The triangular merger structures: the use of the forward and reverse triangular merger structures to circumvent the voting and appraisal rights of minority shareholders and potential shareholder remedies

The triangular merger structures provide an innovative and effective method for avoiding the voting and concomitant appraisal rights of a holding company’s shareholders. This is because, by incorporating and making use of a wholly owned subsidiary company to effect the proposed transaction, the holding company is deemed not to be a party to the amalgamation or merger agreement; even though the transaction is instigated and financed by it. Importantly, and as a result of the fact that the holding company is able to distance itself from the transaction, its shareholders are deprived of their voting and appraisal rights, thereby allowing said company to effectively avoid the usual cash drain resulting from the exercise of shareholder appraisal rights. It is argued that companies must not be allowed to make use of and exploit the separate legal personality of a shell subsidiary company solely to circumvent the rights of their shareholders. Failing specific legislative intervention to curtail this potential abuse, shareholders of the holding company ought to be able to successfully challenge the implementation of a triangular merger by (i) applying to court in terms of s 20(9) of the Act (the theory behind this being that the triangular merger structures propose the use of a separate legal entity as a device or stratagem to defeat their rights); and/or (ii) filing a complaint with the relevant statutory body citing the provisions of s 115(4) of the Act. In either case, and as an alternative submission, shareholders can also argue that such conduct falls within the parameters of the statutory oppression remedy.

Grantor dc:publisher.institution

Department of Commercial Law

Year dc:date.issued

2014

Author dc:creator

• Kershoff, Marko Daniel

Advisor dc:contributor.advisor

• Yeats, Jacqueline

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/11427/12900

OAI identifier oai:identifier

oai:open.uct.ac.za:11427/12900