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
Master Thesis
2014
Permanent link to this Item
Authors
Supervisors
Journal Title
Link to Journal
Journal ISSN
Volume Title
Publisher
Publisher
University of Cape Town
Department
Faculty
License
Series
Abstract
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.
Description
Includes bibliographical references.
Keywords
Reference:
Kershoff, M. 2014. 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. University of Cape Town.