The Competition Commission published draft guidelines on minority shareholder protections in December 2025, aimed at providing guidance on the approach the Commission will likely adopt in assessing whether the acquisition of minority shareholder rights confers control and requires merger approval (if financial merger thresholds are met).
What constitutes a merger under the Competition Act?
In terms of the Competition Act no. 89 of 1998, as amended, a merger occurs when one or more firms directly or indirectly acquire, or establish, direct or indirect control over the whole or part of the business of another firm.
The Act sets out instances of control, including:
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beneficial ownership of more than 50% of shares
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ability to vote or control the majority of votes that may be cast at a general meeting
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ability to appoint or veto the majority of directors
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ability to materially influence the policy of a firm in a manner comparable to a person who exercises one of the listed instances of control.
When could minority shareholder rights confer control?
Minority shareholder protections could give rise to the ability to materially influence the policy of a firm in a way that confers control, and could, therefore, trigger a merger filing. The key question to determine whether an acquisition of minority rights confers control is whether the rights provide the minority shareholder with the ability to influence the policy of the firm, i.e. whether the rights relate to strategic decisions and the commercial strategy of the target firm. This depends, amongst other things, on the content of the right/s and their importance within the context of the specific business. It is a legal and factual assessment which must be analysed on a case-by-case basis.
Key indicators of control in minority protections
The draft guidelines reference the EU approach, signalling an intention to align with globally accepted principles.
Typically, the following rights that may amount to control include:
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approval or veto of budgets
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approval or veto of business plans
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approval or veto of major investments
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appointment and remuneration of senior management
Importantly:
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The assessment is context-specific
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Not all of the typical rights that are generally found to confer control need to be present to establish control
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In some cases, the acquisition of a single right that is generally considered to confer control may not amount to control depending on how it applies in practice
What does NOT constitute control?
Not all minority rights confer control.
The following are generally not considered to amount to material influence:
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investment protection rights
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statutory special resolutions set out in the Companies Act, 2008
Practical implications for transactions
Minority shareholder rights are typically set out in a firm’s shareholders’ agreement. Caution should be exercised when negotiating these kinds of rights to ensure that a merger filing obligation is not inadvertently triggered. The implementation of a merger without the requisite approval from the competition authorities can attract significant penalties of up to 10% of a firm’s turnover in the previous financial year, and the Competition Commission is active in its enforcement of the merger control provisions. It is therefore strongly recommended to seek merger control advice when structuring transactions, particularly those involving minority shareholder protections, especially given the context-specificity of the assessment.