Securing shareholder information in the digital age — An analysis of the proposed amendments to section 26 of the Companies Act

• Jurisdiction: South Africa
• DOI: https://doi.org/10.47348/SAMLJ/v32/i3a2
• Pages: 334-359
• Date: 10 June 2021
• Author: Njotini, M.
• Published date: 10 June 2021

SECURING SHAREHOLDER INFORMATION

IN THE DIGITAL AGE —AN ANALYSIS OF

THE PROPOSED AMENDMENTS TO

SECTION 26 OF THE COMPANIES ACT

MZUKISI NJOTINI*

Vice Dean (Teaching and Learning), Faculty of Law,

University of Johannesburg

Abstract

Amending company legislation has become a common occurrence in

South Africa. The legislature has passed a number of statutes to alter

the principles regulating corporate entities. It is noteworthy that the

Companies Act 71 of 2008 is the most substantial of these amending

statutes. This Act harmonised the legal principles governing the

operation of companies, and brought companies closer to the

developmental needs of society. It sought to promote economic grown,

investor confidence and foreign investment, and accelerate the

transportation of goods and services globally. Because of the need for

companies to continue to promote innovation, the legislature proposed

measures to repeal certain provisions of the Companies Act. Clause 4 of

the Companies Amendment Bill of 2018 contains the proposed

changes. The provision supports one of the cardinal ideals of an

information society — to improve the free flow of information.

However, the challenge with the section 4 provisions is that they are

likely to endanger the sanctity of personal information stored online.

Specifically, it is not completely clear to what extent the proposed

amendments will enhance the integrity of online information, as

opposed to weakening it.

IINTRODUCTION

In South Africa, amending company legislation has become customary.

To date, the legislature has passed a number of statutes to alter the

principles regulating corporate entities.

1

Some of these changes were

*LLB (Vista) LLM LLD (Unisa).

1

To describe the ever-changing nature of company legislation, Carter states that there is

‘no other branch of the law that is more in f‌lux than the law of corporations’ (see Carter,

334

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(2020) 32 SA Merc LJ 334

© Juta and Company (Pty) Ltd

introduced by, among others, the Transvaal Companies Act 31 of 1909,

the Companies Act 46 of 1926, the Companies Act 61 of 1973, the

Companies Act 71 of 2008,

2

and the Companies Amendment Act 3 of

2011. It is trite that the Companies Act is the most signif‌icant of these

amending statutes. This Act covers, inter alia, the registration of

companies, the registration of foreign companies carrying on business in

South Africa, and mergers and take-overs of companies.

3

Furthermore,

it amends certain provisions of the Close Corporations Act

4

and

provides for consistent and harmonious business incorporation and a

regulatory regime.

5

In an elongated manner, the Companies Act syn-

chronises the legal principles governing the operation of companies.

It brings companies closer to the developmental needs of society.

For example, it encourages companies to foster economic growth,

investor conf‌idence and foreign investment, to allow for easing global

travel, accelerating the transportation of goods and services, and global-

ising business.

6

Accordingly, the Companies Act requires a change in

business or in the way of doing business. It accepts that developments in

society, for example, those emanating from information and communi-

cations technology,

7

compel a modif‌ication of the laws regulating

companies. For example, businesses conventionally relied on the elec-

tronic data interchange (EDI) to commence electronic or

e-communications.

8

EDI became an e-communications instrument

businesses used to negotiate and (ultimately) conclude electronic or

e-transactions.

9

However, the scope of EDI was restricted to only

businesses that had consistent dealings with each other. Consequently, a

need arose for businesses to adopt a facility that would simplify the

The Nature of the Corporation as a Legal Entity with Special Reference to the Law of Maryland

(University of Michigan Library 1919) at 1).

2

Hereinafter ‘the Companies Act’.

3

See the preamble to the Companies Act.

4

Close Corporations Act 69 of 1984.

5

See the preamble to the Companies Act.

6

Stein & Everingham, New Companies Act Unlocked: A Practical Guide (Siberink 2011) at

1.

7

Hereinafter ‘ICT’. The essential developments are those that are brought about by the

Fourth Industrial Revolution or Industry 4IR, for example, the Internet of Things (IoT),

Quantum Computing, 3D Printing, Cyber-security, Autonomous Robots, Simulation,

Augmented Reality, System Integration, Cloud Computing, and Big (or Massive) Data.

8

In terms of section 1 of the Electronic Communications and Transactions Act 25 of 2002

(‘ECT Act’), an electronic communication is a communication entered into by means of data

messages. Furthermore, a data message means data (electronic representation of information

in any form) generated, sent, received or stored by electronic means and includes voice, where

the voice is used in an automated transaction and a stored record (s 1 of the ECT Act).

9

Eiselen, ‘The Electronic Data Interchange’ (1995) SA Merc LJ 1 at 1–2. For a transaction

to be regarded as electronic, it must be of either a commercial or non-commercial nature, and

includes the provision of information and e-government services (s 1 of the ECT Act).

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