Shareholder protection rules under fundmental transactions

Abstract

Empirical research in previous years has shown the history and evolution of takeovers and mergers in South Africa. Many theories have emerged to show the advancement in the Companies Act 71 of 2008 (2008 Act) from the Companies Act 61 of 1973, especially in issues relating to takeovers and reorganisations. This includes measures in the 2008 Act that are designed to protect shareholders involved in fundamental transactions. Several academic writers have provided insight into the changes brought about by the 2008 Act with regard to the protection of shareholders, especially in fundamental transactions. It is noted that shareholder protection rules and fundamental transaction rules are the result of some of the purposes of the 2008 Act. Both these rules are a result of the purpose to encourage investment in the economy of the country and to promote the development of South African markets, respectively. However, this research, through critical and comparative analysis of shareholder protection rules in South Africa, the United States of America, India and the United Kingdom, sets out to highlight the conflict between shareholder protection rules and fundamental transactions rules in the 2008 Act. It also shows that with the realisation of one rule comes the transgression of the other and raises the question of whether the 2008 Act has actually struck the right balance.