WARNING! AUTHORITY TO TRANSACT LIMITED BY THE COMPANIES ACT, 2008
Chapter 5 of the Companies Act, 2008 has far reaching consequences for companies that are considered to be Regulated Companies and that are participating in Affected Transactions. Such far reaching consequences can even impact on private Companies!
Fundamental Transactions are transactions that would have an impact on the structure or business of a Company and require one to proceed with caution to ensure that they are completed with legislation in mind.
Fundamental transactions include the following:
- A disposal of all or the greater part of the assets or undertaking (business) of the Company;
- An amalgamation or merger with another Regulated Company;
- A scheme of arrangement between a Regulated Company and its shareholders;
Affected Transactions include all Fundamental Transactions if they relate to a Regulated Company as well as certain proposed shareholding changes for a Company that is considered to be a Regulated Company.
What is a Regulated Company? A Regulated Company means a Company to which Parts B and C of Chapter 5 and the Takeover Regulations apply, and includes the following:
- A public Company;
- A state-owned Company;
- A private Company whose Memorandum of Incorporation expressly provides that the Company and its securities are subject to Chapter 5;
- A private Company, but only if 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% of the issued securities.
Point 4 above has enormous implications for private Companies and their ability to freely transact as previously experienced under the old Companies Act. Directors must now give consideration to proposed transactions and make enquiries about whether approval from the Takeover Regulation Panel is required. In some instances the Company is required to retain the services of an Independent Expert before carrying out the transaction.
Should you be entering into any Affected Transactions, please contact Dave, Alexis or Karen at our offices so that we can assist you with ensuring that the transaction is compliant with the Companies Act, 2008.
Alexis Sacks : Dave Rich