On 4 December 2025, the Competition Commission (Commission) published guidelines setting out the approach it will adopt when assessing whether a minority shareholder protection right in fact amounts to “negative control” as has been reported in a number of cases.
The 2025 guidelines do not deal with clauses, similar to minority protection clauses, found in shareholders’ agreements that are often found in agreements for the sale of shares or a business. Such clauses usually provide that, during a specified period before the shares or business are transferred to the purchaser (typically while the purchaser is carrying out a due diligence investigation or while the parties are waiting for suspensive conditions to be fulfilled), the seller may not make certain decisions or take certain steps in regard to the business.
As mentioned in our previous article, in terms of section 13A of the Act, the parties may not implement a merger until it has been approved by the Commission or Tribunal. The Act does not define “implementation”. However, clauses of the type mentioned, if they confer a form of control on the purchaser, even on an interim basis, may be seen by the Commission or Tribunal as premature or prior implementation of the merger. This may expose the parties to penalties, and they may be prohibited from implementing the clauses until the merger has been approved.
In 2019, the Commission issued a set of guidelines “for the determination of administrative penalties for failure to notify mergers and implementation of mergers contrary to the Competition Act”. In these guidelines, the Commission noted various instances where the Tribunal had determined that the conduct of the parties amounted to prior implementation. They included:
- an increase of shareholding from 22% to 28% and the accompanying right to veto certain strategic decisions of the company, if those strategic decisions are sufficiently material to confer material influence in terms of section 12(2)(g) of the Act;
- where the acquiring firm engages in the day-to-day operations of the transferred firm prior to approval of the competition authorities being obtained;
- where the acquiring firm becomes involved in the making and/or execution of strategic decisions such as:
- targeting markets for the transferred firm to pursue;
- developing new products or services;
- influencing the ordering of raw materials;
- amending procurement policies;
- becoming involved in customer relations;
- pricing or terms to be offered to customers;
- influencing the targeting or servicing of certain customers; or
- marketing and production of certain products lines or services.
It is apparent from the 2019 guidelines that, even where minority protections are intended only to serve as interim measures pending an acquisition of a controlling shareholding in a company, they may be considered to constitute a merger in their own right. If so, they may not be carried into effect until they have themselves been approved, or the ultimate transaction has been approved, by the Commission or Tribunal. Further, although the 2025 guidelines do not expressly refer to rights given to purchasers in anticipation of the full implementation of a transaction, the types of control conferred in each case are substantially similar. It therefore seems reasonable to assume that the Commission is likely to adopt a similar approach as set out in the 2025 guidelines and parties concluding agreements providing for interim protections for purchasers should be advised accordingly.
