Parties generally remember that a company may not implement any of the following transactions, unless the transaction has been approved by a special resolution of the relevant company's shareholders:
- the disposal of all or the greater part of a company's assets or undertaking;
- an amalgamation or a merger; or
- a scheme of arrangement.
This is a requirement under section 115(2)(a) of the Companies Act, 2008 (Companies Act), which also sets out the manner in which this special resolution must be passed.
Section 115(2)(b) of the Companies Act, however, goes further by requiring the company's holding company to also pass a special resolution approving the aforementioned transactions, if:
- the holding company is a company incorporated in South Africa or an external company (as defined in the Companies Act);
- the proposed transaction concerns a disposal of all or the greater part of the assets or undertaking of the subsidiary; and
- having regard to the holding company's consolidated financial statements, the disposal constitutes a disposal of all or the greater part of the assets or undertaking of the holding company.
Whether a company is a "holding company" or "subsidiary" is determined according to the control criteria contemplated in sections 2(2)(a) and 3(1)(a) of the Companies Act.
Accordingly, when implementing the transactions contemplated in sections 112, 113 and 114 of the Companies Act, in order to ensure valid implementation, it is important to consider whether "permission" from the "parent" (holding company) must also be obtained.
This content is provided for general information only and does not constitute legal or other professional advice. While we have taken reasonable steps to ensure it is accurate as of the date of publication, the legal position may be subject to change. Webber Wentzel accepts no liability or responsibility, to the extent allowed by law, if any information is, for any reason, incorrect or corrupted; or for any loss or damage that may arise from reliance on information in this document.
The application of legal principles depends on the specific facts and circumstances of each matter. For advice on your specific situation, please contact your usual Webber Wentzel contact.
