ZAMBIA Law and Practice Contributed by: Emmanuel Manda, Simon Kapampa, Innocent Mung’omba and Kaluwe Libeleki, Musa Dudhia & Co.
Securities Act. As such, the obligations and require - ments relating to ordinary securities generally apply to derivatives. 4.5 Filing/Reporting Obligations If the derivatives would enable the derivatives holder to exert control of at least 15% of the shares of a listed company, then the filing/reporting requirements set out in 4.2 Material Shareholding Disclosure Thresh- old will need to be complied with. Similarly, if a trans - action involving derivative instruments would result in a change of control as envisaged under the Competi - tion Act and meet the financial threshold for notifiable transactions, the transaction would need to be noti - fied to the CCPC or the COMESA Competition and Consumer Commission, as may be applicable. 4.6 Transparency Shareholders are generally not required to disclose the purposes of their acquisition and their intention regarding control of the company. However, the Take - over Rules require that the offer document submitted by the offeror to the offeree shareholders must contain all such information as is necessary to enable offeree shareholders to reach a properly informed decision. Save for public companies, there are no statutory pre - scribed stages when the target is required to disclose a deal, and in practice, it is common for deals to be disclosed when definitive agreements are signed. For public companies, the Takeover Rules require an offer to be put forward in the first instance, to the board of the target or to its advisers and before the offer is announced to the public. The circumstances in which an announcement of an offer is required include: • when a firm intention to make an offer is notified to the board of the offeree company from a serious source, irrespective of the attitude of the board to the offer; • when, following an approach to the offeree com - pany, the offeree company is the subject of rumour and speculation or there is undue movement in its share price, or a significant increase in the volume 5. Negotiation Phase 5.1 Requirement to Disclose a Deal
of share turnover, whether or not there is a firm intention to make an offer; or • when, before an approach has been made, the offeree company is the subject of rumour and speculation or there is undue movement in its share price, and there are reasonable grounds for concluding that it is the potential offeror’s actions which have led to the situation. A listed company or company whose securities are registered with SEC that proposes a takeover or merger, or is being taken over by another company as envisaged by the Securities Act, must also apply for and obtain SEC’s approval prior to implementing the takeover or merger. Additionally, if the prescribed merger and financial thresholds under the Competition Act are met (for both private and public companies), the proposed deal would need to be disclosed to and approval obtained from the CCPC or the COMESA Competition and Consumer Commission, as the case may be. Other regulatory disclosures and approvals would need to be made/obtained depending on the particu - lar industry/sector. These include disclosures to and approvals from BOZ for an M&A deal involving the banking sector. 5.2 Market Practice on Timing Market practice on timing of disclosure does not differ from the legal requirements set out in 5.1 Require- ment to Disclose a Deal . 5.3 Scope of Due Diligence A red flag due diligence is usually undertaken and cov - ers the legal, financial and tax matters of the target. It is also common for parties to agree on a materiality threshold for the issues to be covered in the due dili - gence and physical site visits where this is deemed to be necessary. 5.4 Standstills or Exclusivity It is not rare for standstills or exclusivity to be demand - ed in M&A transactions. However, the standstills demanded must not be in breach of Zambian law. The Companies Act, No 10 of 2017 (the “Companies Act”), for example, provides that fully paid-up shares ought to be freely transferable without restrictions unless a
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