The Companies Act 71 of 2008 and the disclosure of and rights of access to information about securities
| Jurisdiction | South Africa |
| Published date | 25 May 2019 |
| Citation | (2014) 26 SA Merc LJ 167 |
| Author | Stephanie Luiz |
| Pages | 167-211 |
| Date | 25 May 2019 |
Articles
THE COMPANIES ACT 71 OF 2008 AND THE
DISCLOSURE OF AND RIGHTS OF ACCESS
TO INFORMATION ABOUT SECURITIES
S M LUIZ*
Research Fellow, School of Law, University of KwaZulu-Natal
I INTRODUCTION
The Companies Act 71 of 2008 (the ‘Companies Act 2008’) reaffirmed
the company as a means of achieving economic and social benefits
for the South African economy, and it identified the promotion of
investment in our markets as a key purpose.
1
Confidence in our financial
markets will be enhanced if our markets are fair, efficient and transpar-
ent,
2
and this will attract investment. Requiring disclosure of and
allowing access to information about companies encourages transpar-
ency.
Knowledge of who has invested in a company, the level of investment
and the extent to which this would give control over or the ability to
influence the decisions of the company is of paramount importance not
only for the company itself, but for the holders of securities in the
particular company and for potential investors, as well as for the market
generally. Such knowledge may be strategically important in many
situations, including in the context of the market for corporate control,
as it allows persons to make considered and informed decisions about
transactions that may fundamentally affect the company and/or them.
Further, a true picture of who owns and controls a corporate entity is
important for the regulators, for example, in order to enhance their
ability to impose taxes and control illegal activities such as money
* BA LLB (UKZN) LLM (Cantab) HDip Co Law (Wits) LLD (Unisa). Research Fellow,
School of Law, University of KwaZulu-Natal.
1
See s 7(d) and (c) of the Companies Act 71 of 2008 (the ‘Companies Act 2008’).
2
See s 2(a) and (b) of the Financial Markets Act 19 of 2012 (the ‘FMA’) which came into
effect on 3 June 2013: see Proc 12 in GG 36485 of 31 May 2013.
167
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laundering and the financing of criminal conduct.
3
Thus an accurate
reflection of who owns and controls a company is vital, and this will be
ensured by rules that mandate disclosure not only of who are the
registered holders of securities but also of who holds a beneficial interest
in those securities.
Various provisions in the Companies Act 2008 impose obligations to
make such disclosures generally as well as specifically in the context of
the market for corporate control.
4
Allowing access to information about
who holds securities in a company is also provided for in our company
law legislation. This was the case even before access to information was
enshrined in the Constitution of the Republic of South Africa, 1996 and
before the Promotion of Access to Information Act 2 of 2000 (PAIA) was
enacted.
Sensitivities around the disclosure of and rights of access to informa-
tion about the identity of holders of securities in companies have been
highlighted recently by the coming into operation of the Financial
Markets Act 19 of 2012 (the ‘FMA’) on 3 June 2013.
5
Section 73(1) of the
FMA prohibits a market infrastructure
6
such as Strate (South Africa’s
Central Securities Depository) and its representatives from disclosing
confidential information obtained in the performance of its functions
under the Act, unless this disclosure is covered by one of the exceptions.
These include, inter alia, where there has been consent by the person to
whom the information relates, the disclosure is required or permitted by
law or court order or it is necessary for the performance of his function
or it is required for legal proceedings.
7
However, a market infrastructure
may disclose confidential information obtained in the performance of
its functions if it will further one or more of the objectives of the FMA,
which include increasing confidence in our financial markets by ensur-
ing fairness, efficiency and transparency.
8
3
Erik P M Vermeulen ‘Beneficial Ownership and Control: A Comparative Study –
Disclosure, Information and Enforcement’ Organisation for Economic Co-operation and
Development (OECD) Corporate Governance Working Papers, No. 7, OECD Publishing (18
January 2013) 5, available at http://dx.doi.org/10.1787/5k4dkhwckbzv-en, accessed on 14 June
2013.
4
Takeovers or what are more correctly referred to as affected transactions are regulated in
terms of Chapter 5 of the Companies Act 2008, as well as by Chapter 5 of the Companies
Regulations 2011 (the ‘Companies Regulations 2011’) published in GN R351 in GG 34239 of
26 April 2011.
5
Government Gazette 36485 of 31 May 2013.
6
See s 1 for the definition of ‘market infrastructure’.
7
See s 73(1)(a)–(c) of the FMA.
8
See s 2 of the FMA.
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The Protection of Personal Information Act 4 of 2013 is another piece
of legislation that will also affect the disclosure of information.
9
It
attempts to balance the constitutional right to privacy against the right
of access to information,
10
and places conditions on the processing of
personal information. The conditions reflected in the Act regulate, inter
alia, the processing of information (which includes the collection, usage
and dissemination of the information), as well as the integrity of the
storage of such information.
11
Generally speaking, either the data
subject must consent to the processing of the information or it must be
necessary, inter alia, for the conclusion of or performance under a
contract or required in terms of an obligation imposed by law.
12
The impact of these two laws on the personal information contained
in the electronic securities registers of companies led to the publication
by Strate of its concerns regarding its Beneficial Disclosure Report
(BND) that it makes available to the companies issuing the securities as
well as to other parties, for example, market data vendors or data
distributors
13
(such as McGregor BFA (Pty) Ltd, I-Net Bridge or
Bloomberg LP). The BND includes information detailing shareholders’
names, identification numbers and addresses. As a result of these
concerns, Strate has changed its file format of the BND report so that
market information and data vendors will no longer be able to identify
shareholders.
14
As ensuring transparency in financial markets is one of
the aims of the FMA, it has been argued that providing the disclosures
that Strate provide in their BND would be covered by the exception in
section 73(2) of the FMA that includes ensuring transparency in the
South African financial markets.
15
However, the approach of Strate is
that this information can be obtained directly from the company that
issues the securities, and Strate will no longer provide it.
16
9
The Protection of Personal Information Act 4 of 2013 (the ‘Personal Information Act’)
was assented to by the President on 19 November 2013: see GenN 912 in GG 37067 of 26
November 2013.
10
See s 2 of the Protection of Personal Information Act.
11
See Chapter 3 of the Protection of Personal Information Act for details.
12
See s 11 of the Protection of Personal Information Act for details.
13
See StrateTalk March 2013 at 7, available at www.strate.co.za, accessed on 15 June 2013.
14
See Evan Pickworth ‘Market information vendors take on Financial Markets Act’ (5 June
2013), available at http://www.bdlive.co.za/business/2013/06/05/market-information-vendors-
take-on-financial-markets-act, accessed on 8 June 2013. See also FSP Invest ‘SA’s new
Financial Markets Act gets data vendors hot under the collar’ (5 June 2013), available at
http://fspinvest.co.za/articles/latest-news/sas-new-financial-markets-act-gets-data-vendors-
hot-under-the-collar–707.html, accessed on 18 June 2013.
15
See Pickworth op cit note 14.
16
See South Africa’s Central Securities Depository (Strate) ‘Companies’ share register
information is not restricted by new laws’ (19 June 2013), available at http://www.strate.co.za/
publications%20media/press%20releases/companies%20share%20register%20informa.aspx,
accessed on 5 July 2013.
COMPANIES ACT 2008 AND ACCESS TO INFORMATION 169
© Juta and Company (Pty) Ltd
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