The Ansarada DealMakers Gala Awards held on 22 February was a particularly festive event. For the overwhelming majority it was the first such event they had attended since COVID-19 shut down the world in 2020. A little of the 'old normal' was embraced by everyone.
Over the past few years, the scope of public interest considerations in mergers has expanded more in South Africa than in any other jurisdiction globally. In 2022, dealmakers can expect an extensive and broad range of public interest conditions to be imposed on many mergers.
When a new year comes around, M&A practitioners are often asked to discuss trends in the market. Nowadays, this is always coupled with a request for a fresh view on what the pandemic has meant and will mean for deal-making. In my experience, the starting point for identifying trends is contextualisation.
It is probably fair to say that one of the areas of the Companies Act (71 of 2008) (Companies Act) which has been in the most desperate need of a revisit is the applicability of takeover law in the private company sphere. As it stands, in terms of s118(1)(c)(i) of the Companies Act, read with regulation 91 of the Companies Regulations, 2011 (Regulations), a private company is a "regulated company", and is therefore subject to takeover law if more than 10% of its securities (as defined for takeover law purposes – s117(1)(j)) were transferred amongst unrelated persons in the past 24 months.
To the extent that the answer to this query is in the affirmative, the relevant company will need to satisfy the solvency and liquidity test set out in s4 of the Companies Act, 2008, as s46(1)(b) of the Act contemplates that a company cannot make any proposed distribution unless it reasonably appears that the company will satisfy the Solvency And Liquidity Test immediately after completing the proposed distribution.
The COVID-19 pandemic generated a substantial downturn in economies worldwide. Although the disruptive impacts have been less severe for some jurisdictions, the reach of the pandemic on global economies is expected to extend well into 2022. Unprecedented times do, however, create opportunities and, as many economies begin to recover from the pandemic, merger and acquisition (M&A) activity is once again at the forefront of the minds of many company executives as they move on from recovery mode to thrive in the new normal.
Reappraising Section 164 of the Companies Act
Shareholders' growing tendency to campaign for particular corporate actions, or to influence fundamental transactions, has put a spotlight on the legal vacuum regarding the interpretation of s64 of the Companies Act (71 of 2008). Two recent cases attempt to create legal certainty on the intent and application of the appraisal rights remedy in s164.
Initially, I had a clear idea of what I wanted to write about in this article. I mulled over the topic for a while and just as I was about to start typing, the unthinkable happened – Russia invaded its neighbour, Ukraine. While trying to decipher the geopolitical reasons for the events that unfolded this past week, as explained by self-proclaimed experts on Twitter, I wondered how this would affect the economies of Africa as a whole, and South Africa specifically.
South Africa's innovation economy is beginning to show signs of maturity, with more corporate participation and international investors backing South African startups. Digital solutions are allowing for a convergence of industries, with telecom players operating in the FinTech space, and retailers introducing logistic solutions. Angel investing is a key component of any functional startup ecosystem, and it's an opportunity for individuals to participate in the innovation economy while remaining in their day jobs.