African law firm Cliffe Dekker Hofmeyr (CDH) has written an extensive summary of South African appraisal law – often referred to as Section 164. CDH notes that (like in Delaware) in South Africa, appraisal rights are available for many major corporate acts; that the process for seeking appraisal is technical and formalistic; and that the fair value determination is timed to when the applicable resolution about the corporate action was approved. (We’ve posted before that the ‘when’ regarding fair value is a critical issue.) CDH also notes that Section 164 does not provide a specific mechanism for the fair value determination – something courts in the US have wrestled with as well.
Ukrainian appraisal appears to borrow some items from Delaware law. Along with a ‘vote no’ requirement (like Delaware), and timing the appraisal notice to the shareholders meeting/vote, Ukraine offers appraisal rights in mergers and certain asset sales.
As we previously covered, a recent South African court decision has clarified the scope of appraisal rights in that country with respect to a deal that was other than a classic merger.
Webber Wentzel, a law firm practicing in South Africa, has written this piece on the decision, concluding, “The decision of the High Court will give comfort to minority shareholders seeking to exit group companies where they oppose certain corporate actions at subsidiary-level.” The law firm also states that the defendant/respondents intend to appeal–so we can expect further developments on South African appraisal in the future.
A South African trial court has found that an investor who owned shares of a parent company which sold off its operating subsidiary is entitled to appraisal rights. The case concerns the appraisal rights of an activist investor in the company KWV, which had an operating subsidiary that owned liquor assets. According to a press account, the original merger was structured as a purchase of the KWV operating subsidiary, leaving the holding company with some property, art and cash. The investor demanded appraisal, arguing that the transaction for ~13 South African Rand per share undervalued his shares in the holding company – which he pegged as worth significantly more, and which a press account says the acquirer valued at ~25 South African Rand. As the proceedings progressed, the investor’s entitlement to appraisal was challenged on the basis that the acquirer did not purchase the holding company – just the operating subsidiary. The South African court rejected this argument, finding that the investor has appraisal rights and thus may continue his appraisal claim.
*** Lowenstein Sandler LLP does not practice in South Africa and does not provide advice on South African law. The content of this post is derived from press accounts about the case.