Company Law B 3rd Term

8/10/2019 Company Law B 3rd Term

1/124

Company Law B


2/124

Overview

The course is divided into 4 main parts: Introduction to competition law Mergers & acquisitions of companies Stock exchange listings BEE

We will spend some time on the newFinancial Markets Act, which came intoforce on 3 June 2013.


3/124

Why is this course useful?

It is aimed to equip you to practisecorporate law in large firms of attorneys,smaller specialised firms, or at the Bar.

The aim is to give you a practicalfoundation (useable knowledge) in 4important areas of corporate law.

There is no similar course at LLB

undergraduate level at any otheruniversity, which should give you acompetitive advantage over other LLBgraduates.


4/124

Assessment

November exam: 70% of total mark. Class record: 30% of total mark,

comprising one assignment and one test.

Lectures: 1st period Monday and 2nd

period Friday. Standard lectureattendance rules will apply.


5/124

Textbooks Competition law:

There is only one copy of BrasseysCompetition Law on short loan.

Please take care of it! Brassey will be the main source book for part

1 this course.


6/124


7/124

Competition Law

Reading: Brassey p.1-24


8/124

The basic economics


9/124

Important points

Sellers wish to maximise their profits byproducing the quantity at which theirmarginal cost equals their marginalrevenue.

Buyers wish to obtain the largest quantityat the lowest price.

In a market where there are many sellersand buyers, the action of the market willdetermine the price and the output.


10/124

Monopoly supply and demand


11/124

The object of competition law

To maintain as near perfect a market aspossible, that is, with the greatest numberof sellers competing on a level playingfield for the business of buyers.

Why? Because a competitive marketleads to the efficient allocation ofresources, which in turn maximises thewelfare of all participants in the economy.


12/124

But doesnt that happen anyway in a free

market? Yes, but are markets really free?

Consider the markets for:

Legal services Telecommunications University education

Water Pizzas


13/124

But in any event.

The objects and the practicalimplementation of South Africancompetition law go beyond the pureeconomic argument.

The Act must be viewed in its historicalpolitical context, thus its attempt tocontribute to the redistribution of powerand wealth, in addition to fosteringeconomic dynamism.


14/124

Competition Act 89 of 1998s2. Purpose of Act

The purpose of this Act is to promote and maintain competition in theRepublic in order--

a) to promote the efficiency, adaptability and development of theeconomy;

b) to provide consumers with competitive prices and product choices;c) to promote employment and advance the social and economicwelfare of South Africans;

d) to expand opportunities for South African participation in worldmarkets and recognise the role of foreign competition in theRepublic;

e) to ensure that small and medium-sized enterprises have anequitable opportunity to participate in the economy; andf) to promote a greater spread of ownership , in particular to

increase the ownership stakes of historically disadvantagedpersons.


15/124

The Competition Act

89 of 1998Restrictive Horizontal Practices

Reading: Brassey chap.5


16/124

What does the Act prohibit?

Essentially, three categories of behaviour: Restrictive horizontal practices: s.4 Restrictive vertical practices: s.5 Abuse of dominance: s.6 9


17/124

The Competition Act


Reading: Brassey chap.5


18/124

What does the Act prohibit?

Essentially, three categories of behaviour: Restrictive horizontal practices: s.4 Restrictive vertical practices: s.5 Abuse of dominance: s.6 9


19/124

Section 4

What is a horizontal relationship? horizontal relationship means a

relationship between competitors (s.1)

What is a restrictive horizontal practice? 4(1)An agreement between, or concerted

practice by, firms or a decision by an

association of firms , is prohibited if it isbetween parties in a horizontal relationship and if-


20/124

Agreement

American Natural Soda Ash Corporation vCompetition Commission 2005 (6) SA 158(SCA) paras. [52] [55].

Where competitors have reached anagreement to set uniform prices, withoutmore, all that might be required in order to

establish a transgression of s 4(1) (b) is toproduce their agreement, because its veryterms may admit of no conclusion but that itwas designed to eliminate price- competition.


21/124

Agreement, cont

[54] But not every arrangement betweencompetitors entailing the ultimate supply ofgoods necessarily falls into that category.It is, for instance, not difficult to envisage abona fide joint venture that is embarkedupon by competitors for a legitimatepurpose, through the vehicle of a separate

entity, which must necessarily set a pricefor goods that it supplies (emanating fromthe competitors) merely as an incident tothe pursuit of the joint venture.


22/124

Concerted practice

Agreement and concerted practice aremutually exclusive.

The concept of concerted practice allowsthe Competition Commission to actagainst companies where conductappears objectively to be the result of co-operation.

There must be some evidence of contact(even indirect) between the parties.


23/124

Concerted practice

Interpretation of concerted practice is veryproblematic - see Brassey at p.136-137.

Eg. Companies A, B and C are competitors.

Representatives of all 3 are invited to apresentation by a banks economist, whopredicts an imminent massive increase indemand for A, B and Cs products. On thebasis of this prediction, A, B and C eachdecide independently to raise the prices oftheir products by 20%.


24/124

Concerted practice

But I suggest that the example givenwould not constitute concerted practice ifit were a once-only event. The more oftensimultaneous price movements occur, themore likely they will be found to be part ofa concerted practice among competitors.


25/124

Decision by an association offirms

Commissioner, Competition Commission vGeneral Council of the Bar 2002 (6) SA606 (SCA)

The GCB formed the view that some of therules applying to the advocates professionoffended s.4 of the Act, and applied for

exemption. The outcome (not in the reported

judgment) was that exemption was

granted on the GCBs terms.


26/124

Decision by an association offirms

But the GCB was not wholly victorious. Although it maintained its restriction on the

market for advocates services byrestricting entry to the profession, it is nolonger able to prescribe tariffs foradvocates fees.


27/124

Section 4(1)(a)

An agreement between, or concerted practiceby, firms or a decision by an association offirms, is prohibited if it is between parties in ahorizontal relationship and if-(a) it has the effect of substantially preventingor lessening competition in a market, unlessa party to the agreement, concerted practice,

or decision can prove that any technological,efficiency or other pro-competitive, gainresulting from it outweighs that effect; or


28/124

Section 4(1)(a)

Note that 4(1)(b) contains the strictprohibitions, and 4(1)(a) is the catch -allclause designed to pick up cases whichfall outside 4(1)(b).

So when considering whether a practice iscaught by the legislation, look first at4(1)(b), then 4(1)(a).


29/124

Section 4(1)(a)

The important feature of 4(1)(a) is that itallows the anti-competitive behaviourprovided that: The behaviour falls outside of 4(1)(b), and The behaviour can be justified on the basis of

a technological, efficiency or other pro -

competitive gain which outweighs the harmcaused by the anti-competitive behaviour.


30/124

Test for s.4(1)(a)

Is there an agreement between, orconcerted practice by, firms or a decisionby an association of firms? IF YES,

Does it fall within s.4(1)(b)? IF NO, Does it have the effect of substantially

preventing or lessening competition in a

market? IF YES, Can it be justified on the basis that the

gains outweigh the harm?


31/124

Test for s.4(1)(a)

IF YES: conduct permissible. IF NO: conduct prohibited.


32/124

Section 4(1)(b)(1) An agreement between, or concerted practice by,firms, or a decision by an association of firms, is

prohibited if it is between parties in a horizontalrelationship and if:

(b) it involves any of the following restrictivehorizontal practices :

(i) directly or indirectly fixing a purchase or sellingprice or any other trading condition;

(ii) dividing markets by allocating customers,suppliers, territories, or specific types of goods orservices; or

(iii) collusive tendering.


33/124

The Competition Act


continuedReading: Brassey chap.5


34/124

Section 4(1)(b)

(1) An agreement between, or concerted practice by,firms, or a decision by an association of firms, isprohibited if it is between parties in a horizontalrelationship and if:

(b) it involves any of the following restrictivehorizontal practices :

(i) directly or indirectly fixing a purchase or sellingprice or any other trading condition;

(ii) dividing markets by allocating customers,suppliers, territories, or specific types of goods orservices; or

(iii) collusive tendering.


35/124

s.4(1)(b): main points

The 3 prohibited categories are effectively3 different kinds of price fixing.

Conduct falling in s.4(1)(b) is absolutely

prohibited, which means that, unlikeconduct under s.4(1)(a), no justification isadmissible or acceptable.

So evidence is limited to establishingwhether conduct falls within s.4(1)(b).Once that is established, defendantcompanies are automatically liable.


36/124

Price fixing

Absolute prohibition. It does not matter whether the conduct is

direct or indirect, open or in secret. Degree of conduct is irrelevant even the

slightest price fixing conduct is prohibited. Effect of conduct is irrelevant no account

taken of whether it in fact causes harm.


37/124

Price fixing

Numerous cases brought by theCompetition Commission, the greatmajority of which are settled out of court.

Eg. Institute of Estate Agents: settled forfine of R522000 for recommending tariffsto members.

BMW: settled for fine of R8m for fixingmaximum retail discounts that dealers canoffer.


38/124

Allocation of markets

As with price fixing, the prohibition isabsolute.

See Brasseys discussion of the AmericanTopco case at pgs. 148-9 and 151-2.


39/124


40/124

Corporate Leniency Policy


41/124

Corporate Leniency Policy(CLP)

Introduced in May 2008. Relates only to practices prohibited in

terms of s.4(1)(b). Allows the Competition Commission to be

lenient towards a member of a cartelwhich blows the whistle on the cartelsexistence and operations. (Effectively,immunity from prosecution for thewhistleblower).


42/124

Corporate Leniency Policy(CLP)

CLP applies only to firms (widely defined)which are themselves party to the anti-competitive conduct. It must bedistinguished from the whistleblowersprotection in terms of s.44 of the Act readwith Rule 14(1)(b) of the Competition

Commission Rules, which is designed toprotect individuals (eg. employees) whoblow the whistle.


43/124


44/124

Conditions for immunity

You have to get there first. If anothermember of the cartel has already reportedthe anti-competitive conduct, a firmmaking a subsequent disclosure might betreated more leniently, but no immunity.

You must provide full and honest

disclosure. Do not alert other cartel members. Stop cartel conduct immediately.


45/124

CLP procedure

Contact Competition Commission to putdown a marker - preserves place inqueue while disclosure is being prepared.

Apply for immunity in writing if first inqueue, conditional immunity granted. Ifnot first in queue, Comp Comm will say so.

Provide full disclosure of information. Comp Comm investigates.


46/124

CLP procedure, cont.

Cartel members prosecuted. Definitive immunity for whistleblower

confirmed only after final judgment againstother cartel members.


47/124

Restrictive vertical practices

Reading: Brassey: chap. 6


48/124


49/124


50/124

The schema of the section

Just as with s.4, the first part of s.5(ie.5(1))is the catch-all. The second part(ie. 5(2) and 5(3)) contains the specificprohibition.

So consider first whether the conduct fallswithin s.5(2), taking account of s.5(3).

Only if it does not fall within 5(2) / 5(3),consider whether it falls within s.5(1).


51/124

Restrictive vertical practices

Reading: Brassey: chap. 6


52/124

Section 5Restrictive vertical practices prohibited.(1) An agreement between parties in a ver t ica l rela t ion ship

is prohibited if it has the effect of substantiallypreventing or lessening competition in a market, unless aparty to the agreement can prove that any technological,

efficiency or other pro-competitive, gain resulting fromthat agreement outweighs that effect.(2) The practice of minimum resale price maintenance is

prohibited.(3) Despite subsection (2), a supplier or producer may

recommend a minimum resale price to the reseller of agood o r s e rv i ce provided (a) the supplier or producer makes it clear to the resellerthat the recommendation is not binding; and(b) if the product has its price stated on it, the wordsrecommended price appear next to the stated price.


53/124

s.5(2): minimum resale pricemaintenance

What does minimum resale pricemaintenance mean? The wording of

s.5(3) gives the clue as to what thelegislature intended.

There must be a supplier customer

relationship (ie. a vertical relationship),and the customer must be a reseller of theproduct supplied.


54/124

s.5(2)

s.5(2) singles out minimum resale pricemaintenance for harsher treatment thanother vertical restrictions. It is absolutelyprohibited, and no justification isacceptable.

It is therefore irrelevant whether the

conduct has a harmful effect, or whether itmight promote competition.


55/124


56/124

Evidence required

Onus of proof is on the complainant (couldbe the Competition Commission, oranother business, if the CC has decidednot to pursue prosecution).

Complainant bears a heavy onus: mustprove all the elements: The existence of the vertical relationship. The existence of an agreement (widely

defined).


57/124

Evidence required

The existence of a market could bedifficult. Is the market for cornflakes adifferent market from the market for breakfast

cereal, or is it part of that market? The substantiality of the prevention/lesseningof competition. What counts as substantial?

The negative effects must outweigh the pro-competitive gains.


58/124


59/124

MM v IN, cont.

Facts: MM was the publisher of the Ilanga

newspaper.

In terms of a contract between MM and IN, INprinted and distributed the newspaper.

MM terminated its contract with IN, and

appointed a new printer and distributor (NW). IN then: Ordered its agents not to distribute Ilanga, and Started a new newspaper in opposition, Isolezwe.


60/124

MM v IN, cont.

Isolezwe rapidly overtook Ilanga to becomethe dominant isiZulu language newspaper.

MM alleged that INs instruction to its

newspaper agents not to sell Ilanga was abreach of s.5(1) of the Competition Act.(An agreement that had the effect of

lessening competition). (There were also allegations of a breach of

s.8 which are not relevant for present

purposes).


61/124

MM v IN, cont.

Difficulties for the complainant: Defining the market. The act requires

competition to be lessened in a market, but

was it the market for isiZulu newspapers, orall newspapers, or all isiZulu publications?

Substantiality. The evidence showed that theintroduction of Isolezwe had caused theoverall market for isiZulu newspapers toexpand. The new newspaper had thusincreased the size of the market, rather than

taking Ilangas market.


62/124

MM v IN, cont.

INs refusal to allow its agents to sell Ilangahad forced MM and NW to build their owndistribution network, which actually increased

competition in the newspaper distributionbusiness.

Unsurprisingly, MMs complaint wasdismissed.


63/124

The Abuse of Dominance

Reading: Brassey: chapter 7

Section 6


64/124

Section 6 Makes provision for the Minister of Trade

and Industry to set a minimum threshold interms of turnover or value of a companysassets, below which the abuse of

dominance provisions (sections 7, 8, 9) willnot apply.

Since 2001, the threshold has been set at

R5m annual turnover or R5m value ofassets. (Be aware that the Minister has also set out

rules for the calculation of those values).


65/124

Section 7

Section 7 defines what makes a firmdominant in a market.

Only if a firm passes the minimumthreshold test of s.6 and falls within thedefinitions of s.7, can the prohibitionscontained in sections 8 and 9 apply.


66/124

Section 7

7. Dominant firms A firm is dominant in a market if--

a) it has at least 45% of that market;b) it has at least 35%, but less than 45%,of that market, unless it can show that itdoes not have market power; orc) it has less than 35% of that market,but has market power.


67/124

The Abuse of Dominancecontinued

Reading: Brassey: chapter 7


68/124


69/124

Section 7 - Problems

Two major problems:1.The percentage formula is arbitrary and

absolutely inflexible. It fails to takeaccount of the situation where a big firmhas very little power in a market (eg. Pickn Pay in the Grahamstown grocerymarket), or a small firm has considerable

power in a market (Martin Brassey in themarket for advocates who specialise incompetition law).


70/124

Section 7 - Problems

2. Like s.5, s.7 faces the problem of definingwhat a market is. Until the market can be defined, there canbe no dominance in that market. Brasseysuggests defining the market according tothree dimensions: product (the market for

take- away pizzas), space (inGrahamstown) and time (this month).


71/124

Market

The essential point is substitutability: aGinos pizza can be substituted for aDebonairs pizza which can be substituted

for a Pirates pizza. So the products ofthose 3 firms make up the market fortake-away pizzas in Grahamstown.

It does not matter whether consumers infact treat the different products assubstitutable, provided that they could

substitute one product for another.


72/124


73/124

Market power


74/124

Market power Having dominance in a market and market

power is not prohibited. It is the abuse ofthat dominance and power which areprohibited.

There are many cases in which totalmarket power lies in the hands of onecompany, eg:

Natural monopolies (Makana Municipality asthe supplier of electricity in Grahamstown)

Monopolies protected by patents(pharmaceutical companies).


75/124

Section 8(a)

Prohibition on charging an excessiveprice.

What is an excessive price? Section 1: excessive price means a price

for a good or service which- aa) bears no reasonable relation to the

economic value of that good or service;and

bb) is higher than the value referred to insub ara ra h aa .


76/124

Section 8(a)

Determining the price at which a firmearns a reasonable return is fraught withdifficulty, as a result of which it is rare that

a case is brought purely on the basis of aninfringement of s.8(a).


77/124

Section 8(b)

Prohibits a dominant firm from refusingcompetitors access to essential facilitieswhen it is economically feasible to do so.

Section 1: essential facility means aninfrastructure or resource that cannotreasonably be duplicated, and without accessto which competitors cannot reasonablyprovide goods or services to their customers.

Eg. Telkom refuses to allow a competitor touse the national network of telephone lines.


78/124

Section 8(b)

Note the elements which must be satisfied: The complainant must be a competitor . It must be an infrastructure or resource of which

use is denied. The infrastructure or resource must not be

reasonably capable of duplication by thecompetitor.

The absence of the infrastructure or resourcemust mean that the competitor cannot reasonablyprovide goods or services to its customers.


79/124


80/124

Sections 8(c) and (d)

Follow the same pattern that we saw withs.4 and s.5. Section 8(d) includes thespecific prohibitions, and 8(c) is the catch-

all which picks up prohibited practiceswhich fall outside of 8(d).


81/124


82/124


83/124

Sections 8(c) and (d)

Follow the same pattern that we saw withs.4 and s.5. Section 8(d) includes thespecific prohibitions, and 8(c) is the catch-

all which picks up prohibited practiceswhich fall outside of 8(d).


84/124

Section 8(d)It is prohibited for a dominant firm to (d) engage in any of the following exclusionary acts, unless the

firm concerned can show technological, efficiency or otherpro-competitive, gains which outweigh the anti-competitiveeffect of its act:i) requiring or inducing a supplier or customer to not deal

with a competitor;ii) refusing to supply scarce goods to a competitor whensupplying those goods is economically feasible;iii) selling goods or services on condition that the buyerpurchases separate goods or services unrelated to the objectof a contract, or forcing a buyer to accept a conditionunrelated to the object of a contract;iv) selling goods or services below their marginal or averagevariable cost;v) buying-up a scarce supply of intermediate goods orresources required by a competitor.


85/124

Section 8(d)

Note that (d)(i) and (d)(ii) are both essentiallytypes of refusals to deal (i) is where adominant firm uses its power to stop another firmdealing with a competitor, (ii) is where a

dominant firm itself refuses to supply goods to acompetitor.

(d)(ii) has a double escape route for thedominant firm, as the complainant must provethat the supply is economically feasible and that there are no pro-competitive gainswhich outweigh the anti-competitive effects.


86/124

(d)


87/124

Section 8(d)

8(d)(iii) prohibits the practice known astying, which appears to be particularlyprevalent in the liquor market (We will

only supply you with X brand of whisky ifyou also agree to stock Y brand of vodka).

The tie is only prohibited if it is absolute.

Offers of incentives to buy other productsare therefore not caught by the prohibition.

8(d)


88/124

Section 8(d)

Section 8(d)(iv) prohibits a dominant firmselling its goods or services at pricesbelow its marginal or average variable

cost. (Note that marginal cost andaverage variable cost are not normally thesame, so the complainant need only prove

that sales are below one or the other costprice).

S i 8(d)


89/124

Section 8(d)

s.8(d)(v) prohibits buying up a scarcesupply of intermediate goods or resourcesrequired by a competitor.

Problematic because it is unclear howmuch of the supply needs to be bought upin order to trigger the prohibition.

Cannot be triggered if the dominant firmcan show that it genuinely needs thegoods/resources for its own production.

SAA v Comair 2012 (1) SA 20


90/124

SAA v Comair 2012 (1) SA 20(CAC)

Focus on paras [68] [147] of the judgment.

SAA had been found by the CompetitionTribunal to have contravened s.8(d)(i) ofthe Act in that it had used its market power(arising out of its dominant position) to

exclude its rivals, thus harmingcompetition in the air travel market. SAAappealed to the CAC.

SAA v Comair


91/124

SAA v Comair

CAC upheld the Tribunals judgment. Interestingly, while confirming at para.[112] that s.8 requires an anti-competitiveeffect to be proved, the court thenendorses the proposition that once asignificant foreclosure of the market canbe proved (ie. harm to competitors) ananti-competitive effect on the market canbe inferred .

So no actual proof of the anti-competitiveeffect is re uired

8(d) 8( )?


92/124

8(d) or 8(c)?

It is common to prosecute under 8(d) withinfringement of 8(c) as an alternative. See: Competition Commission v Senwes

110/CR/Dec06 at paras. 153-173 of the judgment.

S i 8( )


93/124

Section 8(c)

As with sections 4 and 5, 8(c) is the catch-all that picks up conduct which fallsoutside the specific prohibitions of 8(d).

Prohibits a firm engaging in anexclusionary act, other than one listed in8(d).

s.1: exclusionary act means an act thatimpedes or prevents a firm from enteringinto, or expanding within, a market.

S i 9


94/124

Section 9

Defines price discrimination, prohibitsprice discrimination by a dominant firm,sets out types of conduct which are not

price discrimination. Price discrimination = charging different

prices to different customers for the same

goods or services.

S ti 9


95/124

Section 9

In order to succeed, the complainant mustshow that the price discrimination has hadthe effect of lessening or preventing

competition. In practice, the main ground of justification

is cost difference, allowed in terms of

s.9(2)(a), (eg. it costs less to supply bigcustomers) which can present aconsiderable evidential burden for the

complainant

S ti 9


96/124

Section 9

Saso l Oil v Nat ion w ide Poles 2006 (3)SA 400 (CAC)Case concerns the interpretation ofs.9(1)(a).CAC takes a strict approach to interpretingthe section, which will probably have the

effect of discouraging future complaintswhich rely on s.9.


97/124

Exemptions from provisions of

the Competition Act


98/124

S ti 10


99/124

Section 10

Exemption will be granted only if theotherwise prohibited agreement or practicecontributes to one of 4 listed objectives:

Maintains or promotes exports. Helps small businesses or PDI-controlled

firms to become competitive. Helps stop the decline of an industry. Promotes economic stability of an industry if

the relevant Minister also supports theindustry.


100/124


101/124

Institutions, Procedures

& Remedies

Reading: Brassey chapter 9

Institutions


102/124

Institutions

3 institutions are charged specifically withenforcement of the provisions of theCompetition Act:

The Competition Commission The Competition Tribunal The Competition Appeal Court

The Competition Commission


103/124

The Competition Commission

Look at the website:www.compcom.co.za

Sections 19-25 of the Act provide the legalbasis for the existence and functions of theCommission.

Look in particular at s.21, which sets out

the functions of the Commission.

The Competition Tribunal


104/124

The Competition Tribunal

Look at the website:www.comptrib.co.za

Sections 26-35 of the Act provide the legalbasis for the existence and functions of theTribunal.


the functions of the Tribunal.

The Competition Appeal Court


105/124

The Competition Appeal Court

Information is available on the CACsection of the Tribunals website.

Sections 36-39 of the Act provide the legalbasis for the existence and functions of theCAC.


the functions of the CAC.


106/124

Takeovers & Mergers

Reading: CCL chap. 15

Key documents


107/124

y

The Takeover Regulations s.120 of the 2008 Companies Act provides forthe Minister to prescribe a code, known as theTakeover Regulations , which replaced theSecurities Regulation Code on Takeovers andMergers. The final version of the newRegulations was published on 20 April 2011,and came into force with the Act on 1 May2011.

The new Regulations are simpler than the oldCode, as some provisions of the old Code are

now in the Companies Act 2008

Key documents


108/124

Key documents

The Companies Act 2008. The Companies Act is the source from

which the Regulations derive theirauthority. s.120 of the 2008 Act, (s.440C of the 1973

Act).

The Companies Act also establishes theorganisation charged with theimplementation and administration of the

Regulations

Key institution


109/124

y

s.196 of the 2008 Companies Act providesfor the establishment of the TakeoverRegulation Panel (TRP), which replacedthe Securities Regulation Panel (SRP)from 1 May 2011. (The SRP wasestablished in terms of s.440B of the 1973Companies Act.)

It seems that in practice the SRP hascontinued with business as usual, butunder a new name.

Definitions


110/124

Definitions

Takeover and merger are not defined ineither the 1973 Companies Act or in theold Code.

Takeover is not defined in the 2008Companies Act or in the new TakeoverRegulations.


111/124


112/124


113/124


114/124

So what are these things?


115/124

So what are these things?

Two basic scenarios:1. Company A acquires the assets of

company B in exchange for shares of

company A or a mixture of cash andshares. (sometimes called absorption) 2. Companies A and B transfer their

assets to a new company C inexchange for shares in C. (sometimescalled amalgamation)

Some history


116/124

Some history

In the beginning... The Companies Act 46of 1926 was the first piece of legislation todeal with takeovers, in sections 103,

103 bis and 103 ter . The main focus of s.103-103 ter was the

situation of minority shareholders, giving

them protection during a takeover, but alsocompelling them to sell their shares incertain circumstances.

The 1973 Companies Act


117/124


The Act originally dealt with takeovers ins.314-321.

s.314-321 was much more detailed than

the previous Act and essentially focussedon two areas: Disclosures required of the directors of offeror

and offeree companies. Protection of minority shareholders.


118/124



119/124


S.440B of the amended Act provided forthe establishment of the SecuritiesRegulation Panel, and s.440C(5) allowed

the Panel to draw up a set of rules toregulate affected transactions.

The rules, known as the Securities

Regulation Code on Takeovers andMergers, came into force on 1 Feb 1991.

The Securities Regulation Panel


120/124

Established by s.440B(1) of the 1973Companies Act (following the 1989amendments to the Act).

Originally had 15 members. Laterexpanded to 25 members, most appointedby various organisations, eg. the LawSociety, the JSE, and some co-opted

because of their experience.



121/124


The 25-member panel functioned as a sortof board of directors, with the day-to-dayrunning of the panel in the hands of the

executive director and permanent staff. Aside from monitoring all takeovers and

mergers, the executive provided guidance

to companies contemplating a takeover ormerger.



122/124


The functions of the panel were set out ins.440C of the 1973 Act, and the panelsinvestigatory powers were in s.440D.

The principal function was to regulate alltransactions or schemes which constituteaffected transactions.

The SRP has now been replaced by:

The Takeover Regulation Panel


123/124


Website: www.trpanel.co.za Established by s.196 of the 2008

Companies Act.

Replaced the Securities Regulation Panelon 1 May 2011, in terms of the 2008 Cos

Act.

Functions and powers are contained ins.119 of the 2008 Companies Act.



124/124


The TRP itself claims that it is business asusual: The TRP will perform the same functions as

those which were performed by the SRP. TRP website.

But a glance at the 2008 Cos Act andRegulations shows that that is not whollytrue.

Company Law B 3rd Term

Documents

Transcript of Company Law B 3rd Term