By Jaco de Klerk – Director
This email address is being protected from spambots. You need JavaScript enabled to view it.
In the South African Competition Law landscape, merger notification to the Competition Commission (“Commission”) in relation to an internal restructuring is generally overlooked, due to the ultimate control not being altered.
It is, however, advisable to always consider if a transaction (albeit an internal restructuring or general merger) should be notified to the Commission. During April 2025, the Commission published internal restructuring guidelines (“Guidelines”) setting out the Commission’s approach when considering if an internal restructuring will be notifiable or not.
The Competition Act defines a merger: “when one or more firms directly or indirectly acquire or establish direct or indirect control over the whole or part of the business of another firm”, which can be achieved through numerous ways, as more fully set out in Section 12(1)(b) of the Competition Act. If a transaction falls within the ambit of the aforesaid definition and it breaches the monetary thresholds for notifiable mergers, such transaction shall be notifiable to the Commission.
Most internal restructures will not qualify as being notifiable due to the ultimate controlling party/ies remaining intact. However, the Guidelines shed some light on instances when an internal restructuring will be notifiable to the Commission.
In terms of the Guidelines the position of external shareholders i.e. shareholders who are not part of the group of firms but have an interest in one or more of the firms within the group, should be considered. In instances where ultimate control is not relinquished, the transaction may still be notifiable if the transaction results in the change of the control of the so-called external shareholders.
The Commission’s approach will include consideration of the following:
- If the transaction entails a change of control as outlined in Section 12(2)((a)-(g) of the Competition Act, affecting the control rights of external minority shareholders;
- If the transaction results in a shareholder, who is not part of the group of firms, losing or gaining any form of negative control; and
- If there is an external shareholder whose minority rights conferring control will be changed by implementation of the transaction.
In light of the aforesaid, if a bona fide restructuring of a group of companies affects the rights of external minority shareholders, it may trigger merger notification to the Commission and as such, it should be carefully considered during the structuring phase.