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Want to get your shareholders' permission for fundamental transactions? Here's what to do...

by , 04 October 2013
One of the provisions of the Companies Act is that you can only enter into certain fundamental transactions if you get your shareholders' approval. But how do you do this? Read on to find out so you don't get caught on the wrong side of the Companies Act.

According to the Practical Accountancy Loose Leaf, the four fundamental transactions you need shareholder approval for are:

  1. Where between 50 and 100% of a company's assets are disposed of;
  2. Mergers and amalgamations;
  3. Schemes of arrangement; and
  4. Takeovers.

If you're a regulated company, you must get permission from your shareholders before you enter into these fundamental transactions. If you don't, they could take you to court!

Don't take that risk!

Here's how you get your shareholders' permission for fundamental transactions

If you want to enter into a fundamental transaction, you must send a notice to shareholders who will then convene a meeting to debate whether or not they'll agree to the transaction.

In other words, they must pass a 'special resolution'.

This special resolution is a decision that must be approved by 75% of shareholders to be accepted. This percentage can be changed within certain limits if the shareholders agree.

One word of caution: The notice must be in a specific format. It must say what:

  • The special resolution is all about;
  • The shareholders' appraisal rights are. Shareholders' appraisal rights are the right of shareholders to demand the fair payment for their shares.
  • The specific period of time that shareholders have to vote on the special resolution. Also keep in mind that the meeting should also be attended by at least 25% of those shareholders who are entitled to vote on the proposal.

If this notice isn't in this specified format, the shareholders could oppose the special resolution on these grounds. So ensure your notice is 100% correct before you send it out.

It's that simple. Once you've got your shareholders' approval, go ahead with the fundamental transaction.
 

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