South Africa: Shareholder(s) access to company information

published on 10 November 2022 | reading time approx. 1,5 minutes

The standard position of shareholder(s) rights to information as set out in Section 26 of the Companies Act 71 of 2008 (“Companies Act”) are adopted by most companies in its Memorandum of Incorporations (“MOI”), whereby, shareholders only have access to the following information:

The company’s MOI and amendments thereto;
Records in respect of the company’s directors;
Reports to annual shareholder meetings and financial statements;
Notices and minutes of annual shareholder meetings and communication; and
The security register of the private company.

Access to information such as working documents, accounting records and directors’ minutes, amongst others, do not fall within the ambit of standard shareholder(s) rights. This could be particularly problematic in instances of conflict or dispute between the directors and shareholders. Although shareholders have a right to receive the annual financial statements, it does not include working documents and accounting information.

The right to access accounting and other information could play a crucial role in the selling of shares and the share evaluation process. This position was confirmed by the courts in Clutchco (Pty) Ltd v Davis 2005 (3) SA 486 (SCA), were the court denied a shareholder the automatic right to access the accounting information for the re-evaluation of shares.

In terms of the Promotion of Access to Information Act 2 of 2000 (“PAIA”), a shareholder has recourse outside of the MOI and shareholders’ agreement to request information from the board of directors and the company. However, the directors could deny the shareholder(s) request on various grounds.

Where shareholders have board representation, or they themselves are a director, such person would have oversight of all privy information in the company, however, the director is cautioned to not distribute or use the information for their personal benefit or a benefit other than what is in the best interest of the company as it will constitute a conflict of interest and breach of their duties.

Conclusion

A right to additional information must be expressly incorporated in a MOI by variation of section 26 of the Companies Act. Shareholders should carefully consider which information they wish to have access to and ensure provision of this right is made when negotiating and concluding the MOI and Shareholders’ Agreement.