DD of Private M&A in South Africa

Conducting private M&A transactions in the SAR requires buyers to perform financial DD of a company to be bought. Performing DD normally involves:

• analyzing assets; 
• identifying risks.

Depending on buyers’ requirements, the scope of DD of a South African company may vary. DD performed in this country is usually aimed at:

• verifying ownership of stocks or assets;
• analyzing changes in control;
• analyzing potential & existing risks and liabilities.

Those seeking to purchase a South African company should keep in mind that buyers normally rely on DD reports provided by sellers. However, their responsibility is limited to losses incurred only due to the negligence on the part of individuals responsible for compiling reports. 

Responsibility for providing misleading information may be excluded by adding a corresponding clause to an agreement signed between sellers & buyers. However, sellers may be held responsible for any deliberate or negligent misrepresentation of information that resulted in buyers concluding an M&A agreement in the SAR.

Information

Those seeking to conduct DD of a corporate transaction in the SAR should keep in mind that publicly available information on private companies is rather limited. Pursuant to South African legislation, companies registered in South Africa must be registered with the CIPC. Publicly available information provided by the CIPC is rather limited & includes:

• data on company registration in the SAR;
• information about directors; 
• a date of a company's fiscal year.

Information on companies’ assets or blocks of shares isn’t available. Please note that the CIPC has recently launched a new automated system allowing potential buyers to request documents online. To be able to do so, they must register an account on the platform.

Also, pursuant to the PAIA, anyone can request documents relating to a particular company, provided they follow the proper procedure for requesting information & can provide conclusive proof that they need information to exercise or enforce a right. 

If you intend to conduct an M&A transaction in the SAR, please note that there may be grounds for denying access to requested documents (e.g. if the information is confidential or includes personal data).