Share Buybacks Made Simpler: Section 48 Amended
Amendments to section 48(8) of the Companies Act remove the automatic scheme-of-arrangement trigger but now require shareholder approval for most buybacks.
Companies Act: Section 48 Amended, Share Buybacks Made Simpler
The recent amendments to section 48(8) of the Companies Act 71 of 2008 have reshaped how South African companies may repurchase their own shares.
While the changes simplify certain aspects of compliance, they also introduce new procedural steps that business owners and attorneys should note.
Previously, any share buyback exceeding five percent of a class of shares automatically triggered the complex scheme-of-arrangement procedures under sections 114 and 115 of the Act, which required an independent expert report and shareholder approval by special resolution. These formalities were often disproportionate to the nature of ordinary buybacks.
Under the amended section 48(8), the automatic link to sections 114 and 115 has been removed, meaning companies no longer need to commission expert reports for larger repurchases. However, the trade-off is that almost all share buybacks now require shareholder approval by special resolution, regardless of the size of the transaction. The only exceptions are where the repurchase is made through a pro rata offer to all shareholders of a particular class or where it takes place on a recognised stock exchange.
Repurchases from directors, prescribed officers or their related persons continue to require shareholder approval.
For listed companies, the amendments create tension with the JSE Listings Requirements, which permit certain intra-group or treasury share repurchases without shareholder approval. The Act, as primary legislation, takes precedence, and these transactions will now also require shareholder approval under section 48(8).
Companies should review their memoranda of incorporation to ensure alignment with the amended section and to remove outdated provisions that still reference the old regime. It may also be prudent for companies, particularly private entities, to seek upfront shareholder authority at annual general meetings to approve share repurchases under defined conditions.
In essence, the amendments make the buyback process more straightforward by eliminating unnecessary expert reports, but they also impose a higher level of shareholder oversight. Directors should plan ahead to ensure that any future buybacks are conducted efficiently and remain fully compliant with the revised requirements of the Act.
