In more detail
What has happened?
On 4 December 2025, the Competition Commission of South Africa (“Commission”), published draft guidelines on minority shareholder protections (“Draft Guidelines”), which outline the Commission’s views on the types of minority protections and confer control for competition law purposes as well as examples of protections that generally do not confer control. Public comments are invited with a deadline of 17 December 2025 as per the gazette notice.
There is an inconsistency regarding the deadline for submitting comments, as the Draft Guidelines specify 20 January 2026 as the closing date. The date published in the gazette notice should take precedent pending further clarity.
Why does it matter?
In South Africa, merger clearance is mandatory where a firm acquires control over the whole or part of another business and certain monetary thresholds are met. Control may arise through rights granted to minority shareholders, particularly where these rights include a veto over strategic decisions. Determining whether such minority protections amount to control under competition law can be complex.
The Draft Guidelines clarify the Commission’s approach to the types of minority protections and may and may not trigger the acquisition of control.
Types of control-conferring minority protections
A distinction is made between minority protections that generally do not confer control but are, rather, aimed at protecting minorities’ investments in the ordinary course (e.g., rights to approve asset disposals, dividend policy changes, auditor appointments etc.) and those that do confer control, regardless of the percentage of shares acquired. Minority protections that are control-conferring include rights to:
- Approve or veto the firm’s strategy, business plan, or budget.
- Approve or veto the appointment or dismissal of key executives, or changes to their employment terms.
- Approve or veto new business activities outside usual operations.
- Approve or veto significant deviations from the annual budget (e.g., 50% or more).
The above list of control-conferring matters is not exhaustive. The Commission will review each transaction on a case-by-case basis, focusing on whether the minority protections enable a shareholder to influence the firm’s strategy or appoint key decision-makers, thereby amounting to control under section 12(2)(g) of the Competition Act. If there is uncertainty about whether certain protections confer control, parties may seek an advisory opinion from the Commission as outlined in the Regulations on Non-Binding Advisory Opinions.
Key takeaways
- The Draft Guidelines clarify when minority protections may constitute control, potentially providing greater certainty for the notifiability of transactions.
- Companies must review minority veto rights in the context of restructures as well as minority acquisitions and may need to notify the Commission of changes amounting to “negative control”.
- Routine shareholder protections, like those for share capital or listings, are generally exempt.
- Businesses have flexibility to reconsider the rights being afforded to minority shareholders to avoid conferring control for merger control purposes.
Each transaction must be assessed individually as the examples provided in the Guidelines are not exhaustive.
