Reinforcing the protection of stakeholders’ interests under the South African takeover regulation regime: a comparative assessment from a complementary regulatory perspective.

The dominant view in company law (especially; corporate governance and finance law) is that the regulation of company takeovers (takeovers) and-/ or mergers must carefully balance two opposing notions. On one hand, the regime must be designed to enable or facilitate the initiation and successful implementation of takeovers and mergers in the interests of inter alia economic growth and technological advancement. On the other hand, such a regulatory framework ought to be sensitive to stakeholders’ interests. Various policy rationales are put forward in supporting the incidence of takeover transactions. These motivations include the need for companies to access business synergy, diversification, competitiveness, technological advancement, and broader economic development. However, takeovers may have negative implications for stakeholders. For feasibility sake, this study’s focus is limited to three stakeholder groups, namely, the target company shareholders, the target company directors, and the local communities. For the target shareholders, the takeover-related mischiefs include the possibility that the target directors may be tainted by conflicts of interest in the context of an offer, thereby making recommendations that disadvantage the shareholders. Or the possibility that the minority shareholders may be treated unfairly and unequally by the acquiring company through making a subsequent offer that is inferior to the one received by the majority holders of securities of the same class. For the board of directors, there are twin negative effects that the directors may face. On the one hand, is litigation from disgruntled stakeholders during and after takeovers and, on the other hand, is the possibility that directors often lose their offices and jobs after successful takeovers. This study also examines the possible exposure of local communities to the negative repercussions of takeovers, and these include loss of employment by locals, loss of beneficial community development, loss of community development monies due to losses in corporate taxes, loss of corporate social responsibility benefits where the merged company decides to relocate. Still, the introduction of a new company into a community after a takeover may negatively impact the environment, public health as well as expose the community to severe national security threats especially where the takeovers involve personal data storage, the internet and technology. Against the backdrop of the conceivable benefits and adverse effects surrounding takeovers this study introduces a ‘novel’ complementary regulatory perspective, as a yardstick for undertaking a comparative evaluation of the existing takeover regulation regimes of the United States of America (US) especially the state of Delaware, the United Kingdom (UK) and South Africa to answer this study’s main research question. The primary question sought to be answered is: To what extent are the provisions of the South African takeover regulation framework appropriate and adequate in protecting the stakeholders’ interests? The said complementary regulatory perspective has twin-legs designed to carefully balance two opposing philosophies: that is, on one hand, vigilant optimisation of takeover activity and on the other hand, ensuring the appropriate and adequate protection of stakeholders’ interests by pursuing stakeholder inclusivity through the concept of subordination. Notably, there are several protections under the US, the UK and South African takeover regulation regimes that are available and accessible to the three stakeholder groups identified, discussed and evaluated in this study. And through the evaluations, the related merits and weaknesses of such protections were established. Then, ultimately, several suggestions for law reform are recommended in accordance with the ethos of the complementary regulatory perspective as deliberated.Thesis (PhD) (Law)-- University of Fort Hare, 202