Mandatory Offers
| Jurisdiction | South Africa |
| Citation | (2000) 12 SA Merc LJ 382 |
| Date | 25 May 2019 |
| Published date | 25 May 2019 |
| Author | Stephanie Luiz |
| Pages | 382-396 |
Mandatory Offers
STEPHANIE LUIZ*
University of South Africa
Introduction
Takeovers and mergers, or what are now called 'affected transactions,
are regulated in terms of the Securities Regulation Code on Takeovers
and Mergers: Affected transactions are in essence transactions resulting
in either the acquisition or consolidation of control of a company.
2
Control of a company could be achieved by purchasing a block of
shares from one or a few shareholders. In such a situation the question
arises whether the minority shareholders should be required to remain as
such under the new controlling shareholder or whether they should be
given the right to dispose of their investment in the company at the same
price as the selling controlling shareholder(s) so that they are not locked
into a company in which there has been a change of control. It is clear
that the Securities Regulation Panel endorses the latter approach through
the Code.
One of the main objects of the Code is to 'ensure fair and equal
treatment of all holders of relevant securities in relation to affected
transactions'.
3
The Code contains a number of general principles
4
and
certain rules
5
aimed at achieving this stated purpose. One of the rules
requires comparable offers be made to acquire all the outstanding
securities in the company when there is an acquisition of control or a
consolidation of control by the creeping acquisition of securities.
6
These
are referred to as mandatory offers. The rationale underlying the
mandatory offer provisions is that they provide some protection to non-
controlling shareholders by curtailing the operations of entrepreneurs
who could gain control of a company by buying out one or two of the
larger controlling shareholders, ignoring the smaller shareholders.'
* BA LLB (Natal) LLM (Cantab) H Dip Co (Wits). Professor of Company Law, University of
South Africa.
Here referred to as 'the Code'. Chapter XVA of the Companies Act 61 of 1973 ('the Act') lays
down the broad framework in which the regulation of affected transactions takes place. The
Securities Regulation Panel which was given the responsibility of making rules to regulate affected
transactions was established in terms of s 440B of the Act. Although the Code made by the Panel
under s 440C is generally understood to regulate takeovers and mergers, the words 'takeover' and
'merger' are never used in the Code and have no legal definition. The phrases 'takeover offer'
and 'takeover scheme' were originally legally relevant in the context of the now repealed
ss 314-321 of the Act.
See the definition of an 'affected transaction' in s 440A(1) of the Act and s B(1) of the Code.
3
Explanatory Notes 1(a) of the Code. See also
Haslam & others v Sefalana Employee Benefits
Organization
1998 (4) SA 964 (W) at 969.
See, for example, general principles 1, 10, and 11 of the Code.
5
See, for example, rules 11.1, 12(a), 13, and 16.1 of the Code.
6
See rule 8.1 of the Code.
7
Diemont JA in
Spinnaker Investments (Pty) Ltd v Tongaat Group Ltd
72, whilst commenting on s 314 of the Act which previously regulated takeovers in South Africa,
382
(2000) 12 SA Merc LJ 382
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