Companies: How private are shareholders’ details?

A2B“Privacy, like other rights, is not absolute. As a person moves into communal relations and activities such as business and social interaction, the scope of personal space shrinks” (Extract from judgment below)

All companies – big and small, public and private – must keep registers of their shareholders and directors.   And, as the SCA (Supreme Court of Appeal) made clear recently, even “private” companies’ registers aren’t private at all.

An investigative journalist digs for detail

A financial journalist, investigating a controversial investment scheme, was tasked with investigating the shareholding structures of three companies.

The companies refused him access to their securities registers and he approached the High Court for assistance.

The companies asked the Court to exercise a discretion to refuse such access, and in hearing an appeal around this issue, the SCA has clarified the public’s rights as follows –

  • The public at large (including the media) have an unqualified right to inspect or copy those registers on payment of a statutory fee.
  • The motive of the person seeking access is totally irrelevant; nor does he/she have to show that the request is “reasonable”.
  • It is not necessary to comply with the requirements of PAIA (the Promotion of Access to Information Act)  although of course PAIA can be a useful tool to force access to company documents other than these registers.
  • It is a criminal offence for a company to refuse such access or to “otherwise impede, interfere with, or attempt to frustrate, the reasonable exercise by any person” of these rights.

So what shareholder information is public and what is confidential?

A shareholder is only required to provide –

  • His/her name,
  • His/her business, residential or postal address, and
  • “An identifying number that is unique to that person”.

The shareholder can also voluntarily provide an e-mail address.

Confidentiality can be claimed – by either the company or the shareholder – for the e-mail address (if supplied) and for the identity number.  Names and addresses are public, full stop.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Contracting with a company: Check for director authority!

A3BA recent High Court judgment reminds us once again of how important it is, when dealing with a company, to check that whichever director/s you are dealing with is/are fully authorised to bind the company.

R3.8m in claims attacked

  • A liquidation application was launched against a property developing company with 3 directors,
  • The applicant creditor was owed some R3.8m in loan and suretyship claims,
  • Its problem was that the suretyship and loan agreements had been signed by only one of the directors of the property company, with the knowledge and approval of the second director but not of the third,
  • The third director (acting as trustee of a creditor trust) opposed the liquidation application on the grounds that the first and second directors had acted without authority.  He argued that the creditor had no claim against the company, and therefore had no standing to liquidate it,
  • The Court found on the facts that the creditor had failed to prove that the first and second directors had acted with authority.  Nor had it proved that they were held out as being persons authorised to manage the company’s affairs.  Thus it could not enforce any claim, and the liquidation order was refused.

So, how do you prove authority?

You must firstly show that you were dealing with someone who had either actual or apparent (often called “ostensible”) authority to contract with you.  You can’t enforce your claim if you can’t prove authority!

Assumptions, assumptions

As a rule you are allowed to assume that the board of directors and any managing director have the necessary authority.  The same doesn’t generally apply to any ordinary director or employee, except perhaps to the extent that they hold an executive position (financial director or branch manager perhaps) which suggests that they have authority “usual to that type of position”.  Of course you can’t make any assumptions at all if you actually knew, or should have known or suspected, that the director or employee was acting outside his/her powers and authority.

No wriggle room

To complicate matters (sorry, but this is important and to your advantage) what happens if a company tries to wriggle out of its contract with you on the basis that, unknown to you, the director had breached some internal company procedure?  Since usually only insiders will know about a company’s internal policies, it would be highly unfair to you if that were allowed.

To protect you, our law says that, once you have proved actual or apparent authority as above, you can then assume that all the company’s internal rules and policies have been complied with.   Out of interest, if you ever hear lawyers earnestly and learnedly debating “The Turquand Rule”, this is what they are talking about.

Beware – our law on this is both complex and fraught with grey areas, and the notes above are just a summary of some general legal principles.  Insist on directors you contract with producing written proof of authority (a formal company resolution to start with) and take legal advice on your particular circumstances!

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omissions excepted (E&OE)

Review of director’s decisions

Click here for Afrikaans Article

A3_bIn the previous article regarding “informal” decisions by directors, we considered what acts or decisions may be considered as informal decisions by directors. The precedents established by the courts were discussed, which precedents are considered regarding the enforceability of these “consents” and the validity of informal decisions by directors. Directors of homeowners’ associations have been forewarned to be diligent and carefully choose their words in conversations with other members, especially when these members paint pictures of proposed building projects. And more specifically, directors are to keep their opinion for the debate of the properly tabled application, especially concerning additions and alterations to the property of the member. The rules of the homeowners’ association regarding aesthetics and other such requirements should be paramount in the decision-making process.

But what if the member did comply with the prescribed formal requirements and the board of directors did not approve the request? Where does that leave the directors and the member?

The courts will not interfere with the decision made by a homeowners’ association save on recognised grounds of judicial review as applied to voluntary associations whose members have bound themselves to its rules, which include the conferring of decision–making functions of elected body of directors (Turner vs Jockey Club of South Africa 1974 (3) SA; SA Medical & Dental Council vs McLoughlin 1948 (2) SA 355 (AD) and Marlin vs Durban Turf Club & Others 1942 AD 112). 

The grounds of judicial review are restricted to whether the tribunal was competent to make the decision and whether it complied with the requirements of procedural and substantive fairness which effectively is limited to whether the procedure or decision taken was tainted by irregularity or illegality – unfairness per se is not enough (Bel Porto School Governing Body & Others vs Premier, Western Cape & Another 2002 (3) SA). 

The traditional common law grounds of review of a voluntary association tribunal include illegality, procedural unfairness and irrationality. Prior to the constitutional dispensation, the ambit of the voluntary associations had been settled in case law. The Promotion of Administrative Justice Act, Act 3 of 2000 (PAJA) applies to administrative action on the part of an organ of state or a juristic person exercising a public power or performing a public function.  Accordingly, directors of homeowners’ associations do not fall within the scope of the PAJA.  Section 39(2) of the Constitution on the other hand, requires a court, when developing the common law, to promote the spirit, purport and objectives of the Bill of Rights.

The judgement in the matter of Theron and Andere vs Ring van Wellington van die NG Sending Kerk in Suid-Afrika en Andere 1976 (2) SA 1 (A) has already confirmed that a reasonableness test based on rationality was a competent basis under the common law powers to review decisions of voluntary associations. The court will therefore consider a ground of review that included unreasonableness in the sense that the decision could not reasonably be supported by evidence. There appears to be no difference in principle for present purposes between common law grounds of review in relation to voluntary associations and the grounds of review provided for by PAJA.

Various case laws confirm that a court will only interfere with the decision of the directors of a homeowners’ association where that body has failed to comply with the natural justice requirements of legality, procedural fairness and reasonableness, the latter in the sense of a rational connection existing between the facts presented and the considerations that were applied in reaching the conclusion.

If the Memorandum of Incorporation or rules of the homeowners’ association prescribe a formal procedure to follow for permission or consent to be obtained regarding any alteration or other building projects, any member who did not submit a formal request for the building project, even if it is only the erection of a fence and did not include the detail of the fence to be erected for approval prior to the erection thereof, then the fence is “illegal”.

The board of directors of any homeowners’ association has an obligation to enforce the Memorandum of Association and/or the Memorandum of Incorporation and the rules of the association, and should do so in the interests of the whole of the estate and all its members.

Any building project which has been embarked on or even finished without proper procedures followed by the homeowner, and which does not comply with the aesthetical requirements of the homeowners’ association as is prescribed in the rules, are “illegal” in that the member erected the building without formally complying with the requirements of the homeowners’ association.   Directors should carefully consider each and every such building project within the jurisdiction of the association and, in the best interest of all members of the association, invite such members affected for an informal, amicable discussion regarding the removal or further alteration of the building or building project, even if it is only a fence and the time periods to do so. It is important to note that such members should still be obliged to comply with the formal requirements as prescribed by the association. These applications can be tabled in terms of the formal procedures prescribed with consideration to formally consent thereto retrospectively by the board of directors on condition that all prescriptive requirements have been fully met, even if it is merely aesthetically.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice. Errors and omission excepted. (E&OE)

Sexual harassment in the workplace

Click here for Afrikaans Article

A4_bThe idea of “the corporate workplace” has changed significantly in recent years and nowadays there are more women to be found in positions that were previously filled only by men. Unfortunately this has given rise to the issue of sexual harassment in the workplace. In this article we focus on what sexual harassment is and what someone can do if they are being subjected to it.

Both men and women can be victims of sexual harassment; however, it is more common for this type of harassment to be directed at women in the workplace. According to Section 6(3) of the Employment Equity Act[1] (EEA) harassment of an employee is a form of unfair discrimination and is prohibited on any of the grounds of unfair discrimination, which includes gender. The test for sexual harassment, as set out in Item 4 of the Amended Code of Good Practice on the Handling of Sexual Harassment Cases in the Workplace (the Code), is whether the conduct is unwelcome, of a sexual nature, violates the rights of an employee and constitutes a barrier to equity in the workplace, taking into account the following factors:

  1. Whether the harassment is on the prohibited grounds of sex and/or gender and/or sexual orientation;
  2. Whether the sexual conduct was unwelcome;
  3. The nature and extent of the sexual conduct; and
  4. The impact of the sexual conduct on the employee.[2]

There are three types of conduct that can constitute sexual harassment:

  1. Physical conduct such as touching;
  2. Verbal conduct such as innuendos; and
  3. Non-verbal conduct such as showing another person sexually explicit photographs.[3]

Certain types of sexual harassment are common in the workplace. One such type is quid pro quo harassment, which is where someone is forced to give in to sexual advances to avoid losing their job or a job related benefit. Another type is sexual favouritism where only those who submit to sexual advances can progress or receive benefits in the workplace. There is also sexual victimisation, where those who do not submit to sexual advances are prejudiced. Lastly we have the scenario where jokes, pictures or innuendos create a hostile working environment which need not be directed against one specific employee.[4]

According to Item 8 of the Code there is an obligation on employers to develop clear procedures to deal with sexual harassment, which should enable the resolution of problems in a sensitive, efficient and effective way. Section 60(1) of the EEA provides that conduct in contravention with its provisions must immediately be brought to the attention of the employer. This means as soon as is reasonably possible in the circumstances and without undue delay, taking into account the sensitive nature of sexual harassment, that the complainant may fear reprisals and the relative positions of the complainant and the alleged perpetrator in the workplace. The victim of the sexual harassment need not be the one to bring it to the attention of the employer; any other person who is aware of the sexual harassment may also do so.[5]

Once the sexual harassment has been brought to the attention of the employer the employer should consult all the relevant parties, take the necessary steps to address the complaint in accordance with the Code and the employer’s policy, and take all the necessary steps, which are set out in Item 8.3 of the Code, to eliminate the sexual harassment.[6]

A complainant or another person may choose to follow an informal procedure, the first of which is to explain to the perpetrator that the conduct in question is not welcome, that it offends the complainant, makes him or her feel uncomfortable and that it interferes with his or her work. The second way of handling this is for an appropriate person to approach the perpetrator, without revealing the identity of the complainant, and explain that certain forms of conduct constitute sexual harassment, are offensive and unwelcome, make employees feel uncomfortable and interfere with their work.[7]

If a complainant does not find the abovementioned satisfactory then he or she can follow the formal procedure set out in an employer’s sexual harassment policy and/or collective agreement, which should outline with whom the employee should lodge a grievance, the internal procedures to be followed and time frames which will allow the grievance to be dealt with expeditiously.[8]

If the complainant is still not satisfied with the results a complaint of sexual harassment may be referred to the Commission for Conciliation, Mediation and Arbitration (CCMA). It is important to note here that it is a disciplinary offence to victimise or retaliate against a complainant who in good faith lodges a grievance of sexual harassment.[9]

Reference List:

Employment Equity Act, 55 of 1998

Amended Code of Good Practice on the Handling of Sexual Harassment Cases in the Workplace (4 August 2005)

A C Basson, M A Christianson, A Dekker, C Garbers, P A K le Roux, C Mischke, E M L Strydom: Essential Labour Law 5 ed (2009)

[1] 55 of 1998

[2] Item 4 of the Amended Code of Good Practice on the Handling of Sexual Harassment Cases in the Workplace(4  August 2005)

[3] AC Basson, MA Christianson, A Dekker, C Garbers, PAK le Roux, C Mischke, EML Strydom: Essential Labour Law 5ed (2009) 223

[4] Basson et al: Essential Labour Law 5 ed (2009) 223

[5] Item 8.1 of the Amended Code of Good Practice on the Handling of Sexual Harassment Cases in the Workplace

[6] Item 8.2 of the Amended Code of Good Practice on the Handling of Sexual Harassment Cases in the Workplace

[7] Item 8.6 of the Amended Code of Good Practice on the Handling of Sexual Harassment Cases in the Workplace

[8] Item 8.7 of the Amended Code of Good Practice on the Handling of Sexual Harassment Cases in the Workplace

[9] Item 8.7 of the Amended Code of Good Practice on the Handling of Sexual Harassment Cases in the Workplace

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.

Wie mag as direkteur aangestel word?

Sekere mense kom nie in aanmerking om as direkteure van ‘n maatskappy aangestel te word nie. In hierdie artikel kyk ons na wie van direkteurskap uitgesluit word, sowel as die gevolge van die optrede van sodanige persoon wat as direkteur optree.

Volgens artikel 69(3) van die Maatskappywet 71 van 2008, mag ‘n maatskappy nie wetend ‘n gediskwalifiseerde persoon aanstel as direkteur nie. Dit sluit in die situasie waar die maatskappy redelikerwys moes geweet het dat die persoon gediskwalifiseer is.

In artikel 68(7) vind ons ‘n lys van persone op wie daar ‘n absolute verbod gelê is, wat insluit ‘n regspersoon, minderjariges of enige persoon wat gediskwalifiseer is in terme van die Memorandum van Oprigting. Artikel 69(8) lys persone wat tydelik onbevoeg is om direkteur te wees, wat insluit iemand wat deur die hof verbied is, iemand wat deur die hof as ‘n misdadiger verklaar is, ‘n ongerehabiliteerde insolvente persoon wat op grond van wangedrag uit ‘n vertrouensamp verwyder is na oneerlikheid, en persone wat skuldig bevind is aan ‘n kriminele oortreding en wat tronkstraf opgelê is sonder die keuse van ‘n boete, of ‘n hoër boete opgelê is omdat hulle skuldig is aan enige vorm van oneerlikheidsmisdaad. [1]

‘n Vraag wat hier ontstaan, is wat die effek van die optrede van ‘n verbode direkteur is. Artikel 69(4) bepaal dat ‘n persoon onmiddellik ophou om ‘n direkteur te wees indien hy gediskwalifiseer word, maar artikel 71(3) bepaal aan die ander kant dat, indien ‘n aandeelhouer beweer dat ‘n persoon gediskwalifiseer is, die persoon deur ‘n direksiebesluit verwyder moet word voordat hy ophou om ‘n direkteur te wees. Dit beteken dat enige optrede wat deur so ‘n persoon gedoen is, geldig en bindend op die maatskappy sal wees ten spyte van sy onbevoegdheid, tensy die derde party wat in die optrede betrokke was, bewus was van die feit dat die persoon gediskwalifiseer was.[2]

Daar is ses gronde ingevolge artikel 162(5) (a)-(f) vir ‘n misdadigheidsbevel. ‘n Hof moet ‘n misdadigheidsbevel maak as die persoon:

  1. ingestem het om as direkteur te dien, of in die hoedanigheid van ‘n direkteur of voorgeskrewe beampte, terwyl hulle nie gekwalifiseerd is om ‘n direkteur te wees nie;
  2. opgetree het op ‘n wyse wat in stryd is met ‘n proefbevel;
  3. sy posisie erg misbruik het;
  4. persoonlike voordeel uit inligting of ‘n geleentheid verkry, of opsetlik of deur growwe nalatigheid skade berokken aan die maatskappy of ‘n filiaal;
  5. opgetree het op ‘n wyse wat neerkom op growwe nalatigheid, opsetlike wangedrag of verbreking van vertroue; of opgetree het op ‘n wyse wat in artikel 77(3) (a), (b) of (c) beoog is;
  6. herhaaldelik persoonlik onderworpe was aan ‘n voldoeningskennisgewing of soortgelyke afdwingingsmeganisme;
  7. ten minste twee keer skuldig bevind is aan ‘n misdaad, of onderwerp is aan ‘n administratiewe boete of soortgelyke straf; of
  8. binne ‘n tydperk van vyf jaar ‘n direkteur van ‘n maatskappy of ‘n bestuurslid van ‘n beslote korporasie was, of beheer of deelgeneem het aan die beheer van ‘n regspersoon wat skuldig bevind is aan ‘n misdryf, of ‘n boete of soortgelyke straf ontvang het. [3] & [4]

Wanneer iemand as ‘n misdadiger in terme van artikel 162(5) (a) of (b) verklaar is, is dit onvoorwaardelik en vir die leeftyd van die persoon. Wanneer iemand as ‘n misdadiger in terme van artikel 162(5) (c)-(f) verklaar is, is dit tydelik en vir ‘n minimum van 7 jaar. [5]

Dit is dus baie belangrik by die aanstelling van ‘n direkteur om seker te maak dat hulle in terme van die nuwe Maatskappywet bevoeg is en daarom moet ‘n mens behoorlik navorsing doen oor ‘n persoon voor hulle aanstelling as direkteur van ‘n maatskappy. As jy dit nie doen nie, sal die maatskappy waarin jy aandele hou moontlik die gevolge van hierdie ongekwalifiseerde persoon se dade moet dra.

Verwysingslys:

  • Maatskappywet 71 van 2008
  • FHI Cassim et al Contemporary Company Law (2012)

[1] Artikel 69(7) – (8) van die Maatskappywet 71 van 2008.

[2] Artikel 69(4) en 71(3) van die Maatskappywet 71 van 2008.

[3] Artikel 162(5) (a)-(f) van die Maatskappywet.

[4] FHI Cassim et al Contemporary Company Law (2012) 435 – 437.

[5] FHI Cassim et al Contemporary Company Law (2012) 438.

Hierdie artikel is ‘n algemene inligtingstuk en moet nie gebruik of staatgemaak word op as professionele advies nie. Geen aanspreeklikheid kan aanvaar word vir enige foute of weglatings of vir enige verlies of skade wat voortspruit uit vertroue op enige inligting hierin nie. Kontak atyd jou finansiële adviseur vir spesifieke en gedetailleerde advies.

Who may be appointed as director?

Certain people are not eligible to be appointed as directors of a company. In this article we look at who is disqualified from being a director as well as the effects of the actions of such persons while still acting as director.

A company must not knowingly permit an ineligible or disqualified person to serve or act as a director, according to section 69(3) of the Companies Act 71 of 2008. “Knowingly” includes the situation where the company should reasonably have known that the person is ineligible or disqualified.

Section 69(7) lists the persons on which there are an absolute prohibition, being juristic persons, minors or any persons disqualified in terms of the Memorandum of Incorporation. Section 69(8) lists the persons that are disqualified on a temporary basis, being someone who has been prohibited by the court or whom the court has declared a delinquent, unrehabilitated insolvents, persons who were removed from an office of trust on the grounds of misconduct involving dishonesty, and persons who were found guilty of a criminal offence and imprisoned without the option of a fine, or were ordered to pay a higher fine for being found guilty of any dishonesty crimes.[1]

A question that arises here is what the effect would be of appointing a prohibited director. Section 69(4) says that a person immediately ceases to be a director if they are prohibited from being a director, but section 71(3) states that if a shareholder alleges that a person is disqualified then the person must be removed by a board resolution before they cease to be a director. This means that any act done by such a person, despite his disqualification, will be valid and binding on the company unless the third party who was involved in the act was aware that the person they were dealing with was disqualified.[2]

Section 162(5) (a)-(f) sets out the grounds for an order of delinquency. A court must make an order declaring a person to be a delinquent director if the person:

  1. consented to serve as a director, or acted in the capacity of a director or prescribed officer, while ineligible or disqualified to be a director;
  2. acted as a director in a manner that contravened an order of probation;
  3. grossly abused the position of director while being a director;
  4. took personal advantage of information or an opportunity, or intentionally or by gross negligence inflicted harm upon the company or a subsidiary while being a director;
  5. acted in a manner that amounted to gross negligence, wilful misconduct or breach of trust while being a director; or as contemplated in section 77(3) (a), (b) or (c);
  6. has repeatedly been personally subject to a compliance notice or similar enforcement mechanism;
  7. has been convicted of an offence at least twice, or subjected to an administrative fine or similar penalty; or
  8. was a director of a company or a managing member of a close corporation, or controlled or participated in the control of a juristic person that was convicted of an offence, or subjected to a fine or similar penalty, within a period of five years. [3] & [4]

If a person is declared a delinquent in terms of section 162(5) (a) or (b) it is unconditional and for the lifetime of the person. If a person is declared a delinquent in terms of section 162(5) (c)-(f) this is temporary for a minimum of 7 years.[5]

It is therefore very important, when appointing a director, to make sure that he is qualified in terms of the new Companies Act. One must do proper research about a person accordingly before appointing him as a director of a company because it is possible that if you do not do so, the company in which you are a shareholder may have to bear the consequences of the actions of this disqualified person. 

References:

  • Companies Act 71 of 2008
  • FHI Cassim et al Contemporary Company Law (2012)

[1] Section 69(7) – (8) of the Companies Act 71 of 2008.

[2] Section 69(4) and 71(3) of the Companies Act 71 of 2008.

[3] Section 162(5) (a)-(f) of the Companies Act.

[4] FHI Cassim et al Contemporary Company Law (2012) 435 – 437.

[5] FHI Cassim et al Contemporary Company Law (2012) 438.

This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your legal adviser for specific and detailed advice.