Abstract
The research report focuses on the interpretation of section 48(8)(b) of the Companies Act 71 of 2008 (hereinafter referred to as “the Companies Act” or “the Act”). The Act stipulates that a decision by the board of directors to repurchase a company’s shares is subject to sections 114 and 115 if, considered alone or in conjunction with other transactions, a company acquires more than five per cent of the issued shares of any particular class of the company’s shares. The latter provision was interpreted by the high court of South Africa (Gauteng Local Division, Johannesburg) in First National Nominees (Pty) Ltd v Capital Appreciation Limited. The high court had to determine if share repurchases concluded according to section 48(8)(b) are regarded as schemes of arrangement and whether appraisal rights are triggered where a company repurchases more than five per cent of its issued shares in terms of section 48(8)(b) of the Companies Act. The court held that dissenting shareholders could rely on appraisal rights envisaged in section 164 if a company effects a share repurchase according to section 48(8)(b) but that the provision does not change the nature of a share purchase concluded in terms of section 48(8)(b) into a scheme of arrangement.
The dissertation addresses the differences between share repurchases concluded in terms of sections 48 and by way of schemes of arrangement. It argues that the high court's findings in First National Nominees (Pty) Ltd v Capital Appreciation Limited does not resolve the legal issues pertaining to share repurchases effected under section 48(8)(b) of the Companies Act and proposes that the section should be replaced.
Key terms: share repurchases; shareholder approval for re-acquisition of shares; appraisal remedy for substantial share repurchases; acquisition of own shares through scheme of arrangement.