The Securities Regulation Code on Takeovers and Mergers (the Code) emanates from the Securities Regulation Panel (the Panel), which was established under the provisions of section 440B of the Companies Act, No 61 of 1973, as amended (the Act). In terms of sections 440C (1), (3) and (4) the Panel is empowered and required to make rules on certain matters, including –

The Code contains the Rules referred to in paragraphs (i), (ii) and (iii) above. It (the Code) is based to a large extent on the City Code on Take-overs and Mergers (the City Code) issued by the London Panel on Take-overs and Mergers (the London Panel).

The Code, as laid down and applied by the Panel, will operate principally to ensure fair and equal treatment of all holders of relevant securities in relation to affected transactions. The Code also provides an orderly framework within which affected transactions are to be conducted.

It is not the function of the Panel to judge the commercial advantages and disadvantages of affected transactions [see section 440C(2) of the Act]. These are matters for the holders of the relevant securities in the offeree company. Nor is the Panel concerned with competition policy, other than to take notice of references to and rulings by the Competition board established under the provisions of the Maintenance and Promotion of Competition Act, No 96 of 1979. The rules governing competition could, in their own right, have a bearing on affected transactions. Similarly, the Code will effectively relieve The Stock Exchange of its present responsibilities in regard to takeovers and mergers.

The Code represents the collective opinion of those professionally involved in the field of takeovers and mergers as to acceptable business standards and as to how fairness to holders of the relevant securities may be achieved. This collective opinion is expressed through the wide representation of interests on the Panel. The representative bodies co-operate through the Panel because of the importance of the maintenance of such standards to the integrity of the financial markets in the Republic of South Africa.

The appointment of the Panel and its formulation and application of the rules in the Code express the principle of self-regulation by the securities industry.

The responsibilities described in the Code apply most directly to those who are actively engaged in the securities markets. They are also regarded by the Panel as applying to directors of companies which are subject to the Code and to persons or groups of persons involved in relevant transactions. They also apply to all professional advisers, insofar as they advise on the transactions in question. These responsibilities apply irrespective of whether those involved are directly affiliated to any of the bodies whose representatives are members of the Panel. The Panel also expects all persons who issue circulars to holders of the relevant securities in connection with affected transactions to observe the highest standards of care.

The Code enjoys the force of law. An affected transaction must comply with the Code (see section 440L of the Act).

Sections 440C(1)(b), 440C(4)(e) and 440M confer certain powers of enforcement on the Panel. The Panel may enforce the Code by application to court for an order for specific performance and/or for an interdict and/or for a declaratory order and/or by notification to interested parties and/or by general publication of an announcement that the requirements of the Code have not been complied with and/or that a particular offer is not or was not valid, with the consequences flowing therefrom.

It will be in the interests of an offeror in a proposed affected transaction to obtain clearance from the Panel for any doubtful aspects of the offer, and in the interests of the holders of the relevant securities of the offeree company for its board to obtain clearance for its conduct in response to the offer.

The Panel mero motu may conduct an investigation into the circumstances of any offer or intended offer, and may take action on its findings.