In more detail
Even when they appear routine, internal restructurings in South Africa can fall under merger control if they shift how control is exercised particularly where minority shareholders hold strategic veto rights. The Competition Commission's 2025 Guidelines underline the need for companies to look beyond form to substance, carefully assessing potential impacts to avoid unexpected regulatory scrutiny and penalties.
As corporate structures grow more complex and strategic agility becomes paramount, internal restructurings have become a routine feature of business operations. Whether driven by operational efficiency, tax optimisation, or alignment with new strategic imperatives, these reorganisations often occur within a group of affiliated entities. Yet, what may appear to be a purely internal affair can, under South African competition law, trigger merger control obligations. Importantly, this can be the case even where the ultimate controller of a firm remains unchanged.
Under South Africa's merger control regime, a merger is defined not only as the acquisition of a majority stake, but more broadly as gaining control (directly or indirectly) over all or part of another firm. Control can take many forms, including the ability to influence key decisions or policies. This broader understanding means that internal restructurings, even within a single corporate group, must be carefully assessed to determine whether they change how control is exercised.
The Competition Commission's Internal Restructuring Guidelines, published in August 2025, clarify that not all intra-group transactions are subject to merger notification. In general, restructurings that are purely internal, meaning they do not affect the rights of shareholders outside the corporate group, are not considered notifiable mergers. However, this is not an automatic exemption. The key consideration for the Competition Commission is whether the restructuring alters the control rights of external minority shareholders (i.e., those who are not strictly part of the group but hold interests in one or more of the entities involved).
External minority shareholders may hold rights that go beyond passive investment protections. In some cases, these rights (such as the ability to veto budgets, business plans, or executive appointments) can give them a form of negative control. This means they can block or significantly influence strategic decisions, even without holding a majority stake. Where such rights exist, the Competition Commission may view the shareholder as exercising control, which can affect whether a restructuring is considered a notifiable merger.
The Competition Commission draws a distinction between strategic control rights, which may trigger merger notification, and ordinary investment protections, which generally do not. For example, if a shareholder has the right to veto the appointment of a CEO or block major capital expenditure, this may be seen as exercising control under the Competition Act. In contrast, rights related to changes in share capital or decisions about listing securities are typically considered standard protections and are unlikely to amount to control.
Consider a scenario where a company undertakes a share buy-back. If this results in a minority shareholder's stake increasing to a level where they acquire strategic veto rights, the transaction may unintentionally trigger a merger notification requirement under the Competition Act. Similarly, the movement of assets or subsidiaries within a corporate group may appear routine, but if such changes affect the control rights of external shareholders, they fall within the scope of the Competition Commission's merger control oversight.
While many internal restructurings may appear routine, the Competition Commission's nuanced approach highlights that even intra-group transactions can have significant regulatory implications, particularly where external minority shareholders hold strategic control rights. The Competition Commission's emphasis on substance over form means that businesses must look beyond corporate structure and ownership and assess how a transaction may alter the control structure of the firm following the restructure.
For businesses, the message is clear: no restructuring should be dismissed as routine or purely administrative. Even seemingly minor internal changes can have far-reaching implications if they alter control rights, particularly in relation to minority shareholders. A careful, upfront competition law assessment is therefore essential not only to ensure compliance and avoid costly penalties, but also to preserve strategic flexibility and protect long-term business objectives. In an environment where regulators prioritise substance over form, proactive legal guidance is the best safeguard against unnecessary risk.
