Madison Liebmann and Sinovuyo Damane, ENS
Organisations Act, 1997; the Financial Intelligence Centre Act, 2001; the Companies Act; and the FSRA. The Companies Act has been amended to include definitions of “affected company” and “beneficial owner” and to provide for a mechanism through which the Companies and Intellectual Property Commission can keep accurate and updated beneficial ownership information. The amendment requires a company to keep a record of a natural person who owns or con - trols the company in terms of the definition of “ben - eficial owner”, and it prescribes specified timelines within which the company must record any changes in this information. Companies must also file a record of any natural person who owns or controls the company in terms of the definition of “beneficial owner”, with the Companies and Intellectual Property Commission. 4. Stakebuilding 4.1 Principal Stakebuilding Strategies Bidders are entitled to, and often do, build stakes in the target prior to launching an offer; however, it is not a requirement. Until a potential bidder breaches the 35% shareholding level of the target, other than for certain disclosure obligations, stakebuilding is unregulated. Stakebuilding does not constitute trading on inside information (defined in 5.3 Scope of Due Diligence ) as the information is not obtained from an “insider” – it is the offeror’s own information. The main reasons for building a stake include prevent - ing/dissuading other parties from making a bid for the target and putting pressure on the board. Depending on the timing of the purchase of the stake, the acqui - sition of the stake may be at a price lower than the ultimate offer price (see 4.3 Hurdles to Stakebuilding ). It is important to note, however, that a bidder and its concert parties will not be entitled to vote on a resolu - tion proposing a scheme of arrangement. 4.2 Material Shareholding Disclosure Threshold The bidder (or any shareholder for that matter) is required to disclose its acquisition to the target com -
pany if the bidder reaches any of the threshold limits of 5%, 10%, 15% or any further multiples of 5% of the issued securities of that class in the share capital of the target company. The target is then required to file a notice with the TRP and announce such informa - tion to all its shareholders (see 6.2 Mandatory Offer Threshold ). 4.3 Hurdles to Stakebuilding A company’s memorandum of incorporation may stip - ulate a more onerous shareholding reporting thresh - old, but cannot impose a less onerous threshold, than that contained in the Companies Act. It is, however, uncommon for companies to amend the reporting thresholds in this way. If an offer is made and the offeror, or any person act - ing in concert with the offeror, has acquired relevant securities in the offeree-regulated company within the six-month period before the commencement of the offer period, the offer consideration, per security, to the offeree-regulated company’s holders of securities of the same class must be: • identical to, or where appropriate, similar to, the highest consideration paid, excluding commission, tax and duty, for those acquisitions; and • accompanied by a cash consideration, at not less than the highest cash consideration paid per secu - rity, excluding commission, tax and duty, if securi - ties that carry 5% or more of the voting rights cur - rently exercisable at a class meeting of that class were acquired for cash. 4.4 Dealings in Derivatives Dealing in derivatives is allowed; however, it is impor - tant to note that instruments convertible into voting securities may be regarded as securities for certain purposes under the Takeover Regulations. 4.5 Filing/Reporting Obligations As a result of the recent amendments to the Com - panies Act (see 3.1 Significant Court Decisions or Legal Developments ), the term “securities” is now defined as “any shares or debentures, irrespective of their form or title, issued or authorised to be issued by a profit company”. Derivatives which carry general voting rights or that are convertible into voting secu -
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