South Africa
Answer ... In South Africa, several data protection rules are relevant to private M&A transactions, governing the collection, use and transfer of personal information during the process. The key regulations to consider include the following:
Protection of Personal Information Act (POPIA): This act is the primary legal framework governing data protection in South Africa. It applies to any party processing personal information within the country or using means from within the country, regardless of their nationality.
The key requirements are as follows:
- Lawful processing: Personal information must be processed lawfully and fairly, with informed consent from data subjects (ie, individuals whose information is collected).
- Purpose limitation: Information should be collected and used for specific, explicit and legitimate purposes only.
- Data security: Appropriate security measures must be implemented to protect personal information from unauthorised access, loss, damage or misuse.
- Data retention: Personal information should be retained only for as long as necessary for the stated purpose.
- Cross-border transfers: Transferring personal information outside South Africa requires additional requirements and safeguards.
Promotion of Access to Information Act (PAIA): This act grants individuals the right to access information held by public and private bodies, including information about themselves. The parties to M&A transactions might receive requests for accessing personal information during due diligence or investigations, requiring compliance with PAIA procedures.
Companies Act (71/2008): This act includes provisions related to data breaches and requires the notification of stakeholders if certain types of data breaches occur. Data breaches during an M&A transaction could trigger notification requirements depending on the nature and severity of the breach.
Electronic Communications and Transactions Act (25/2002): This act regulates electronic communications and transactions, including how electronic signatures can be used in agreements and data sharing practices. Virtual data rooms and electronic agreements used in M&A transactions must comply with this act’s provisions.
Additional considerations include the following:
- Sector-specific regulations: Certain industries might have additional data protection regulations, such as the rules of the Financial Services Conduct Authority for financial institutions.
- Contractual arrangements: Data sharing agreements with due diligence providers, advisers and other parties involved in the transaction should incorporate robust data protection clauses.
South Africa
Answer ... There are several additional considerations during private M&A transactions from a data protection perspective:
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Due diligence and data sharing:
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- Minimise data transfer: Limit the transfer of personal information to what is absolutely necessary for due diligence purposes.
- Implement secure data-sharing methods: Utilise secure data rooms, encryption and access controls to protect sensitive information during information sharing.
- Data subject consent: Whenever possible, obtain informed consent from data subjects before transferring their personal information.
- Data anonymisation and pseudonymisation: Consider anonymising or pseudonymising personal data when feasible to reduce privacy risks during due diligence.
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Data breach management:
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- Conduct data breach risk assessments: Identify potential vulnerabilities and implement measures to prevent data breaches during the transaction process.
- Have a data breach response plan: Establish a clear and documented plan for identifying, containing and reporting data breaches if they occur.
- Notify stakeholders promptly: If a data breach occurs, notify the relevant authorities and affected individuals according to POPIA and other applicable regulations.
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Post-merger integration:
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- Data mapping and inventory: Conduct a comprehensive data mapping exercise to identify all personal information collected and processed by both parties.
- Data harmonisation and consolidation: Develop a plan for harmonising data management practices and consolidating systems while ensuring data protection compliance.
- Training and awareness: Train employees who handle personal information on their data protection responsibilities and best practices.
Additional considerations include the following:
- Cross-border transfers: If personal information is transferred outside South Africa, comply with POPIA’s requirements for cross-border transfers, including obtaining necessary approvals.
- Vendor management: Ensure that data processors and third-party vendors engaged in the transaction uphold appropriate data security and privacy standards.
- IP considerations: Address ownership and access rights to personal data created or collected during the transaction, aligning with IP agreements.
- Transparency and communication: Communicate openly and transparently with data subjects about how their information is being collected, used and protected throughout the M&A process.