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CS Professional · Corporate Restructuring, Valuation and Insolvency · Regulation of Combinations

Orchid Capital, a foreign portfolio investor, acquires shares of Veda Foods Ltd under a covenant of an investment agreement. Separately, Orchid also buys a controlling stake in Veda's competitor Zenith Dairy through a plain purchase agreement with no investment-agreement covenant, and the deal is a notifiable combination. Which statement is correct?

Only the Veda Foods acquisition is outside section 6. The exclusion in section 6(9) for foreign portfolio investors applies to acquisitions made under a covenant of a loan or investment agreement. The Zenith Dairy purchase lacks such a covenant, so the normal combination rules apply.

  1. ABoth acquisitions fall outside section 6
  2. BBoth acquisitions need notice because an FPI is not exempt
  3. COnly the Veda acquisition is outside section 6; the Zenith acquisition is not covered by the section 6(9) exclusionCorrect
  4. DOnly the Zenith acquisition is outside section 6

Explanation

Section 6(9) excludes acquisitions by an FPI only when made pursuant to a covenant of a loan agreement or investment agreement. The Veda acquisition meets this. The Zenith purchase has no such covenant, so the exclusion is unavailable and the normal notice rules apply.

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