The reacquisition of shares in terms of the Companies Act 71 of 2008

Abstract

This mini-dissertation evaluates the regulation of share reacquisitions, as provided for in the Companies Act 71 of 2008 (the “Act”). The need and purpose for a legal system, such as the South African regime, to allow reacquisitions will be studied as background. Protection against the potential prejudice which creditors and shareholders are exposed to due to such distribution is stressed. Thereafter material issues and considerations relating to the provisions in the Act regulating reacquisitions are evaluated, including inconsistent terminologies usage and unnecessary cross-referencing. Significant legal questions such as whether a share reacquisition contemplated in section 48(8)(b) of the Act constitutes a scheme of arrangement or is merely subject to the requirements of sections 114 and 115 is furthermore considered, in light of the judgment in Capital Appreciation Ltd v First National Nominees (Pty) Ltd 2022 (6) SA 67 (SCA). The regulation of reacquisitions is also explored in view of the proposed changes in the Companies Amendment Bill, 2021. Finally, against the aforementioned context, this mini-dissertation considers if shareholders and creditors are adequately protected in the Act during reacquisitions. This will include a comparison brief reference to the protective measures offered in the United Kingdom and by the Companies Act 61 of 1973. It is argued in light of the potential abuse that creditors and shareholders may suffer that the Act’s regulation of reacquisitions is inadequate. The mini-dissertation concludes with recommendations for possible legal reform in respect of reacquisitions in terms of the Act.