Abstract
Section 48 of the Companies Act provides directors with exclusive powers to conduct repurchases
either selectively or proportionately and with or without the shareholders’ approval. These
exclusive powers, particularly the powers to selectively repurchase shares may prejudice the
interest of shareholders in a company. The study is to analyses the provisions of the Companies
Act 71 of 2008 to determine whether it adequately protects the interests of shareholders. The
analysis will be made in comparison with protective measures contained in the New Zealand
Companies Act 1993.
The Companies Act 71 of 2008 does not distinguish between selective or proportionate
repurchases. Section 48 of the Companies Act 71 of 2008 sets out the requirements to be complied
with by a company when repurchasing any of its shares and in addition it set out the requirements
for repurchases of shares held by directors or prescribed officers and their related persons or
repurchases conducted in terms of a scheme of arrangement.
The forms of protection available to shareholders depends on whether a shareholder is a director
or whether a selective repurchase is undertaken in terms of a scheme of arrangement. Shareholders
will have to rely on protective measures outside section 48 of the Companies Act 71 of 2008, for
them to protect themselves, and in particular when a repurchase is not conducted in terms of a
scheme of arrangement. The protective measures in repurchases conducted through a scheme of
arrangement includes the shareholders’ approval requirement, voting restrictions and appraisal
right. The protective measures available to shareholders who are directors for a repurchase which
does not constitute a scheme of arrangement is the shareholders’ approval requirement.
The New Zealand Companies Act appears to better protect the interest of shareholders by requiring
that selective repurchases be approved by all shareholders and if not, repurchases are subject to
ideal protective measures such as the disclosure requirement, observance of the best interests of
the company and shareholder, and that the price paid for shares must be fair to the company and
the remaining shareholders.
LL.M. (Corporate Law)