Zambian Breweries Plc and Ors v Securities and Exchange Commission (APPEAL NO. 126/2022) [2024] ZMCA 56 (18 February 2024)

• IN THE COURT OF APPEAL OF ZAMBIA APPEAL NO . 126/2022 HOLDEN AT NDOLA (Civil Jurisdiction) BETWEEN: ZAMBIAN BREWERIES PLC ANHEUSER-BUSCH INBEV PLC NATIONAL BREWERIES PLC AND 1 ST APPELLANT 2ND APPELLANT 3RD APPELLANT SECURITIES AND EXCHANGE COMMISSION RESPONDENT CORAM: CHASHI, MAKUNGU AND SICHINGA, JJA ON: 21 s t and 28th February, 2024 For the Appellants: C. P. Chuula and J. Ngisi, Messrs Chibesakunda & Co For the Respondent: K. N Sakala and L. Hall (Ms), In - House Counsel JUDGMENT CHASHI JA delivered the Judgment of the Court. Cases referred to: 1. Godfrey Miyanda v The High Court (1984) ZR, 62 "' • -J2- 2. Edith Tshabalala v Attorney General (1999) ZR, 139 3. Attorney General v William Muzala Chipango (1971) ZR, 1 4. Edward Jack Shamwana v Attorney General (1988/89) ZR,4 5. Attorney General and Others v Akashambatwa Mbikusita Lewanika and Others (1993/94) ZR, 164 6. OJ Kalunga v Zambia Revenue Authority - 1999/RA T/36 7. Moobola v Muweza - SCZ Judgment No. 3 of 1991 8. Lt. General Peter Zuze and Others v Attorney General - CAZ Appeal No. 108 of 2017 9. South African Veterinary Counsel and Registrar v Greg Syzmanski - Case No. 70 of 2001 10. Frederick Titus Chiluba v Attorney General - SCZ Appeal No. 125 of 2002 11. Council of Civil Service Union v Minister for the Civil Service (1985) AC 374 12. Zambia National Commercial Bank Plc v Musonda & Others - SCZ Judgment No. 24 of 2018 13. Chintu Kanga v Zambia Revenue Authority - SCZ Appeal No. 194 of 2015 Legislation referred to: 1. The Securities Act, Chapter 354 of the Laws of Zambia 2. The Securities Act, No. 41 of 2016 .. -J3- 3. The Interpretation and General Provisions Act, Chapter 2 of the Laws of Zambia Rules referred to: 1. 2. The Securities (Takeovers and Mergers) Rules, Statutory Instrument No. 170 of 1993 The Securities Statutory Instrument No. 165 of 1993 (Licensing, Fees and Levies) Rules, 3. The Securities (Licensing, Fees and Levies) (Amendment) Rules, Statutory Instrument No. 82 of 2013 1.0 INTRODUCTION 1.1 This is an appeal against the Judgment of the Capital Markets Tribunal (the Tribunal), delivered on March 11, 2022. In the said Judgment, the Tribunal ruled that the applicable law during the Takeover Transaction was The Securities Act, 1 Chapter 354 of the Laws of Zambia. 1.2 Additionally, the Tribunal found that the Respondent, the capital market regulator, had the legal authority to charge authorisation fees to the Appellants. This was because there was a takeover of SABMiller PLC, which ultimately held a majority shareholding in the two Zambian Companies, the 1 st and 3rd Appellants. .. -J4- 2.0 BACKGROUND 2 .1 The brief background to this case on which the appeal revolves, is as was captured by the Tribunal in its introductory remarks. We will recapitulate the same for ease of reference and understanding. 2.2 SABMiller PLC, a company headquartered 1n Johannesburg and listed on both the London and Johannesburg Stock Exchanges, was the majority shareholder of the 1 st and 3 rd Appellants. Sometime in November 2015, the 2 nd Appellant announced its intention to make an offer to acquire the entire issued and to be issued share capital of SABMiller PLC. 2.3 The acquisition (the Transaction) was to be completed in three stages. In the first stage, SABMiller PLC shares were to be transferred to a Belgian Company known as Newco in exchange for the issue of Newco shares to SABMiller PLC shareholders. Under the second stage, the 2nd Appellant would acquire the shares in Newco from the former SABMiller PLC shareholders. In the last and third stage, the 2 nd Appellant would merge into Newco, -JS- holding all the shares and having sole control of SABMiller PLC. 2.4 The Transaction, completed in 2016, did not involve the exchange of securities in Zambia because only the shares in SABMiller PLC were the subject of the Transaction. Accordingly, the shareholders in the 1 st and 3 rd Appellants did not change. That notwithstanding, the Transaction triggered the requirement for a mandatory offer pursuant to Part XVI Rule 56 of the Third Schedule to The Securities (Takeovers and Mergers) Rules, Statutory Instrument No. 170 of 1993 (The Takeovers and Mergers Rules). 1 This was prompted by the fact that the 2 nd Appellant had acquired more than 35% of the voting rights in the 1 st and 3 rd Appellants. 2.5 Following the trigger of the mandatory offer, the Appellants, on 11 th November 2016, applied to the Respondent for a waiver from making a mandatory offer to the minority shareholders of the 1 st and 3 rd Appellants, and the same was granted on 16th December 2016. As a result, the Respondent requested payment of -J6- a waiver fee and payment of authorisation fees in accordance with The Securities (Licensing, Fees, and Levies) (Amendment) Rules, Statutory Instrument No. 82 of 20133 amounting to K4,571,763.38 and K888, 615 .00 in respect of the 1st and 3 rd Appellants respectively. 2.6 In a letter dated 11 th April 2016, the Appellants questioned the legal basis and quantum of the authorisation fees on the ground that the repealed Securities Act, which was 1n force at the time of the Transaction, did not provide for the authorisation of takeovers and mergers, nor did it have provisions for transactions conducted outside the Jurisdiction. On that basis, the Appellants applied to the Respondent for a 100% waiver of the authorisation fee. 2.7 On 5th June 2017, the Respondent sent a letter to the Appellants. In the letter, the Respondent informed the Appellants that they had approved a waiver of 60% of the authorisation fees. However,· they also demanded that the -J7- Appellants pay the remaining 40% of the authorisation fee within 14 days. 2.8 The Appellants were dissatisfied with the decision of the Commission and launched an appeal before the Tribunal. The essence of their appeal was that the Respondent did not have a legal basis for imposing a takeover authorisation fee for the Transaction. According to them , the applicable law at the time, did not provide for authorisation of takeovers and mergers, and the Transaction took place outside the Jurisdiction. 3.0 DECISION OF THE TRIBUNAL 3.1 Upon considering the evidence and the arguments advanced by the parties, the Tribunal formulated the following six issues for determination: 1. Does the Jurisdiction of the Tribunal include determining the validity of the Third Schedule to Statutory Instrument No. 82 of 2013? 2. Which Securities Act was applicable at the time of the Transaction? -JS- 3. Was the Transaction subject to regulatory oversight and approval by the Respondent? 4. Did the acquisition of SABMiller PLC by the 2nd Appellant result into the takeover of the 1st and 3 rd Appellants? 5. Whether the Respondent had lawful authority to charge the 2 nd Appellant an authorisation fee? 6. Did the Respondent have a legal obligation to inform the Appellants about the existence of prescribed fees? 3.2 The Tribunal resolved the first issue by referring to the case of Godfrey Miyanda v The High Court 1 and analyzing section 184(3) of The Securities Act, 20162 , which defines the Tribunal's Jurisdiction. The Tribunal determined that, as an adjudicative body, it has an inherent function of interpretation, which involves authoritatively construing legislation. Therefore , the Tribunal concluded that it has the power to determine the validity of laws, including statutory instruments , within its inherent jurisdiction. -J9- 3.3 In resolving the second issue regarding which law was applicable at the time of the Transaction, it was observed that the Transaction began in 2015 and concluded in October 2016. The current Securities Act, which replaced the former Securities Act, Cap 354, came into effect on December 27, 2016. The Tribunal therefore, found that the former Securities Act was the applicable law at the time of the Transaction, as it had been concluded before the current Act came into force. 3.4 The Tribunal rejected the Appellants' argument that applying the regulations under the former Securities Act would be a retroactive application of the law. According to the Tribunal, all statutory instruments issued under the former Securities Act would continue to remain in force, as per section 15 of The Interpretation and General Provisions Act3 , unless they were repealed. The instruments would be considered as though they had been issued under the current Securities Act. 3. 5 Coming to the third issue, the Tribunal found that the former Securities Act did not define the term takeover. -JlO- However, section 39 (1) was the principal provision that regulated takeovers . Section 39 provides the following: "A Person shall not make or pursue an offer in respect of a takeover or a substantial acquisition of the securities of any company except in accordance with the conditions prescribed by the rules made under the Act" 3.6 According to the Tribunal, going by the above provision, the former Securities Act had established rules for conducting takeovers. Further, under section 39(2) of the Act, a substantial acquisition was defined as the acquisition of at least twenty percent of the issued securities of a company. In this case, the 2 nd Appellant had control of SABMiller PLC, which owned 54.12% and 43.4% shareholding and voting rights in the 1st and 3 rct Appellant, respectively. This ownership exceeded the 20% threshold specified in section 39(2). Therefore, the transaction was subject to oversight by the Respondent. 3. 7 In resolving the fourth issue, the Tribunal addressed the question of whether there was a takeover and concluded -Jll- that the Transaction consisted of two parts. The first part involved the sale and acquisition of shares in SABMiller PLC. The Tribunal determined that this sale was not subject to local registration of securities or payment of any registration fees since it occurred outside the jurisdiction. 3.8 Regarding the second part, the Tribunal noted that the former and current Securities Acts do not differentiate between direct and indirect takeovers but prioritise the takeovers based on the control acquired in the target company. This 1s evident in section 39 and The Takeovers and Mergers Rules 1 . The ref ore, the Tribunal concluded that the law applies to all takeovers, whether direct or indirect. 3.9 The Tribunal examined the different stages of the Transaction, as highlighted in paragraph 2.3, which ultimately led to the 2 nd Appellant merging with Newco. Newco holds all the shares and has sole control of SABMiller PLC, which has a majority stake and control in two Zambian Companies, the 1 st and 3 rd Appellants. The -J12- Tribunal determined that this was an indirect takeover, and therefore, according to Rule 4(1) of The Takeovers and Mergers Rules1, the Appellants were required to comply with the general principles set out in the second and third schedules to The Takeovers and Mergers Rules 1 . 3.10 The Tribunal concluded that the acquisition was subject to oversight by the Respondent and required payment of fees prescribed under section 78 of the former Securities Act and The Securities (Licensing, fees, and levies) · Rules2 . Therefore, the Respondent's demand for payment of an authorisation fee in relation to the acquisition was legal. 3.11 The Tribunal considered whether the Appellants had a legitimate expectation not to pay the authorisation fee and concluded that there were two reasons why this did not apply to the present case. Firstly, the Respondent had not made any statement about the authorization fees to the Appellants or the public, so there was no basis for a legitimate expectation to arise. Secondly, the principle -J13- of legitimate expectation only applies where the law is silent on the issue, but in the present case, paragraph 8 (i) of the new Third Schedule of 2013 regulations, although not completely prescriptive, required compliance and could not be disregarded. 3.12 The Tribunal also applied the principle of caveat emptor, which means "buyer beware," as a core principle that applies to buyers when deciding whether or not to buy or invest in businesses, including those listed on stock exchanges. The Tribunal noted that if the Appellants had conducted a legal due diligence, they would have been aware of the regulatory licenses, fees payable, and approvals required for the transaction. 3 .13 The Tribunal resolved the sixth and last issue by considering whether the Respondent was legally obligated to inform the Appellants about the existence of the prescribed fee. The Tribunal applied the principle of "ignorance of the law is no defence" and concluded that the Respondent did not have a corresponding obligation to inform the Appellants about the statutory obligation, -J14- which is believed to be in the public domain. However, the Tribunal encouraged the Respondent to be proactive in creating a suitable investment environment that promotes transparency of industry information available in the public domain. 3.14 Further, the Respondent urged players in the market to take advantage of the provisions in the law, such as Rules 10(3), 11, and 12 of the First Schedule of The Takeovers and Mergers Rules, 1 that encourages constant consultation and dialogue with the Respondent during the conduct of securities transactions . 4.0 THE APPEAL 4.1 Dissatisfied with the decision of the Tribunal, the Appellant launched an appeal before this Court advancing five (5) grounds of appeal couched as follows : 1. That the Tribunal erred in law and fact when it held "that the Respondent did not err in fact or law when it issued authorization fees to the Appellants in relation to the 'Transaction' because there was a takeover of the SABMiller -JlS- PLC, a company that ultimately holds majority shareholding in two Zambian companies the 1 st and 3 rd Appellants respectively." 2. That the Tribunal erred in law and fact when it held that "players in the market are urged to take advantage of the provisions in the law such as Rules 10(3), 11 and 12 of the First Schedule of the Securities (Takeover and Mergers) Rules, Statutory Instrument No. 170 of 1993 that encourage constant consultation and dialogue with the Respondent as regulator during the conduct of securities transactions" and disregarded the fact that the Appellant had provided evidence of various consultations it had with the Respondent and the Respondent still did not make the Appellants aware about the payment of the authorised fee. 3. That the Tribunal erred in law and fact when it failed to consider and / or appreciate the -J16- argument regarding the Appellant's legitimate expectations. 4. Alternative to ground 3 above, the Tribunal erred in law and fact when it held that there was no legitimate expectation for the Appellant not to pay the authorisation fee. 5. That the Tribunal erred in law and fact when it found that the Securities Act Chapter 354 of the Laws of Zambia was the applicable law at the time of the Transaction and that it did not distinguish between the indirect and direct takeovers and that the law relating to the authorisation fee was lacking in detail but still proceeded to hold that the Respondent's request for payment of an authorisation fee with respect to the takeover was lawful. 6. That the Tribunal erred in law when it held that Statutory Instrument No. 82 of 2013, the Securities (Licensing, Fees and Levies) (Amendment) Rules paragraph S(i) exists to serve -J17- a purpose and that Statutory Instrument No. 82 of 2013, the Securities (Licensing, Fees and Levies) (Amendment) Rules paragraph S(i) creates a lawful obligation for the payment of an authorisation fee, and that the request for payment of the authorisation fee was lawful. 5.0 ARGUMENTS IN SUPPORT OF THE APPEAL 5.1 The Appellants argued grounds one, five and six together. The Appellants drew our attention to a myriad of cases, including the cases of Edith Tshabalala v Attorney General2 , Attorney General v William Muzala Chipango3 , Edward Jack Shamwana v Attorney General4 , Attorney General and Others v Akashambatwa Mbikusita Lewanika and Others5 and OJ Kalunga v Zambia Revenue Authority6 on the rules of interpretation. 5.2 It was argued that on a literal interpretation, the former Securities Act did not explicitly provide for the authorisation of takeovers and mergers by the Respondent or the issuance of authorization fees . -J18- According to the Appellants, the provisions only governed the conduct of takeovers and mergers. It was argued that the prev10us lack of prov1s10ns 1n the law necessitated the enactment of the current Securities Act. The Act now expressly provides authorisation of takeovers and mergers by the Respondent, whether direct or indirect. 5.3 It was argued that since the former Securities Act did not provide for authorisation of Takeovers and Mergers, it was improper for the Respondent to create a power to authorise Takeovers and Mergers through a statutory instrument. By issuing the authorisation fee after the enactment of the current Securities Act, the Respondent was applying the law retrospectively, which is frowned upon by the law. In that regard, we were referred to sections 14(3) (a) and (b) of the Interpretation and General Provisions Act3 and the case of Moobola v Muweza. 7 5.4 It was argued that based on the foregoing, the Tribunal erred when it held that the former Securities Act applied -Jl9- to both direct and indirect takeovers and that the Respondent's request for payment of the authorisation fees was lawful. 5.5 It was further contended that going by Rules 4(1) and 9(1) of The Takeovers and Mergers Rules1, the Transaction did not affect the 1 st and 3 r d Appellants because all the shareholders in both companies remained the same after the Transaction. Therefore, there was no need for authorisation by the Respondent. 5.6 In ground two, it was submitted that contrary to the Tribunal's observations, there was ample evidence on record to suggest that the Appellants and the Respondent had several consultations, including meetings and correspondences in the form of letters, before the Transaction was completed. It was further argued that the Respondent never disclosed the requirement for payment of an authorisation fee at any point during these interactions. 5.7 The Appellants drew our attention to page 36 of the Tribunal's Judgment, where the Tribunal encouraged the -J20- Respondent to create an investment environment that promotes transparency. According to the Appellants, it goes to show that the Tribunal was aware of the Respondent's lack of proactivity and transparency. Therefore, the lack of transparency on the part of the Respondent should not unfairly impact the Appellants . 5.8 In support of grounds three and four , the Appellants cited several authorities, including the case of Lt. General Peter Zuze and Others v Attorney General8 , on the doctrine of legitimate expectation and when it anses. 5 .9 It was argued that in April 2017, the CEO of the Respondent and the Country Director of the 1 s t Appellant held a meeting, during which the Appellants stated that the authorisation fee was inapplicable because there was no regulatory framework that allowed for its issuance. In response, the Respondent advised the Appellants to apply for a waiver of the fee. The Appellants applied for the waiver, believing that the fee was entirely inapplicable. -J21- 5 . 10 The Appellants further argued that going by Rule 11 of The Takeovers and Mergers Rules, 1 they had several consultations with the Respondent and were never informed about the authorisation fee that would be required once they made the Transaction. Based on this , the representations made by the Respondent created a legitimate expectation on the part of the Appellants. 5 . 11 The Appellants argued that they conducted due diligence before the Transaction, which revealed that the enabling legislation at the time did not explicitly require authorisation and that they had submitted all relevant information to the Respondent. The Appellants believed they would be informed of any pending fees and guided accordingly. 5.12 The Appellants also claimed that the Respondent acted illegally by acting on powers not provided for by the law. They cited the cases of Frederick Titus Chiluba v Attorney General9 and Council of Civil Service Union v Minister for the Civil Service 10 to support their assertion. -J22- 6.0 ARGUMENTS OPPOSING THE APPEAL 6.1 Regarding grounds one, five, and six, it was argued that the Respondent had the authority to charge an authorisation fee based on the former Securities Act and the Rules that were promulgated under it, such as The -Takeovers and Mergers Rules 1 and The Securities (Licensing, fees, and levies) Rules2 • 6.2 In response to the Appellant's claim that the Respondent charged an illegal authorisation fee, the Respondent cited the concept of delegated legislation and argued that section 4 (e) and (o) of the former Securities Act granted the Respondent the authority to establish rules for the securities markets' operation. The Respondent also claimed that these regulations are recognized as law under section 3 of The Interpretation and General Provisions Act 3 • 6 .3 That therefore , the Respondent's authority and mandate , as per the rules governing takeovers and licensing, continue to be valid until revoked or declared invalid. For this position, we were referred to Section 15 of The -J23- Interpretation and General Provisions Act3 and the case of Zambia National Commercial Bank PLC v Musonda and Others 11 • 6.4 In response to the Appellants' argument that Rule 11 of The Securities (Licensing, Fees, and Levies) (Amendment) Rules3 does not allow for the levying of an authorisation fee as provided for in paragraph 8(i) of the Third Schedule, it was argued that the authority to do so could be traced back to section 78(2)(n) of the repealed Securities Act, which gives the Respondent the discretion to prescribe fees necessary to give effect to the provisions of the Securities Act. 6.5 That equally, in relation to the Appellant's request for exemption from having to make a compulsory offer to shareholders, the fees associated with such an exemption are listed in the Third Schedule of The Securities (Licensing, Fees, and Levies) Rules2 • Although not specifically outlined in Rule 11 of The Takeovers and Mergers Rules, these fees are still valid under the Third -J24- Schedule of The Securities (Licensing, Fees, and Levies) Rules2 • 6.6 That it would appear that the Appellants are willing to accept the Respondent's ability to approve a waiver against making a mandatory offer, as stated in paragraph 8(j) of The Securities (Licensing, Fees, and Levies) Rules2 , but are disputing the Respondent's authority to impose an authorization fee outlined in paragraph 8(i) of the same Schedule. 6.7 It has been argued that the Appellants cannot selectively choose the provisions of the Securities Act and the Rules they wish to follow. By requesting a waiver from making a mandatory offer as per clause 56 of the Third Schedule to the Takeover and Mergers Rules 3 , the Appellants have acknowledged the authority of the Respondent to enforce all regulations related to takeovers, including the imposition of an authorisation fee as per The Securities (Licensing, Fees, and Levies) Rules2 • 6.8 Regarding the argument of distinguishing between direct and indirect takeovers, it was argued that there is no -J25- differentiation in the wording of the Act and Rules. Therefore, it can be inferred that the legislature intended for the provision to cover all types of takeovers. 6 . 9 With regards to the argument that the transaction did not affect the 1 st and 3 r d Appellants , it was argued that the transaction did affect the 1 st and 3 r d Appellants . This was based on the evidence of the Appellants' witness on page 295 of the record, which showed that the 2n d Appellant made changes to senior management and the board in both companies. 6 .10 The 1st Appellant also started offering products that the 2 n d Appellant had ownership rights of. In addition, the 2 nd Appellant took control of the 1 st and 3 rd Appellants and was able to approve changes to their structure. According to the Respondent, these changes demonstrated that, even though the transaction appeared to have taken place outside Zambia, it triggered The Takeovers and Mergers Rules 1 and the authorisation fee. 6. 11 Coming to ground two , the Respondent argued that the issues being raised were never brought up before the -J26- Tribunal. Therefore, this ground ought to be dismissed. In that regard, the case of Chintu Kanga v Zambia Revenue Authority 12 was cited on the position that issues not raised in the court below cannot be considered on appeal. 6.12 Notwithstanding the argument 1n the preceding paragraph, the Respondent argued that Rule 10 (3) of The Takeovers and Mergers Rules 1 allowed for consultation and dialogue with the Respondent. However, the Appellants failed to adduce any evidence to prove that they consulted with the Respondent regarding the issue of the authorisation fee . 6 . 13 According to the Respondent, the evidence on record (specifically on pages 110 and 112-155) shows that the Appellants requested a waiver of the mandatory offer, not the authorisation fee. This is what the Respondent responded to. 6.14 The Respondent disagreed with the Appellants' argument regarding lack of transparency. It was argued that the Appellants were informed about the authorisation fee as -J27- demonstrated on pages 158 - 162 of the record. Furthermore, the provision for the authorisation fee is available 1n The Securities (Licensing, Fees, and Levies) (Amendment) Rules3 , which 1s publkly accessible. 6.15 The Respondent argued that there was enough evidence on record showing that it was transparent in its dealings with the Appellants. The Appellants were given a chance to consult and represent themselves to the Respondent. The Respondent cited pages 184 and 266 of the record to support its argument. Additionally, the Respondent stated that the correspondence on pages 164 and 1 72 of the record shows that the legal basis for imposing the authorisation fee was communicated to the Appellants. 6.16 Regarding grounds three and four on legitimate expectation, The Respondent argued that the Tribunal adequately considered the law and considerations giving rise to a legitimate expectation. The Tribunal correctly determined that there was no legitimate expectation for the Appellants to avoid paying the authorisation fee. -J28- 6.17 Our attention was drawn to the letters dated 6 th February 201 7 and 18th April 2017, appearing at pages 164 and 175 of the record, wherein the Respondent informed the Appellants that their request for a reconsideration of the fee or waiver of the authorisation fee could only be considered if an application was made to the Respondent's Board. The Respondent argued that the application for a 100% waiver of the authorization fee did not guarantee its approval by the Board. 6 .18 The Respondent further stated that there was no evidence on record to support the Appellants' claim that they were promised a 100% waiver of the authorisation fee to give rise to a legitimate expectation . 6.19 It was argued that the Respondent is obligated to monitor and investigate takeover transactions according to The Takeovers and Mergers Rules 1 . The power to charge takeover fees was expressly provided for with the promulgation of The Securities (Licensing, fees and levies) (Amendment) Rules3 , three years prior to the completion of the Transaction. -J29- 6.20 It was argued that the Appellants did not seek consultation with the Respondent regarding the levy of the takeover authorisation fee. The Appellant's request before and after the transaction was limited to seeking clarification on the operation and application of Rule 56 of The Takeovers and Mergers Rules 1 . The. Appellants did not seek any opinion on the validity of The Securities (Licensing, fees, and levies) (Amendment) Rules3 • 6.21 On that basis, it was argued that the Appellants did not meet the necessary requirements for a legitimate expectation. Additionally, it was contended that the statutory obligation of the Respondent to provide guidance does not require it to advise on the entire legal framework of a Transaction. As the Appellants' consultations did not pertain to the authorisation fee, the Respondent was not obliged to provide a ruling on an issue that was not consulted upon. We were, therefore , urged to uphold the decision of the Tribunal. -J30- 7.0 ARGUMENTS IN REPLY 7.1 In reply, the Appellants reiterated their arguments in the heads of argument save to highlight that the former Securities Act regulated the conduct of participants in the securities industry but did not provide for the authorisation of the same. On the other hand, the current Securities Act explicitly states under section 9 (2) (i) that the Respondent's function is to inter alia regulate the manner and extent of security transactions . Therefore, the powers granted under the current Securities Act are broader and include the authorisation of takeovers and mergers. 8.0 DECISION OF THE COURT 8.1 We have considered the evidence on record, the arguments advanced by the parties, and the Judgment of the Tribunal. In our view, the key issue to be determined is whether the Respondent had the legal authority to charge the Appellants an authorisation fee with regard to the takeover Transaction. -J31- 8.2 The Appellants strongly argued that the Respondent had no legal basis for imposing an authorisation fee. They claimed that the former Securities Act, Cap 354, which was applicable at the time of the Transaction, only governed the conduct of takeovers and mergers and did not provide for authorisation of the same. The Appellants argued that by imposing the authorisation fee, the Respondent was applying the current Securities Act, 2016, retrospectively since the Transaction occurred before the enactment of the Securities Act, 2016. 8.3 On the other hand, the Respondent argued that it had a legal basis for imposing the authorisation fee based on its powers under the former Securities Act and the Rules formulated under it. The Respondent claimed that even after the repeal of the former Securities Act, the rules remained 1n force due to section 15 of The Interpretation and General Provisions Act3 • 8.4 Based on the evidence presented and the Tribunal's findings, it is evident that the Transaction began in 2015 and concluded in October 2016. Therefore, the enabling -J32- legislation in effect during the Transaction was the former Securities Act, Cap 354. Section 39 of the said Act on Takeovers and Substantial Acquisitions provides as follows: "39. (1) A person shall not make or pursue an offer in respect of a takeover or substantial acquisition of the securities of any company except in accordance with the conditions prescribed by the rules made under this Act. (2) For the purposes of this section, "substantial acquisition" means acquisition of at least twenty per cent of the issued securities of the company concerned." 8.5 Further, Section 78, provides as follows: "78. (1) The Commission may by statutory instrument make rules for or with respect to any matter that by this Act is required or permitted to be prescribed, or that is necessary or convenient to be prescribed for carrying out or giving effect to this Act, other than a matter -J33- required or permitted to be prescribed by the Minister. (2) Without limiting the generality of subsection (1), such rules may be made for or with respect to- (n) fees and charges to be levied and paid in respect of any matter or thing required or permitted to be done for the purposes of this Act, including annual or other periodic licence fees." 8.6 In our view, the aforementioned legal provisions provide the Respondent with extensive discretionary authority to formulate regulations concerning any matter that is essential or expedient for effectively implementing the Act. In this regard, the creation of The Takeovers and Mergers Rules 1 and The Securities (Licensing, Fees, and Levies) Rules 2 are relevant to this case . 8.7 The Respondent has argued that the basis of the authorisation fee is clause 8(i) of the Third Schedule to -J34- The Securities (Licensing, Fees and Levies) Rules, as amended by Statutory Instrument No. 82 of 2013. According to the Appellants, the aforementioned Clause provides for the payment of a fee amounting to 0.25% of the value of the Transaction for the authorisation of a takeover or merger Transaction . 8.8 Upon reviewing The Securities (Licensing, Fees, Levies) (Amendment) Rules3 , cited by the Respondent , we recognize that it is essential to interpret the amendment rules in conjunction with the principal rules, The Securities (Licensing, Fees, and Levies) Rules2 • 8. 9 A careful reading of the principal rules and the amendment led to the identification of Rule 11 in the Principal Rules as a crucial provision worth noting. This rule states that: The fees prescribed in the Third Schedule of the Securities (Licensing, Fees and Levies) shall be payable to the Commission, with respect to: (a)the grant and renewal of licences; • -J35- (b)the registration of securities under Part V of the Securities Act; and (c)the authorization of collective investment schemes under Part X of the Securities Act. 8.10 The abovementioned provision essentially entails that there must be a correlation between the fees to be paid under the Third Schedule of The Securities (Licensing, Fees, and Levies) Rules and the three actions set out in Rule 11. It is important to note that Rule 11 is limited in scope and does not encompass the authorisation of takeovers and mergers. Consequently, The Securities (Licensing Fees and Levies) (Amendment) Rules will not apply to the Transaction because they do not fall under the purview of actions outlined in Rule 11. 8.11 We concur with the Appellants that the current Securities Act significantly differs from the former Securities Act regarding the role of the Respondent in mergers or takeover transactions. Part XI of the current Act deals with Takeovers and Mergers. According to Section 134, the Respondent 1s responsible for " -J36- considering applications for proposed takeovers and mergers. The Respondent has the power to approve or reject the proposed takeovers and mergers within 60 days from the application date . 8.12 Additionally, section 135 gives the Commission the power to investigate any merger or takeover, while section 136 grants the Respondent power to create rules through statutory instruments to regulate the process of takeovers and mergers. 8.13 On the other hand, under the former Securities Act, Section 39 is the authoritative provision on Takeovers and Substantial Acquisitions, and it merely provides as follows: 39. (1) A person shall not make or pursue an offer in respect of a takeover or substantial acquisition of the securities of any company except in accordance with the conditions prescribed by the rules made under this Act. • • -J37- (2) For the purposes of this section, "substantial acquisition" means acquisition of at least twenty per cent of the issued securities of the company concerned. 8.14 It appears that the Appellants' argument regarding comparing the former Securities Act to the current one on takeovers and mergers has some validity. The previous Act did not explicitly grant the Respondent the power to authorise takeovers and mergers. As there was no connection between the authorisation fee prescribed under paragraph 8(i) of the Third Schedule and the enabling legislation, the Respondent had no legal basis for issuing an authorisation fee for the Takeover Transaction. Therefore, any authorisation fee or levies that would normally be charged under the current Securities Act in relation to a takeover or merger would not be payable in relation to this Transaction. 8.15 Based on the foregoing, we concur with the Appellants' that the authorisation fee lacked a legal basis, which I .. . -J38- means that the Respondent had no legal authority to charge an authorisation fee. 8.16 Furthermore, in light of our decision, the arguments on the distinction between indirect and direct takeover and legitimate expectation are irrelevant. We will, therefore , not consider them. To the extent highlighted above, we find that the appeal has merit. 9.0 CONCLUSION 9.1 In sum, the Appeal is meritorious and is accordingly allowed. Since the appeal emanated from the Judgment of a Tribunal, we will Order that each party bears its own costs. COURT OF APPEAL JUDGE C. K MAKUU COURT OF APPEAL JUDGE . COURT