Qualifying Factors and Assessment Process for Affected Transactions & TRP Exemption Applications

Qualifying Factors and Assessment Process for Affected Transactions & TRP Exemption Applications

BROAD OVERVIEW

 

What kind of transactions does the TRP regulate?

The TRP regulates “affected transactions” or “offers” as defined in the Companies Act, 2018 (“Companies Act”) (“mergers and takeovers”). These transactions relates to the acquisition of more than 35% of the voting securities of a regulated company, disposal of major assets or undertakings a company, schemes of arrangements, amalgamations or mergers, acquisitions of 5%, 10% or 15%, or any further multiple of 5% of the issued securities of a company and compulsory acquisitions and squeeze outs.

The TRP has no authority to consider:

  1. the commercial advantage or disadvantages of the above transactions;
  2. or transactions which are not affected transactions or offers, as defined in the Companies Act.

Which companies are regulated by the TRP?

TRP regulates mergers and takeovers involving a profit company or securities of that company if the company is a public company, a state owned company (unless the state owned company has been exempted) and/or private companies if the memorandum of incorporation of the company so provides or if 10% of the issued securities of the company has been transferred in a period of 24 months before the date of the particular transaction (except if the transfer is between related or interrelated persons).

Functions of The Panel

  1. To investigate complaints relating to Affected Transactions and Offers;
  2. To regulate affected transactions or offers set in part B and C of chapter 5 of the Companies Act that involve regulated companies.

Regulated companies are:

  1. a profit company which is a public company;
  2. a state owned company; and
  • a private company, but only if:
    1. the memorandum of incorporation of the company makes provision for the Panel’s authority to apply; or
    2. if more than 10% of the issued securities of the company have been transferred within a period of 24 months, immediately before the date of a particular affected transaction or offer;

Affected Transactions and Offers include (amongst others):

  1. disposals of all or the greater part of assets or undertaking of a company by a regulated company;
  2. amalgamations or mergers of regulated company;
  • schemes of arrangement between a regulated company and its shareholders;
  1. mandatory offers to shareholders of a regulated company;
  2. compulsory acquisitions of remaining shares of a regulated company;
  3. acquisitions of, or announced intention to acquire 5%, 10% or any multiple of 5% of the issued shares of a regulated company; and
  • the announced intention to acquire the remaining shares in a regulated company.

 

 

 

ASSESSMENT PROCESS

(RELEVANT EXTRACT FROM THE COMPANIES ACT)

STEP 1:

ASSESSMENT:  ARE YOU A ‘REGULATED COMPANY’ IN TERMS OF THE COMPANIES ACT?

“regulated company” means a company to which … the Takeover Regulations apply, as determined in accordance with section 118(1) and (2):

s118 (1)     the Takeover Regulations apply with respect to an affected transaction or offer involving a profit company or its securities if the company is-

  • a public company;

(b)     a state-owned company, except to the extent that any such company has been exempted in terms of section 9; or

(c)      a private company, but only if

(i)      the percentage of the issued securities of that company that have been transferred [other than by transfer between or among related or inter-related persons] within the period of 24 months immediately before the date of a particular affected transaction or offer exceeds [10%]; or

(ii)     the Memorandum of Incorporation of that company expressly provides that the company and its securities are subject to … the Takeover Regulations, irrespective of whether the company falls within the criteria set out in subparagraph (i).

(own emphasis added)

 

STEP 2:

ASSESSMENT:     IF YOU ARE YOU A ‘REGULATED COMPANY’, IS THE PROPOSED TRANSACTION AN ‘AFFECTED TRANSACTION’?

S117 (c)     “affected transaction” means-

(i)      a transaction or series of transactions amounting to the disposal of all or the greater part of the assets or undertaking of a regulated company, as contemplated in section 112, subject to section 118(3);

(ii)     an amalgamation or merger, as contemplated in section 113, if it involves at least one regulated company, subject to section 118(3);

 (iii)    a scheme of arrangement between a regulated company and its shareholders, as contemplated in section 114, subject to section 118(3);

(iv)     the acquisition of, or announced intention to acquire, a beneficial interest in any voting securities of a regulated company to the extent and in the circumstances contemplated in section 122(1) – [NOTE: General exemption granted by TRP];

(v)     the announced intention to acquire a beneficial interest in the remaining voting securities of a regulated company not already held by a person or persons acting in concert;

(vi)    a mandatory offer contemplated in section 123; or

(vii)   compulsory acquisition contemplated in section 124;

(own emphasis added)

 

STEP 3:

EXEMPTION:       IF YOU ARE YOU A ‘REGULATED COMPANY’ AND IT IS AN AFFECTED TRANSACTION, EXEMPTION MAY BE APPLIED FOR FROM THE TRP

 

S119 (6)     The Panel may wholly or partially, and with or without conditions, exempt an offeror to an affected transaction or an offer from the application of any provision of … the Takeover Regulations if-

(a)     there is no reasonable potential of the affected transaction prejudicing the interests of any existing holder of a regulated company’s securities;

(b)     the cost of compliance is disproportionate relative to the value of the affected transaction; or

(c)      doing so is otherwise reasonable and justifiable in the circumstances having regard to the principles and purposes of … the Takeover Regulations.

 

Panels obligations in relation to regulating affected transactions

The above application for exemption is read light of the Panel’s obligations to protect shareholders during affected transactions and offers by:

  1. ensuring integrity of markets and fairness to shareholders during affected transactions;
  2. ensuring that the necessary information is provided timely to shareholders to make an informed decision during affected transactions;
  • preventing action by companies intended to impede, defeat or frustrate affected transactions;
  1. ensuring that persons undertaking affected transactions are ready, able and willing to implement the transaction;
  2. ensuring that all shareholders are treated equally and equitably during an affected transaction;
  3. ensuring that all shareholders receive the same information during an affected transaction, and that no relevant information is withheld to shareholders;
  • ensuring that shareholders are provided sufficient information, and permitted sufficient time to enable them to reach a properly informed decision about an affected transaction.