Skip to main content

Clifford Chance

Clifford Chance


Companies Act Reform: Organisation Restructuring/M&A (Cash-out, Capital Raising)

29 July 2014

This briefing explains the new rules regarding cash-out and capital raising by a private placement of shares as set out in the amendment to the Companies Act, which was enacted on 20 June 2014 ("Amendment").  The Amendment is expected to come into effect on 1 April 2015.

The Amendment has introduced a new cash-out mechanism called a Demand for Sale of Shares.  A cash-out (or squeeze out) is the compulsory acquisition of shares by majority shareholders from minority shareholders for consideration in cash and is often used to convert of a subsidiary into a wholly-owned subsidiary.  Under the amended Companies Act, a Demand for Sale of Shares can be made by a shareholder holding no less than 90% of the voting rights in the target company.  The amended Companies Act also provides for new minority shareholder protections for each of the existing mechanisms under current law for undertaking a cash-out: namely a "consolidation of shares" and a "class share scheme", the latter of which is by way of subjecting class shares ("Class Shares") to a class-wide call.  In relation to capital raising, a shareholders' resolution will be required in certain types of share issuances that result in a person acquiring control of the company.

Download PDF Download PDF