Editor’s note: This is general educational information about South African takeover law, not investment advice, and it does not comment on any particular transaction. It is based on the official documents listed at the end.
A shareholder can build a position in a listed South African company for years without owing anything to anyone else on the register. Then one purchase changes the shareholder’s status entirely. The moment the holding reaches 35% of the voting rights, the buyer must offer to buy out every other holder, on terms a statutory regulator will vet. The number is not a market convention. It sits in a regulation gazetted on 26 April 2011, and the machinery around it sits in the Companies Act 71 of 2008.
Where the threshold comes from
Section 123 of the Act sets the trigger conditionally. It applies where a person acting alone, or two or more related or inter-related persons, or two or more persons acting in concert, acquire a beneficial interest in voting securities of a regulated company; where before that acquisition they could exercise less than the prescribed percentage of all voting rights; and where after it, counting securities already held, they can exercise at least the prescribed percentage. The Act itself does not fix that percentage. It authorises the Minister, on the advice of the Takeover Regulation Panel, to prescribe a figure of not more than 35%.
Regulation 86 of the Companies Regulations, 2011 then does the fixing: the percentage to be prescribed in terms of section 123(5) is 35% of the issued voting securities of the company. The statutory ceiling and the prescribed number are the same, which means the threshold cannot be raised without amending the Act.
Crossing it starts a short clock. Within one day after the completed acquisition, the buyer must notify the holders of the remaining securities that it is in a position to exercise at least the prescribed percentage, and must offer to acquire their securities on terms determined under the Act and the Takeover Regulations. Within one month after that notice, the written offer itself must be delivered.
Which companies are caught
Section 118 draws the perimeter. The takeover provisions apply to affected transactions involving a public company, a state-owned company unless exempted under section 9, and a private company in two situations: where the percentage of its issued securities transferred other than between related or inter-related persons within the 24 months before the transaction exceeds a prescribed threshold, or where its Memorandum of Incorporation says the rules apply regardless. Regulation 91 sets that private-company threshold at 10%, applied at the time of each qualifying transfer, measured against securities in issue and aggregated immediately before an affected transaction takes place.
The concert-party rules are what make the 35% line harder to sidestep than a simple shareholding test. Regulation 84 presumes a company acts in concert with its directors, with companies controlled by those directors, and with trusts in which a director is a trustee or beneficiary, and presumes the company’s pension, provident and benefit funds and share incentive schemes act in concert with one another. Those presumptions are rebuttable at a hearing before the Executive Director, whose ruling binds everyone concerned and can be reissued as a compliance notice. Parties coming into or out of concert must declare it within five business days on Form TRP 84.
There are carve-outs, and they are drafted narrowly. Persons who cross the threshold only because they came into concert, each having been below it beforehand and none of them buying further securities, do not owe an offer for that reason alone. Voting rights that accrue on preference shares acquired earlier, where those shares are not voting securities as defined, do not trigger the duty unless further securities are bought. A transaction can also be exempted where independent holders of more than 50% of the general voting rights waive the benefit of a mandatory offer, though a waiver is a nullity if the acquirer, subscriber or underwriter or their concert parties bought securities between the transaction announcement and the waiver date.
What the offer has to look like
Once triggered, the offer runs on a regulated timetable. Under regulation 102 the offeror’s circular must be posted within 20 business days of the firm intention announcement, the offer opens the day after posting, and it must stay open for at least 30 business days. If the offeree is listed, the closing date must be a Friday, and that date doubles as the last day to trade for the exchange timetable.
The back half of the timetable is tighter still. The independent board must post its response circular within 20 business days of the offeror’s circular. On the 45th business day after a conditional general offer opened, an announcement must be made by no later than 16:30 saying whether the offer is unconditional as to acceptances or has terminated, and no revision of the consideration may be announced from that day unless the offer is already unconditional. Consideration must be settled within six business days of the later of the offer going wholly unconditional and a holder’s acceptance. Nothing may be implemented until the Panel has issued a compliance certificate.
Regulation 90 puts an independent expert into the process. The offeree company must ask the Panel to rule whether an expert is needed and retain one if the Panel requires it. The expert must show it is independent and will reasonably be perceived to be independent, satisfy the Panel that it is competent, and value the company using generally accepted approaches including a capitalisation, income or cash flow method resting on value in use and a comparative or market approach resting on willing buyer, willing seller. The Panel can order a further expert at any time, including in response to written representations from holders.
Analysis: what the number is actually doing
The 35% threshold is not a definition of control. It is a fixed proportion of voting rights, set below a simple majority, and it applies as a bright line rather than through a case-by-case enquiry into control. The Panel’s own mandate explains the design: it must regulate affected transactions without regard to the commercial advantages or disadvantages of any transaction, ensure equivalent treatment of holders within a class, ensure no relevant information is withheld, and ensure holders get the same information and enough time to reach a properly informed decision. A fixed percentage is what lets a regulator do that without forming a view on whether the deal is a good one.
The design has a cost, and the regulations address it directly. A mechanical trigger catches people who never intended to buy a company: heirs, funds whose managers are deemed to be in concert, holders whose percentage rises because the company itself bought back shares under section 48. That is why section 123 is surrounded by exemptions, why the Panel can exempt an offeror where there is no reasonable potential of prejudice to existing holders or where the cost of compliance is disproportionate to the value of the transaction, and why the shareholder waiver exists at all.
What the threshold does not establish is that anyone will be bought out. It establishes a price and a process, not an exit. Holders may decline. If they accept in sufficient numbers the position reverses: under section 124, an offer accepted within four months by holders of at least 90% of a class, excluding securities the offeror already held, lets the offeror give notice within two further months and compulsorily acquire the rest on the same terms, subject to a dissenting holder’s right to apply to court within 30 business days.
A careful reader watching a stake build past 30% therefore looks less at the percentage than at three documents: the concert declarations filed on Form TRP 84, the firm intention announcement that starts the 20 business day posting clock, and the independent expert’s report the Panel required. Those set the terms the remaining holders will actually be offered.
