Unit 16 - Fundamental transactions Flashcards
What is a fundamental
transaction ?
- Transactions/actions for which specific rules are prescribed.
- They will require section 115 approval or pursuant to the company’s business rescue plan.
What are the conditions for disposal ?
- Approval by Special Resolution.
- Satisfaction of section 115 requirements.
What does “all or the greater part of the assets or undertaking” mean in the case of a companies assets ?
More than 50% of the company’s gross assets fairly valued irrespective of liabilities; or in the case of an undertaking, more than 50% of the undertaking fairly valued.
What must an agreement to merge contain ?
- Proposed MOI of new company.
- Conversion of securities.
- New proposed directors (Name and ID).
- Consideration (details and manner of payment).
- Allocation of assets and liabilities.
Discuss notice to creditors.
- Creditor may apply for review on the grounds that they will be materially
prejudiced within 15 business days from date of delivery. - Company must wait until the matter is decided to proceed.
- Court may grant effect to the objection if they are convinced that the creditor is:
- Bona fide.
- Prejudicial.
- No other remedies.
Discuss the implementation of the merger.
- MOI of new company.
- Approvals from regulatory authorities.
- CIPC deregisters non-surviving company.
- Notice filed with CIPC and documentation which must include:
- Confirmation of section 113 and 115 compliance.
- The New MOI.
- Proof of sanction from regulatory authority incl Bank’s Act.
- Proof of approval in terms of Competition Act.
Discuss the section 114 arrangements.
- Board proposes the arrangement and
shareholders approve by a special resolution. - An independent expert must assess the fairness of the arrangement.
- Expert must be impartial, qualified, and have no past or present connection to the company.
- The report should explain how the arrangement affects shareholder rights and security values; any impact on the company’s business; any director interests affected by the arrangement.
Discuss section 115.
- Fundamental transactions must be approved in terms of section 115 or be pursuant to a business rescue plan.
- Requires special resolution or a court where opposed by 15% or on application for leave.
What is the purpose of
regulation ?
- Market integrity and fairness.
- Information disclosure.
- Prevents unfair action.
What is an affected transaction ?
- Disposal of major assets or business.
- Mergers or amalgamations.
- Schemes of arrangement.
- Acquisitions of voting securities or offers to acquire.
Who is a regulated company ?
Public or state-owned companies, and certain private companies with large shareholder transfers.
Discuss the disclosure of share transactions.
- Notification requirement when a person acquires or disposes of 5% or more of a company’s shares (or multiples of 5%).
- Company must report to TRP and shareholders.
Discuss compulsory acquisitions and squeeze-outs.
- 90% acceptance required for an offer to trigger a compulsory acquisition.
- After 90% acceptance, offeror can acquire the remaining shares and force the sale.
