Abstract
The dynamic landscape of the corporate world often calls for companies to engage in complex corporate actions such as takeovers, mergers and restructurings for purposes of growth and adaptability. It is essential to maintain business continuity during these crucial periods as it plays a vital role in operational stability to ensure consistency in the company’s reliability and performance. Yet, this fundamental aspect of business continuity is increasingly challenged when considering the prohibitions imposed by regulations that govern such fundamental actions, including takeovers.
Within the South African law context, the Companies Act 71 of 2008 contains restrictive provisions which are often referred to as ‘Restrictions on Frustrating Actions’, that impose prohibitions on specific activities of the company and its board of directors during an offer period. This study aims to critically examine the intersection of business continuity, and the restrictions imposed during takeover scenarios, offering a comparative analysis of takeover laws across two jurisdictions. Using South African law as its foundation, the study incorporates a comparative perspective by analysing the legal framework of the United Kingdom. The focus is on how these two legal systems laws regulate takeovers and the restrictions imposed on the board of an offeree company during an offer, as a means to prevent unfair practices during corporate takeovers.
In the South African context, this dissertation specifically addresses the restrictions outlined in section 126(1) of the Companies Act, with particular attention to the prohibition on frustrating actions during an offer period. The research explores how these restrictions affect fixed term contracts and evaluates the potential risk of undermining both new and existing contracts. Furthermore, it considers the broader implications of such prohibitions on a company's financial health during key corporate actions, where business continuity is crucial to maintaining value.
This study seeks to contribute to the ongoing discourse on corporate takeovers by providing a detailed analysis of the legal limitations that impact business continuity during such processes. By examining South African law and comparing it to the legal framework of the United Kingdom, this dissertation offers valuable insights into how legal restrictions can influence corporate decision-making, contract stability, and overall financial viability in takeover
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scenarios. Ultimately, the research aims to provide recommendations for strengthening the balance between regulation and business flexibility in corporate takeovers.