Magister Legum - LLM (Public Law and Jurisprudence) / Prior to 2010, as a result of a sluggish global economy, the amalgamation and merger procedure in South Africa was active although it was at an all-time low.1 However, in 2010, there was an increase in amalgamation and merger activity in South Africa which was more pronounced in cross-border deals in South Africa and general corporate restructurings.2 As a result of this, as well as the developed infrastructure that was placed in preparation for the FIFA 2010 World Cup, the country attracted more and more foreign markets to invest in South Africa which contributed to the increasing rate of amalgamations and mergers.3 Nevertheless, the global recession has also contributed to the increase in amalgamations and merger activity as many companies in South Africa have merged to buck the negative trend that most companies find themselves in, increase their revenue and work with each other to advance the position of the company on a par with those of its competitors. However, there are various other reasons as to why companies consolidate their assets and liabilities. Recently, Tiso Blackstar, a merged investment holding company, consolidated their assets, liabilities and skills between Blackstar Plc and Tiso Investment Holdings to expand its operations and to seek investment opportunities in Africa which is boasting with economic growth.4 The company was of the opinion that the merger would not only enhance its scale and profitability, but it would also put the group on a new growth path.5 There are many benefits in which companies may reap from amalgamations and mergers, but elucidating them is beyond the scope of this research.

The capital maintenance rules stem from the English company law and were primarily aimed at protecting the rights of a company’s creditors. Before the introduction of the Companies Amendment Act 37 of 1998, a company was prohibited from purchasing its own shares. After this legislation was passed, a company was able to do so, provided that it satisfied the solvency and liquidity test and also complied with the new statutory provisions set out by sections 85 to 89 of the Companies Act 61 of 1973. Section 48 of the Companies Act 71 of 2008 now regulates the acquisition by a company of its own shares, as well as the acquisition of shares in its holding company by a subsidiary company. The above actions also fall under the ambit of a “distribution” as defined in the Act and therefore need to satisfy the requirements of section 46 of the Act as well. Unlike its predecessor, the provisions in the new Act are very broad and devoid of guidelines. The emphasis is placed on companies satisfying the principles of solvency and liquidity. Non-adherence to these provisions gives rise to the personal liability of the company’s directors. The provisions of section 48 do not apply where a dissenting shareholder exercises his appraisal rights in terms of section 164 of the new Act, or where a company redeems redeemable securities. These exceptions do, however, still amount to “distributions” and will accordingly need to satisfy the requirements contained in section 46 of the Act. Redeemable securities were initially not exempted from the provisions of section 48. This would potentially have given rise to a situation where a company could approach a court in terms of section 48(6) to reverse a redemption of its securities. It would have had dire consequences for financing by way of redeemable securities. In terms of the Companies Amendment Act 3 of 2011 redeemable securities are now specifically exempted from the provisions of section 48. In terms of the new Act a subsidiary company is allowed to purchase shares in its holding company to a maximum of 10% in the aggregate of the issued shares of any share class, provided that no voting rights attached to such shares may be exercised. The new Act fails to properly address some of the issues regarding the “round-tripping” of dividends and the declaration of a dividend in specie that were already identified as far back as 2001. Where the consideration for a repurchase constitutes a “dividend” as defined in the Income Tax Act 58 of 1962, the company will be liable to pay secondary tax on companies in respect thereof. If a distribution does not constitute a dividend, capital gains tax is payable with regard to it. Share repurchases are allowed in terms of Canadian corporate law after the legislative reform which occurred in that country during the 1970’s. The Canadian Business Corporations Act contains provisions that bear a striking resemblance to the provisions of the new Act adopted in South Africa. Whilst the basis and rationale behind the new corporate legislation cannot be faulted, a host of issues and concerns still remain. The unfortunate consequence is that the new Act lacks transparency and is fraught with clumsy errors. Copyright / Dissertation (LLM)--University of Pretoria, 2012. / Mercantile Law / unrestricted

Thesis / The Companies Bill B61-2008 proposes to introduce appraisal rights into South African law. Appraisal entitles a shareholder to demand payment from the corporate issuer of his shares at a fair cash value in certain instances where major transactions which would change the company's direction have been proposed. It allows a cash exit rather than being coerced into supporting the majority's decision. Arriving at a fair share value is a challenge to appraisal. Presently, under the Personal action, a shareholder who opines that the company's act or omission is unfairly prejudicial or that its affairs are conducted in an unfairly prejudicial manner, may apply to court for an appropriate order. It enables the minority to challenge the majority's decision. Both remedies will be available to dissenting shareholders under the new dispensation and a shareholder must decide which remedy best suits his purposes. Appraisal should be seen as a last resort. / Law / LL.M. (Corporate Law)

Thesis / The Companies Bill B61-2008 proposes to introduce appraisal rights into South African law. Appraisal entitles a shareholder to demand payment from the corporate issuer of his shares at a fair cash value in certain instances where major transactions which would change the company's direction have been proposed. It allows a cash exit rather than being coerced into supporting the majority's decision. Arriving at a fair share value is a challenge to appraisal. Presently, under the Personal action, a shareholder who opines that the company's act or omission is unfairly prejudicial or that its affairs are conducted in an unfairly prejudicial manner, may apply to court for an appropriate order. It enables the minority to challenge the majority's decision. Both remedies will be available to dissenting shareholders under the new dispensation and a shareholder must decide which remedy best suits his purposes. Appraisal should be seen as a last resort. / Law / LL.M. (Corporate Law)