Oscar and the Companies Act

The directors of three companies linked to the erstwhile Sharemax investment scheme have asked for leave to appeal to the Constitutional Court against a recent judgment in the Supreme Court of Appeal (SCA) that found that the companies must open their shareholder registers to Moneyweb.

Intriguingly, a metaphoric reference to convicted murderer Oscar Pistorius found its way into the court papers as part of an example of why the identities of shareholders of companies should remain secret.

The SCA judgement found that a company may not refuse any member of the public access to its shareholder register if an application to do so was submitted in terms of Section 26 of the Companies Act. The court found that Section 26 gives an applicant an unqualified right to access the register and that the motive for seeking access is irrelevant.

It follows Moneyweb’s original application in 2013 to access the shareholder registers of Nova Property Group Holdings, Frontier Asset Management and Centro Property Group, which the directors of the three companies vehemently denied. They allege that Moneyweb is waging a vendetta against the directors and will use the shareholder information to defame them. The case has been in various courts since then.

“Too rigid to withstand constitutional muster”

Dominique Haese, the CEO of Nova, argues in her affidavit in support of the application for leave to appeal that the SCA did not take the shareholders’ right to privacy – as defined by the Bill of Rights – into account in its interpretation of Section 26. She says the finding that the right afforded by Section 26(2) is an unqualified right, is “too rigid to withstand constitutional muster”.

She argues that the right of privacy provision in the Bill of Rights should allow a company to refuse access under certain circumstances, and that the motive for accessing the registers “may” be relevant if the information will be used unlawfully. “The right must be capable of limitation in certain circumstances albeit exceptional ones. We therefore accept that, generally, a company must produce its securities register; but we also recognise that there may be times when it is entirely reasonable for it to refuse to do so.”

Oscar Pistorius

In her 27-page affidavit Haese argues there are many reasons why a company may not want to disclose the identity of shareholders and justifies this, inter alia, with a metaphoric reference to convicted murderer Oscar Pistorius.

“A company’s reputation or brand could be negatively impacted depending who holds its shares and depending on the public’s perception of a particular shareholder. Consider a hypothetical sports company which enjoys the loyal support of the general athletics-loving public. The public do not know who the company’s shareholders are.

“Suppose that they one day learn that one of its shareholders is a notorious public enemy figure, perhaps a fallen hero who incurred the ire of the people after murdering his model girlfriend. A large segment of the general public, some of whom may have been happy customers of that company, could quite conceivably wish to dissociate themselves from the company after the disgraced murderer is disclosed as being a part-owner. The company would, in a case like that, suffer a loss through no fault of its own and for a reason entirely unconnected with the company itself.”

Haese also argues that people subjectively want the details of their private financial affairs and wealth to remain private. “A person’s wealth, what they can afford, and their credit-worthiness are all deeply personal aspects of a person’s private life. Most people do not want their wealth to be known and they have an expectation that their assets will not become the subject of public knowledge and scrutiny.”

She adds that the information contained in a company’s securities register is of a personal nature. “It contains the names and identities of individual people and will tell those who read it where they live and how they can be contacted. It may give the reader a sense of who the person affiliates with on a business level and may even tell the general public what kinds of political, moral or religious views the person holding the shares probably has. These are deeply private matters.”

Who owns Nova?

The whole case follows former Moneyweb journalist Julius Cobbett’s Section 26 application

to access the shareholder registers of the three companies back in 2013.

Moneyweb believes it is critical to see who the shareholders of Nova are as they now own the properties in which more than 33 000 investors, mostly elderly pensioners, invested R4.5 billion. The overwhelming majority of investors lost their status as shareholders in the individual properties through the scheme of arrangement that was part of the rescue plan following the collapse of the Sharemax scheme.

With the announcement of the scheme of arrangement in 2011, the executive directors of the erstwhile Sharemax group, Haese, Rudi Badenhorst and Dirk Koekemoer held 43.2% of Nova’s issued shares. Haese, Badenhorst and Koekemoer are now directors of Nova. Connie Myburgh is the fourth Nova director.

Legal procession

The case went to the SCA after the directors of the three companies appealed against an interlocutory judgment in the Gauteng North High Court.

In its judgement, the SCA agreed with Moneyweb and the amaBhungane Centre for Investigative Journalism, an amicus curiae, that the right enshrined in Section 26 is an unqualified right and that the directors cannot refuse access. This section in the Act, in which amaBhungane played an active role to ensure its inclusion, is aimed to allow journalists to quickly and easily gain access to companies’ shareholder registers.

In the judgement, acting Judge of Appeal Fayeeza Kathree-Setiloane wrote that the three companies’ interpretation of Section 26(2) “would have a negative impact on openness and transparency, and would directly undermine the work of Moneyweb, amaBhungane and other investigative journalists, as it limits the right to freedom of expression.”

Moneyweb will contest the application for leave to appeal.

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