26.7 REGULATED COMPANY
We need to understand the definition of a regulated company. The takeover provisions ss 117 -127 only apply to a regulated company.
A regulated company is defined in terms of s117 (1) (i) as a company in which Part B, Part C and the Takeover Regulations apply as determined in accordance with s 118(1) and (2). This means that in terms of 118 (1) and 118 (2) various types of company are specified as a regulated company and under certain conditions a private company falls within the definition of a regulated company.
Section 118 (1) states that the provisions of the company’s act and the takeover regulations will apply with respect to an affected transaction or an offer involving a profit company or its securities if the company is:
a. A public company;
b. A state owned company;
c. A private company only if the MOI expressly provides that the company and its securities are subject to Part B, Part C of the Takeover Regulations and if more than the prescribed percentage currently (10%) of its issued securities have been transferred (other than between related or interrelated persons) within the 24 month period before the date of a particular affected transaction or offer.
Refer to the definition of related and interrelated in s 2 of the act as it will have a major bearing on whether a private company becomes regulated or not. It is important that we understand what related and inter-related means. In regard to individuals a related party would be a relationship within two degrees of consanguinity or relationship steps, example it would be a brother, but not a cousin as a cousin is more than 2 relationship steps.
In regard to the shares being held by a company, close corporation or trust one would need to look at who in effect controls the voting rights of these entities and determine what the relationship is. If they do not fall within two degrees of relationship steps they are outsiders then the transaction in question would make the company a regulated company if there is an affected transaction.
In a private company if securities of 10% or more were transferred within the last 24 months to an unrelated party this does not necessarily make the company a regulated company. It only becomes a regulated company if there is an offer or proposal for an affective transaction in terms of s 112 s 113 and s 114. It is at this point that the company becomes a regulated company and has to comply with all the necessary requirements and make the necessary applications to the TRP.