Companies Bill gives business a shield of secrecy
Last week Parliament’s portfolio committee on trade and industry heard submissions on the Companies Bill, an important piece of legislation that will overhaul our corporate law.
The Bill, however, fails the public in not achieving one of its main objectives—encouraging transparency. It fails because while rights of access to certain company information are given to shareholders and other holders of securities, there is no attempt to balance the right of the public to company information and the understandable need for a company to protect its confidential commercial information.
One area where this omission is particularly acute is in respect of access to the shareholders register—the document that reveals who the shareholders of a company are and how many shares in the company they hold.
The existing provision of the Companies Act—section 113—grants an unconditional right to any person to inspect and make a copy of the shareholders register. This section has sharp teeth: if the company does not comply with a written request for access to the register within 14 days, every director who is a party to the refusal commits a criminal offence and a court is empowered on application to order immediate access.
The Companies Act applies the same principle of transparency to the register of debenture holders, to the register that reveals who the beneficial owners of shares held by a nominee are and to the register of directors. The Bill, in sharp contrast, obliterates all these rights of public access.
Instead, clause 26 of the Bill allows only shareholders to request access to these registers, while members of the public must rest content with a request under the Protection of Access to Information Act. That this is cold comfort will be clear to anyone who has requested information under the Act from a recalcitrant party; the Act is replete with procedural and substantive opportunities to refuse access and tie the requester up in a bottomless pit of litigation.
Companies wield significant power in our nation. The constitutional rights of access to information and freedom of expression are not only engaged when information about organs of state is required. These rights encourage the flow of commercial information to citizens and protect expression that criticises or examines corporate and economic power.
Access to the shareholder register of a company is important for a host of other reasons too. Potential investors need the information to ascertain the identities of shareholders from whom they wish to purchase shares.
Researchers and analysts need the information to examine the nature of economic power in our country, to assess ownership trends and to determine whether economic wealth is truly being distributed as required by BEE charters. Journalists need the information to investigate corporate corruption and to examine conflicts of interest where, for instance, public officials hold shares in companies in contravention of codes of ethics.
Members of the public must therefore be able to inspect the shareholders register and, if access is refused, should be able to approach the new institutions proposed by the Bill—the Company Ombud or the Companies and Intellectual Property Commission.
The ultimate irony is that if the secrecy that the Bill endorses is adopted by Parliament, the most transparent corporate entity will be a close corporation, where the existing Close Corporations Act will continue to apply. So while a one-member close corporation has to reveal to the public who that member is, the largest listed corporate, whose activities have a profound impact on our environment and our citizens, may function with what is effectively corporate anonymity.
Companies are not exempt from the transformation agenda mandated by our Constitution. The Bill must recognise that openness, accountability and transparency are values that also enjoy application in the private sphere.
Dr Dario Milo, partner at Webber Wentzel attorneys, made representations on the Companies Bill on behalf of the Mail & Guardian, Who Owns Whom and the Centre for Economics Journalism in Africa