The Companies (Amendment) Act 2007 (“CAA”) which came into operation on 15 August 2007, brought some welcomed changes to the Companies Act 1965 (“CA”).

Chief among this is the deletion of Section 132G which generally prevented a company (“Acquirer”) from entering into any arrangement or transaction to acquire the shares or assets of another company (“Target Company”) in which a shareholder or director of the Acquirer or a person connected to such shareholder or director (“Relevant Person(s)’), has a substantial shareholding, unless the arrangement or transaction was entered into 3 years after the Relevant Person(s) first held shares in the Target Company or after the assets were first acquired by the Target Company. Although the intention of Section 132G was to prevent any abuse which may arise due to the Relevant Person(s)’ interest in the Target Company, it also had the effect of stifling legitimate transactions since not even the shareholders’ approval in a general meeting could save such transactions.

Notwithstanding the deletion of Section 132G, the safeguards against the abuse which Section 132G was aimed at can be found in other provisions in the CA such as Sections 131 and 132C. Section 131 requires a director of a company who is interested in a contract or proposed contract with the company, to disclose his interest. This could arguably include a situation where the director has a substantial shareholding in the other contracting corporation. Section 131A (which was incorporated by the CAA), further requires an interested director to abstain from voting on such contract or proposed contract. Section 132C requires the company’s approval in a general meeting for arrangements or transactions involving the acquisition of an undertaking or property of a substantial value by the company or the disposal of a substantial portion of the company’s undertaking or property.

With these changes, the minority shareholders’ interest is still protected without unduly hindering the company’s ability to undertake legitimate transactions.