The Competition Commission of South Africa (“Commission”) has published its Draft Guidelines on Minority Protections (“Draft Guidelines”), providing its view on when minority shareholder protections may amount to an acquisition of “control” and require merger control approval. Comments on the Draft Guidelines are due by 20 January 2026 at 16h30.

The Draft Guidelines, for the most part, confirm that the Commission's approach to minority protections are aligned with the approach –

• of the European Competition Commission as set out in the Consolidated Jurisdictional Notice under council Regulation (EC) No.139/2004 on the Control of Concentrations between Undertakings; and
• adopted by the South African Competition Tribunal and Competition Appeal Court.

• that is that minority protection rights that purely protect a financial interest do not amount to 'control' for merger control purposes.

Why are the Draft Guidelines Useful?

Under South African competition law, a shareholding of less than 50% of a company’s issued share capital does not automatically confer control. However, in terms of the Competition Act a minority shareholder may be deemed to have acquired control for merger-notification purposes if they can materially influence the firm’s strategy.

The Draft Guidelines are useful as they set out a non-exhaustive list of rights commonly held by minority shareholders, grouped into two categories:

1. Protective rights that generally do not confer control (i.e., rights aimed at safeguarding an investor’s financial interest); and
2. Strategic rights that enable a minority shareholder to influence strategic decision-making.

The determination of whether minority rights provide control remain fact-specific and must be assessed on a case-by-case basis and within the context of the specific market or sector within which the firm operates. Whether a shareholder is able to materiality influence the strategy is not only about the decisiveness of a particular right but also the extent of the matters it covers. To this end, even a limited set of rights may constitute material influence if they relate to matters critical to the firm’s strategic direction.

Protective Rights

The Draft Guidelines explicitly provide that certain decisions recorded in the Companies Act, No. 71 of 2008 (as amended) which require a special resolution do not confer control. In addition, the Commission identifies the following minority protection rights that are also not considered control-conferring:

These include the right to approve or decline:

• changes to dividend policy;
• the appointment or removal of auditors;
• decisions relating to the public listing of the company;
• profit- or revenue-sharing arrangements;
• the acquisition or disposal of assets outside the ordinary course of business;
• entering into any joint venture, partnership or similar arrangement outside the ordinary course of business;
• the establishment, acquisition, or investment in new businesses outside the ordinary course;
• entry into loans, guarantees, or securities, or the variation or repayment thereof;
• changes to the basis of accounting;
• decisions to institute or settle litigation outside the ordinary course of business;

• the conclusion or amendment of any agreement providing for the disposal or licensing of the firm's or any subsidiary of the Company's intellectual property.

Strategic Rights

The Draft Guidelines identify rights that are likely, depending on context, to confer control because they allow a minority shareholder to influence the strategic direction of a firm.

These include rights to:

1. approve or veto the strategy, business plan, or budget;
2. approve or veto, the appointment or dismissal the chief executive officer or chief financial officer, or amend the material terms of their appointments;
3. approve or veto the undertaking of new business activities outside the ordinary business of the firm;
4. approve or veto any departure from the annual budget.

In conclusion, while certain minority rights may individually confer control, it is also important to consider the rights wholistically to determine whether there may be control.