What businesses, investors and transaction advisors need to know

KEY TAKEAWAY  |  Eswatini’s merger-control regime remains active under the Competition Act, 2007 and the Competition Commission Regulations, 2010. The critical question is not simply the size of a transaction, but whether it falls within the statutory definition of a merger and has the requisite Eswatini nexus.

 

1. The Current Legal Framework

 

Eswatini’s merger-control regime is principally governed by the Competition Act, 2007 (Act No. 8 of 2007) and the Competition Commission Regulations, 2010. The Eswatini Competition Commission (ESCC) continues to administer merger control under section 35 of the Competition Act. Current ESCC regulations confirm that a merger may not be carried out without Commission authorisation.

The Draft Competition Bill, 2020 should be treated as a proposed reform measure and not as enacted law. The current ESCC materials continue to identify the Competition Act, 2007 as the governing statute. The Draft Bill proposes a more comprehensive competition framework, including reforms to merger control, the Commission’s powers, public-interest considerations and institutional arrangements.

 

2. 2. Mandatory and Suspensory Merger Notification

 

Eswatini operates a mandatory and suspensory merger-control regime. Section 35 requires Commission authorisation before a qualifying merger or takeover is implemented. The ESCC’s current merger materials state that all parties involved in a merger are responsible for notifying the Commission. The practical consequence is important: parties should obtain the necessary approval before completing or implementing a notifiable transaction. Closing first and seeking approval afterwards can expose parties to significant legal and financial consequences.

The ESCC’s current Form 1 further records that participation in a merger or takeover falling within section 35 without authority from the Commission constitutes an offence. On conviction, the statutory sanction may include a fine not exceeding E250,000, imprisonment for a term not exceeding five years, or both. The form also records that a merger or takeover made in contravention of section 35 has no legal effect unless an application for condonation has been made to and granted by the Commission.

 

3. 3. Notification Thresholds and Filing Fees

 

One point deserves particular emphasis. Eswatini does not presently use a minimum transaction-value or turnover threshold to determine whether a transaction is a merger requiring notification. The ESCC classifies mergers as “small” or “large” for purposes of the applicable filing fee. A large merger is one where the parties’ combined assets or turnover exceed E8 million. For a large merger, the filing fee is 0.1% of the greater of the combined annual turnover or assets value of the merging entities, subject to a maximum of E600,000.

 

The E8 million figure should therefore not be described as a notification threshold. It is relevant to the classification of the merger for filing-fee purposes. The absence of a minimum financial notification threshold means that businesses should assess whether a transaction falls within the statutory definition of a merger and has a sufficient Eswatini nexus, irrespective of transaction value.

 

4. 4. What Constitutes a Merger and the Eswatini Nexus

 

The ESCC defines a merger by reference to the acquisition of a controlling interest in a business or in an asset which is or may be used in connection with the production or distribution of goods or services. A merger may occur through the purchase or lease of shares, an interest or assets, or through an amalgamation or other combination with another business.

 

The practical assessment should therefore focus on whether the transaction results in the acquisition of a controlling interest and whether the transaction has an economic connection with Eswatini. Foreign-to-foreign transactions should not automatically be assumed to be outside the regime merely because the parties are incorporated or headquartered outside Eswatini; the parties should assess their Eswatini activities and economic presence and obtain advice where the nexus is uncertain.

 

Internal restructurings and joint ventures should likewise be assessed on their particular facts. They should not be described as automatically notifiable merely because they are restructurings or joint ventures. The key questions are whether the arrangement falls within the statutory concept of a merger, including the acquisition or creation of a controlling interest, and whether the statutory requirements for notification are met.

 

5. 5 Merger Review Period: 90 Days – But not always!

 

Regulation 16 of the Competition Commission Regulations, 2010 provides that the Commission must consider and determine a proposed merger within 90 days from receipt of the application. Where the Commission requests further information under the applicable provisions, the Regulations provide for a 30-day period from receipt of the additional information. The Commission may, before expiry of the applicable period, extend the relevant period once by a further period not exceeding 60 days.

 

The review process should therefore not be described simply as an unconditional 90-day period or as an automatic 150-day period. The applicable statutory and regulatory provisions governing completeness, requests for further information and extensions must be considered in calculating the relevant period.

 

6. 6. Additional Information and Completeness

 

The ESCC’s current merger forms confirm that where submitted information is insufficient to finalise the investigation, the Commission may request additional information. The Commission’s current Form 5 states that a notification cannot be accepted and the merger-review process cannot commence until the requested information has been provided. Parties should therefore ensure that merger filings are complete and supported by the documents required by the Commission’s current merger-filing checklist.

 

7. 7. Administrative Penalties and Enforcement Risk

 

In addition to the offence and consequences recorded under section 35, the Competition Commission Regulations contain provisions concerning administrative penalties. The ESCC has itself referred in a recent Board decision to Regulation 28A as permitting an administrative penalty not exceeding 10% of a company’s total turnover. The application of any penalty is fact-specific and should not be presented as an automatic 10% penalty for every notification failure.

 

Businesses should therefore distinguish between the statutory consequences of implementing a merger without the required authority and the Commission’s administrative-penalty powers under the Regulations and applicable penalty guidance.

 

8. 8. Cross-Border and International Transactions

 

The Competition Commission Regulations specifically address international transactions. Where the closing of an international transaction is likely to occur before the Commission has finalised its investigation, the parties must disclose the intended closing date, explain how their Eswatini interests will be insulated from implementation of the worldwide transaction, and provide legally enforceable undertakings ensuring that the Eswatini interests remain insulated following closing.

 

The Regulations state that international closing is not permitted before a merger application has been filed with the Commission. Parties considering ring-fencing or carve-out arrangements should obtain transaction-specific legal advice and ensure that any proposed structure satisfies the Commission’s requirements.

 

9. 9. The COMESA Dimension

 

Transactions with a regional dimension should also be assessed for possible application of the COMESA merger-control regime. The ESCC’s current merger-filing checklist expressly requires parties to identify whether a transaction has a COMESA dimension. The existence and effect of any COMESA filing obligation must be determined under the applicable COMESA rules; it should not be assumed that every transaction with a regional element automatically falls outside the ESCC regime.

 

10. 10. Practical Guidance for Businesses

 

• Assess proposed acquisitions, takeovers, amalgamations, asset transactions and other combinations at an early stage.

 

• Determine whether the transaction constitutes a merger involving a controlling interest and whether it has an Eswatini economic nexus.

 

• Do not treat E8 million as a notification threshold; it is relevant to the ESCC’s large-merger filing-fee classification.

 

• Prepare and submit the required merger notification and supporting documents before implementation.

 

• Do not close or implement a transaction requiring ESCC approval before the necessary authority has been obtained.

 

• For international transactions, consider ring-fencing or other legally enforceable arrangements only after obtaining transaction-specific advice.

 

• Assess whether the transaction has a COMESA dimension and whether a separate regional filing analysis is required.

 

• Consider the potential statutory and administrative consequences of non-compliance, including penalties and the legal-effect provisions applicable to unauthorised mergers.

 

11. 11. Conclusion

 

Eswatini’s merger-control regime remains active under the Competition Act, 2007 and the Competition Commission Regulations, 2010. The principal compliance risk is not the size of the transaction but whether the transaction falls within the statutory merger definition and has the requisite Eswatini nexus. The ESCC continues to maintain an active merger-review function and current filing materials. Businesses should therefore obtain competition-law advice at an early stage, particularly for acquisitions, takeovers, restructurings, joint ventures and cross-border transactions.

 

Should you require further elucidation on the subject you may contact the writer.