By Robyn Shepherd, Attorney 
Category: Company Law | Commercial Law

A regulated company is either a public company, a state-owned company or private company where more than 10% of its issued securities have been transferred within the previous 24 months (other than by transfer between related or interrelated persons), or a private company which is regarded as a regulated company in terms of its Memorandum of Incorporation (“MOI”).

A regulated company is subject to Part C of the Companies Act 71 of 2008 “the Act” as well as the Takeover Regulations. Therefore, the company needs to comply both with Part C of the Act and with the Takeover Regulations where a transaction is affected.

An affected transaction is defined in S117(1)(c) of the Act as follows:
A transaction, or series of transactions, amounting to the disposal of all or the greater part of the assets or undertaking (business) of a regulated company; An amalgamation or merger involving at least one regulated company; A scheme of arrangement between a regulated company and its shareholders; The acquisition of, or announced intention to acquire, a beneficial interest in any voting securities of a regulated company; 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 together; A mandatory offer; or A compulsory acquisition.

The Takeover Regulation Panel (TRP)
The TRP was established to guarantee integrity of markets and fairness to shareholders during affected transactions. A company can apply to the TRP for exemption from the Takeover Regulations which may be granted if the affected transaction does not reasonably prejudice any shareholder, the cost of compliance is disproportionate to the relative value of the affected transaction or doing so is otherwise reasonable and justifiable in the circumstances.

The Takeover Regulations do not apply when an approved business rescue plan requires or contemplates the fundamental transaction, the transfer of more than 10% of the issued shares is due to a company buy-back or the transfer is between related or interrelated persons.

If you are planning on selling your business, remember to take the regulations into account. Further, it is important to remember when a transaction will be affected in accordance with s117 (1) (c) of the Act as compliance is vital herein.

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