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)

Directors, managers: Your new risk of “cartel conduct” criminal liability is even wider than reported

A3B“A cartel involves an agreement or concerted practice between two or more competitors to engage in fixing prices and/or trading conditions, dividing markets and/or collusive tendering.  By artificially limiting competition that would normally prevail between them, firms avoid exactly the kind of pressures that lead them to innovate, both in terms of product development and production methods. This results ultimately in high prices and reduced consumer choice.” (Competition Commission)

Government’s determination to crack down on cartel conduct is evidenced in the newly-introduced criminal liabilities imposed on individuals by amendments to the Competition Act.  Offending businesses already face substantial penalties, and now any director or manager of a business guilty of causing or permitting it to engage in a “prohibited practice” is also personally liable to prosecution, risking heavy fines (up to R500,000) and/or imprisonment (up to 10 years).

A “prohibited practice” here means “directly or indirectly fixing a purchase or selling price or any other trading condition”, “dividing markets by allocating customers, suppliers, territories, or specific types of goods or services”, or “collusive tendering”.

Legal commentators are suggesting that even more severe sanctions (possible life imprisonment, blacklisting from public tenders etc) imposed by separate anti-corruption legislation could also come into play.

Don’t forget also that these penalties for directors and managers personally are in addition to the existing and substantial penalties already faced by the businesses themselves.

Don’t take any chances here – get advice before embarking on any course of conduct which might be regarded as falling foul of these provisions.

© DotNews, 2005-2016. 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)