SOUTH AFRICA Law and Practice Contributed by: Michael Katz, Matthew Morrison, Madison Liebmann and Sinovuyo Damane, ENS
offer that they have received from a potential bidder (even where the bidder is an “unwanted” bidder), and express an opinion to the shareholders.
holder activism in the USA and Europe, as well as a governance framework which encourages share - holder activism. Examples of shareholder activism in SA include: • reconstituting the board, or replacing key figures (eg, the CEO or CFO); • arguing for further transparency and change regarding remuneration of directors and execu - tives; • encouraging the divestment of various assets that are not performing; • playing a role in either facilitating or frustrating M&A deals; and • addressing environmental, social and corporate Shareholder activists use various tactics in order to pursue their different objectives. Shareholders have become increasingly interested in ESG-related con - cerns. In line with this, the JSE published its Sustain - ability Disclosure Guidance in June 2022. Although primarily intended to assist JSE-listed companies, the guidelines are intended to also be of value to insti - tutional investors and stakeholder groups interested in ESG disclosure and performance. Shareholder activists’ desired objectives may be non-financial, for instance, improving the diversity of a company’s board or ensuring a company is more environmen - tally responsible. Alternatively, shareholders’ objec - tives may be financial, which, in the context of M&A deals, often entails shareholders using their appraisal or other rights (or reputational influence) in order to seek a higher value. 11.3 Interference With Completion Shareholder activists are progressively interfering with M&A transactions to either block or force certain deals, as well as at annual general meetings of listed companies. governance (ESG) issues. 11.2 Aims of Activists
10. Litigation 10.1 Frequency of Litigation
Litigation is not common in M&A deals in SA. Parties usually attempt to institute legal proceedings to claim that a material adverse change has occurred, or that there has been a material breach of warranties (this usually occurs if the acquirer no longer wishes to go ahead with the deal) or to enforce the conditions set out in a merger filing (if any). There have been recent instances of litigation launched by minority sharehold - ers pursuant to their appraisal rights under the Com - panies Act, but this is not commonplace. 10.2 Stage of Deal As stated in 10.1 Frequency of Litigation , litigation does not play a dominant role in connection with M&A deals in SA. If parties do institute proceedings, this will usually occur after signature of a sale agreement or once the terms of an offer have been published by the parties on the stock exchange news service. 10.3 “Broken-Deal” Disputes See 10.1 Frequency of Litigation and 10.2 Stage of Deal for further information. At the start of the pan - demic, there was a considerable consideration of vis majeure clauses in contracts to assess whether COV - ID-19 could be relied upon as a vis majeure.
11. Activism 11.1 Shareholder Activism
In the past, shareholder activism has not been a domi - nant feature in SA; however, shareholder activism is beginning to feature as part of the corporate land - scape. This is mainly due to the influence of share -
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