We regularly hear or read about oppressive or prejudicial conduct against minority shareholders, by a company. Now bear in mind that the company cannot act – it is always its directors or executives who act on its behalf. So, for a company to be doing something oppressive or prejudicial, it has to be the directors or officials who decided to do so.
A good case in point is Bell Equipment, a JSE listed earth-moving equipment group as reported by Moneyweb. IA Bell, the controlling shareholder (approx 70% equity control) intends to delist and is offering the minority shareholders R10 / share when the NAV is about R38.
Should a mandatory offer not have been made to the minorities at the time control was acquired? Is this enough grounds for the minorities to push back by approaching the courts?
The answers to these questions are, as usual, “it depends…..”
Mandatory offer
The mandatory offer provisions of the Takeover Regulations of the Companies Act apply in respect of all regulated companies. This includes JSE-listed companies.
In the case of IA Bell, if he previously held less than 35% of the voting rights in Bell Equipment and through the acquisition from John Deere acquired a further block of more than 30%, it would trigger a mandatory
offer to the minority shareholders.
However, such a mandatory offer may be waived if the holders of more than 50% of the present/voting shareholders other than Bell or John Deere pass such a resolution. What is less than clear is why this was never done, as the minority shareholders still hold about 30% and could have forced a mandatory offer.
Could the minorities approach the court?
The answer to this is most certainly. The question rather is, would they?
Firstly, they might have to work together and agree to share the costs. This requires that one or more aggrieved shareholders take it upon themselves or try to bring others in to help carry the cost.
Secondly, our courts have previously considered similar issues under Section 163 of the Act and the court will not lightly grant relief to minority shareholders, it seems. The cases in point are:
- Garden Province Investment and Others v Aleph (Pty) Ltd and Others 1979 (2) SA 525 (D), and
- Grancy Property Ltd v Manala 2015 (3) SA 313 (SCA) which was a Supreme court decision.
A better and far cheaper option could be for these minorities to rather approach the Takeover Regulation Panel or the JSE or even FSCA in an effort to either force a mandatory offer to minorities or at least to improve the alleged offer of only R10 / share. It’s unlikely that they would want to remain on board once the company delists.