A change in or the consolidation of a company can be achieved in many different ways and one way is to use a scheme of arrangement. Part A of Chapter 5 of the Companies Act 71 of 2008 (hereafter ‘the Act’) provides for three types of fundamental transactions, namely, an amalgamation or merger, a disposal of all or the greater part of the assets or the undertaking of a company and for schemes of arrangement. The research will be limited to schemes of arrangement (hereafter ‘arrangement’), specifically on the meaning of the term ‘arrangement’. Schemes of arrangement are provided for in section 114 of the Act which provides that the board of a company may propose and implement any arrangement between the company and holders of any class of its securities by way of, among other things; a consolidation of securities of different classes, a division of securities into different classes, an expropriation of securities from the holders, exchanging any of its securities for other securities, a re-acquisition by the company of its securities or a combination of the methods mentioned above. The list of the methods mentioned above does not constitute a closed list of the methods that could be employed to effect a scheme of arrangement. This is so because the list is preceded by the words ‘may include’ and ‘by way of’, ‘among other things’. Section 114 also requires the retention of an independent expert, who must, as part of the report to the shareholders, include a copy of sections 115 and 164 of the Act. Section 115 deals with the requisite approval for all fundamental transactions and section 164 deals with appraisal rights of minority shareholders. Section 114 of the Act lists methods with which a scheme of arrangement may be effected, including, inter alia, an expropriation of securities from the holders and a reacquisition by the company of its securities; however, the Act fails to define what a scheme of arrangement is. As a result of the legislature’s failure to define what an arrangement is, case law provides insight into discerning the parameters of what may or may not constitute a scheme. There has been much controversy regarding what constitutes an arrangement, especially in the area of the nature of the consideration given in lieu of shareholders’ shares, with courts differing in the interpretation of what qualifies as an arrangement. Of importance to note on this point is the addition of the expropriation of securities from the shareholders in section 114 of the Act because with the Companies Act 61 of 1973 (hereafter ‘the 1973 Act’), the expropriation of securities for cash was held by the courts to fall outside the scope of an arrangement in Ex Parte Sabel (EDMS) Bpk, which approach was later followed by the court in Ex Parte Natal Coal Exploration Co Ltd. Ex Parte Suiderland Development Corporation rejected this approach. In this case Van den Heever J stated that he did not understand why the ‘compensating advantage’ should have to take the form of retention of rights as members of the company and that if the legislature wished to limit the ambit of an ‘arrangement’ it would have done so by definition in the Act. The current Act has potentially resolved this controversy by including expropriation as one of the methods that could be employed as a means of effecting a scheme of arrangement. In an obiter in Ex Parte Mielie-Kip Ltd, Flemming DJP, stated that a scheme of arrangement may provide for the termination of the relationship between a company and its shareholders, with or without substitution of a new relationship between the said parties. The differing court rulings will be discussed in detail below. Schemes of arrangement have not been challenged in court under the Act, and as such, the legal precedents that will be discussed in this paper are based on the predecessor of the Act, the 1973 Act. Another important question to be considered is whether section 48 buy-backs by the company constitute a scheme of arrangement. The said section of the Act states that if a company reacquires its previously issued shares in excess of five per cent, it has to comply with the requirements of section 114 and 115. However, it does not state whether this means that the transaction is now a scheme of arrangement. Furthermore, a reacquisition of previously issued securities by a company is listed in section 114(1)(c) as one of the methods that can be used to effect a scheme of arrangement; however, as with section 48 of the Act, section 114 does not state whether or not this reacquisition will now be a scheme of arrangement. Due to the fact that schemes of arrangement are included in the definition of affected transactions in section 117(1)(c)(iii) in Part B of Chapter 5 of the Act, they must comply with the Takeover Regulations and Part C of the Act. It is thus necessary to consider the parameters of what a scheme of arrangement will constitute so as to align the transactions within the regulatory framework of the Act. / Dissertation (LLM (Corporate Law))--University of Pretoria, 2020. / Mercantile Law / LLM (Corporate Law) / Unrestricted

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This dissertation focuses on two central capital market transactions, takeovers and initial public offerings (IPOs), from both a theoretical and an empirical point of view. After an introductory chapter, the first two chapters analyse how minority shareholders are affected by a change in take-over regulation (introduction of the mandatory bid rule) in Germany in 1995. The last chapter focuses on the pricing and timing of going-public transactions. Chapter 2 focuses on the absolute wealth effect of the mandatory bid rule and formalises the trade-off minority shareholders of corporate raiders face with respect to the adoption of a mandatory tender offer after a shift in control. Under plausible assumptions about the distribution of security and control benefits, minority shareholders of acquirers profit from the adoption of the mandatory bid rule. A subsequent empirical study supports this hypothesis by measuring the stock price effects after the acceptance of the German Takeover Code. Chapter 3 uses a dataset of German dual-class shares during 1988-1997 to study how the change of corporate governance rules affects the price differential between voting and non-voting stock. First, the chapter discusses how mechanisms to separate control from cash-flow rights relate to the value of control. Second, the chapter analyses how minority voting and non-voting shareholders participate in transfers of corporate control under the alternative regulatory structures pre- and post- 1995. By providing an analysis of sequential going-public decisions. Chapter 4 outlines conditions under which the likelihood of a second IPO increases after a first firm has gone public ('hot issue markets'). Two effects can trigger the rise of hot issue markets in a setting with asymmetric and costly information about both firm quality and industry prospects: risk-induced selling pressure and informational free-riding on the industry news conveyed by a first IPO. Finally, the model offers an explanation for the empirical finding that hot issue markets exhibit a higher degree of underpricing than cold issue markets.

This thesis contains an analysis of the impact on shareholder wealth of domestic and cross-border takeover bids for UK listed companies. The study covers the calendar years from 1986 to 1991 inclusive. For the cross-border acquisitions, data is available for an analysis of 143 targets, 71 bidders, and 55 matched pairs of targets and bidders. For domestic acquisitions, data was available for 568 targets, 414 bidders and 356 pairs of targets and bidders. Three different event study methodologies are applied; the capital asset pricing model, the market model, and the index model. UK target companies gained significantly from both domestic and cross-border takeover bids. Over the period from eight months prior, to one month after, the month of the bid announcement (t-8, t+1), cumulative abnormal returns exceeded +20.2% in cross-border and +16.6% in domestic acquisitions. Both domestic and overseas bidders underperformed during the five month period following the bid announcement. However, over the whole analysis period (t-8, t+5), UK bidders performed significantly better than overseas bidders. Analysis of joint abnormal returns to pairs of targets and bidders reveals that both cross-border and domestic acquisitions in the UK during the 1986-1991 period created significant shareholder wealth. However, the gains to target shareholders exceed the total gain, thus resulting in a transfer of wealth from bidders to targets.

Target firms in Australian takeovers are required to obtain an independent assessment of the offer price in situations where the Corporations Law considers the bidder has a superior bargaining position. The intention of this requirement is to protect target shareholders from being offered a lower takeover premium. The only empirical study of expert reports, Eddey (1993), is consistent with expert reports achieving their purpose, as the results indicate no difference in target firm premiums in offers with and without an expert report. Eddey also reports that a revision in offer price is more likely where an expert indicates the bid is �not fair and reasonable.� Using all takeovers from 1990 to 2000, this thesis aims to re-examine and substantially extend the findings in Eddey. As the sample includes all bids, irrespective of the form of payment consideration, the thesis will assess whether the results in Eddey can be extrapolated from cash-based bids to all takeover bids. In addition, the analysis will extend Eddey�s results by investigating whether expert reports result in a higher probability of a revision in offer price relative to takeovers without an expert report. This study also investigates the impact of the expert report on bidder announcement abnormal returns and examines the returns to both bidders and targets when the expert report is released. This will add to the limited current knowledge on the impact of expert reports on the capital market. This thesis also tests the validity of public criticisms of expert independence. Firstly, experts have been publicly criticised on the basis that they are not independent from the target firm. It has been suggested that such experts will be more likely to provide an opinion that agrees with the recommendation of target directors. Secondly, it has been alleged that experts who are also the target auditor provide their reports at a lower fee by cross-subsidising the reports� preparation from other fees received from the client. The concern with this practice is that these reports may be of lower quality. This criticism is tested by developing an expert fee model. This fee model is then used to assess whether, similar to evidence in the auditing field, �quality� experts earn a fee premium. The results indicate that the need for an expert report does not affect bidder abnormal returns at either the announcement of the takeover or release of the expert report. On the other hand, target shareholders earn significantly lower abnormal returns at the announcement of a bid where an expert report is required. This result is inconsistent with Eddey (1993) and raises doubt over whether experts prevent bidders from using their superior bargaining position to offer target shareholders a lower premium. Consistent with Eddey, the probability of an alteration in offer price is greater where an adverse expert opinion is given. The results also show that the presence of an expert increases the likelihood of a bid revision relative to takeovers in general. Target abnormal returns on the release of an expert report are positive and significant, irrespective of the type of expert opinion. This result however, is sensitive to any association between the author of the report and the target. In the case that an expert discloses any prior or current business dealings with the target, abnormal returns are insignificant. The conclusion from this finding is that the market perceives expert reports prepared by an associate of the target as lacking credibility. In light of this lack of information content it is recommended corporate regulators review those experts permitted to prepare reports. Contrary to the published criticisms, experts who have business dealings with the target are just as likely as other experts to provide an opinion that agrees with the recommendation of directors. The tests of a fee reduction by experts associated to the target indicate significant lower fees where the expert is the target auditor. Further analysis shows this result is only significant where the auditor is also a non-Big 6/5 firm. These auditors are also found to provide reports that are significantly shorter than other experts, suggesting the cut in fee is achieved by reducing the amount of effort. The results also find that the top two experts, Grant Samuels and Associates and Price Waterhouse Coopers, earn a fee premium over other experts. The finding of a fee premium for a large accounting firm indicates that such firms may receive a premium for both auditing and non-audit services.

A takeover announcement does not necessarily mean good news for stockholders of the acquiring firm. In fact, for a majority of takeovers it means losses in share prices. Motives that can explain this trend are agency and hubris. This thesis is an event study of 28 acquir-ing firms in Sweden between the years 1997-2005, and the purpose is set to see whether stock prices are affected or not. This has been done by the help of the market model. The empirical results show that the takeovers are on average value decreasing operations which indicate that agency and hubris are the primary motives even though one can not for cer-tain exclude synergy.

<p>A takeover announcement does not necessarily mean good news for stockholders of the acquiring firm. In fact, for a majority of takeovers it means losses in share prices. Motives that can explain this trend are agency and hubris. This thesis is an event study of 28 acquir-ing firms in Sweden between the years 1997-2005, and the purpose is set to see whether stock prices are affected or not. This has been done by the help of the market model. The empirical results show that the takeovers are on average value decreasing operations which indicate that agency and hubris are the primary motives even though one can not for cer-tain exclude synergy.</p>

This paper examines the Ontario Securities Commission's regulation of poison pills as well as several proposals to reform the current regulatory regime. In particular, the paper argues that regulation and reforms should be viewed within the context of two fundamental, normative questions that underlie much of corporate law: what is the purpose of the corporation, and who should determine whether these goals are being met. After outlining several competing theories, the paper explains why a corporate model based on the shareholder-centric, wealth maximization theory is best suited for hostile takeover situations. Additionally, the paper argues that a structural bid reform that would require hostile bidders to include minimum tender conditions and additional opportunities for target company shareholders to tender following a successful bid would provide the best way to incorporate this corporate model into Ontario securities regulation.

This paper examines the Ontario Securities Commission's regulation of poison pills as well as several proposals to reform the current regulatory regime. In particular, the paper argues that regulation and reforms should be viewed within the context of two fundamental, normative questions that underlie much of corporate law: what is the purpose of the corporation, and who should determine whether these goals are being met. After outlining several competing theories, the paper explains why a corporate model based on the shareholder-centric, wealth maximization theory is best suited for hostile takeover situations. Additionally, the paper argues that a structural bid reform that would require hostile bidders to include minimum tender conditions and additional opportunities for target company shareholders to tender following a successful bid would provide the best way to incorporate this corporate model into Ontario securities regulation.

Target firms in Australian takeovers are required to obtain an independent assessment of the offer price in situations where the Corporations Law considers the bidder has a superior bargaining position. The intention of this requirement is to protect target shareholders from being offered a lower takeover premium. The only empirical study of expert reports, Eddey (1993), is consistent with expert reports achieving their purpose, as the results indicate no difference in target firm premiums in offers with and without an expert report. Eddey also reports that a revision in offer price is more likely where an expert indicates the bid is �not fair and reasonable.� Using all takeovers from 1990 to 2000, this thesis aims to re-examine and substantially extend the findings in Eddey. As the sample includes all bids, irrespective of the form of payment consideration, the thesis will assess whether the results in Eddey can be extrapolated from cash-based bids to all takeover bids. In addition, the analysis will extend Eddey�s results by investigating whether expert reports result in a higher probability of a revision in offer price relative to takeovers without an expert report. This study also investigates the impact of the expert report on bidder announcement abnormal returns and examines the returns to both bidders and targets when the expert report is released. This will add to the limited current knowledge on the impact of expert reports on the capital market. This thesis also tests the validity of public criticisms of expert independence. Firstly, experts have been publicly criticised on the basis that they are not independent from the target firm. It has been suggested that such experts will be more likely to provide an opinion that agrees with the recommendation of target directors. Secondly, it has been alleged that experts who are also the target auditor provide their reports at a lower fee by cross-subsidising the reports� preparation from other fees received from the client. The concern with this practice is that these reports may be of lower quality. This criticism is tested by developing an expert fee model. This fee model is then used to assess whether, similar to evidence in the auditing field, �quality� experts earn a fee premium. The results indicate that the need for an expert report does not affect bidder abnormal returns at either the announcement of the takeover or release of the expert report. On the other hand, target shareholders earn significantly lower abnormal returns at the announcement of a bid where an expert report is required. This result is inconsistent with Eddey (1993) and raises doubt over whether experts prevent bidders from using their superior bargaining position to offer target shareholders a lower premium. Consistent with Eddey, the probability of an alteration in offer price is greater where an adverse expert opinion is given. The results also show that the presence of an expert increases the likelihood of a bid revision relative to takeovers in general. Target abnormal returns on the release of an expert report are positive and significant, irrespective of the type of expert opinion. This result however, is sensitive to any association between the author of the report and the target. In the case that an expert discloses any prior or current business dealings with the target, abnormal returns are insignificant. The conclusion from this finding is that the market perceives expert reports prepared by an associate of the target as lacking credibility. In light of this lack of information content it is recommended corporate regulators review those experts permitted to prepare reports. Contrary to the published criticisms, experts who have business dealings with the target are just as likely as other experts to provide an opinion that agrees with the recommendation of directors. The tests of a fee reduction by experts associated to the target indicate significant lower fees where the expert is the target auditor. Further analysis shows this result is only significant where the auditor is also a non-Big 6/5 firm. These auditors are also found to provide reports that are significantly shorter than other experts, suggesting the cut in fee is achieved by reducing the amount of effort. The results also find that the top two experts, Grant Samuels and Associates and Price Waterhouse Coopers, earn a fee premium over other experts. The finding of a fee premium for a large accounting firm indicates that such firms may receive a premium for both auditing and non-audit services.