Can companies still keep information under wraps?

This is a big change from what is currently prescribed in the Companies Act, 2008 (the Act).

In addition to processing and submission of personal information to the CIPC, the Act also allow for certain information to be made available publicly on request. This is in addition to people / entities requesting information using the Promotion of Access to Information Act, 2000 (PAIA). These reforms are set to transform corporate disclosure and transparency requirements in South Africa.

Current requirements

Section 26 of the Act allows for access to certain information and currently states that a person who has a beneficial interest (BI) in any securities issued by a profit company or someone who is a member of a non-profit company (NPC) has the right to inspect and copy the following records without charge or upon payment of a certain amount, that is no more than a prescribed maximum charge:

1. MOI
2. Records in respect of directors
3. Report to annual meetings and AFS
4. Notices and minutes of annual meetings
5. Securities register of profit companies or members register of NPCs

At present it also states that any person has the right to inspect or copy the securities register of profit companies or the members register of non-profit companies or the register of directors of companies.  

Proposed changes

• Access by beneficial interest holders

The Companies Amendment Act, 16 of 2024 (Amendment Act) allows for access to information by persons who has beneficial interests in the profit company or members of NPC and it has been amended to allow beneficial interest holders or members of NPC’s the right to inspect and copy the following records:

1. MOI
2. Records in respect of directors
3. Report to annual meetings
4. AFS
5. Notices and minutes of annual meetings
6. Securities register of profit companies or members register of NPC’s
7. Register of disclosure of BI of affected companies

The changes now split the reports to annual meetings and AFS into two separate categories and also includes access to the register of disclosures of beneficial interests of affected companies.

Beneficial interest is defined in the Act and it states that a person has a beneficial interest where a person has the right or entitlement “through ownership, agreement, relationship or otherwise, alone or together with another person to:

(a) receive or participate in any distribution in respect of the company’s securities;

(b) exercise or cause to be exercised, in the ordinary course, any or all of the rights attaching to the company’s securities;  or

(c) dispose or direct the disposition of the company’s securities, or any part of a distribution in respect of the securities, but does not include any interest held by a person in a unit trust or collective investment scheme in terms of the Collective Investment Schemes Act, 2002 (Act 45 of 2002).”

• Access by any person

The Amendment Act also made certain changes which will impact private, non-profit and personal liability companies and will allow for information, currently not in the public domain, to be available to the public on request.

The Amendment Act now allows for any person to access the following information of private, non-profit and personal liability companies:

1. MOI
2. Records in respect of directors
3. AFS
4. Securities register of profit companies or members registers of non-profit companies
5. Register of disclosure of BI of affected companies

Although there was huge public outcry and numerous comments raised on these changes during the Companies Amendment Bill public consultation period, the Department of Trade, Industry and Competition (DTIC) stated in their responses to these comments that the changes to section 26 was implemented with the objectives of transparency and openness in mind as contemplated in section 7 of the Act.

• Exemption to access AFS by any person

The Amendment Act includes an exemption regarding the right to access the annual financial statements of certain companies that meet the definition. This was discussed and agreed at NEDLAC to assist smaller companies. Th exemption states that the right to access the annual financial statements shall not apply to a private company, non-profit company or personal liability company where the annual financial statements were internally prepared and the public interest score is less than 100 or where the annual financial statements were independently prepared and public interest score were less than 350.

The exemption therefore allows certain companies to not having to provide access to their annual financial statements, which are the following:

1. Owner-managed and non-owner managed companies with a PI Score below 100 and the AFS are internally prepared
2. Owner-managed and non-owner managed companies with a PI Score less than 350 and the AFS are independently compiled, this is therefore companies that are not required to have their AFS audited in terms of the Act.

As the exemption only refers to the PI Score and not whether the company actually has their AFS audited voluntarily, only the PI Score and whether the annual financial statements were independently or internally compiled should be considered in applying the exemption.

Companies that have a PI Score between 100 and 350 whose AFS are internally compiled that require their AFS to be audited cannot apply the exemption.

Balance between privacy and access to information

Questions are also often asked on the balance between access to information and privacy. Although the Protection of Personal Information Act, 2013 (POPIA) sets out the requirements when personal information is processed, section 11(1)(c) of POPIA states that personal information may be processed where processing complies with an obligation imposed by law on the responsible party.

Therefore, where the Companies Act has certain requirements for personal information to be disclosed, the disclosure is in line with legislative requirements. The DTIC also confirmed in feedback on comments on the Companies Amendment Bills that they had requested a legal opinion from senior council, which confirmed that the amendments to section 26 do not unconstitutionally intrude on the right to privacy of the intended entities and persons and that the changes do not offend the provisions of POPIA and PAIA.

Way forward

As the changes to section 26 is not yet effective, companies have some time to prepare to ensure that they can meet the requirements.

Considerations include:

• Having a system in place to deal with requests for information, taking note that companies have to respond within 10 business days.
• Confirm whether the person requesting the information is a beneficial interest holder or an external person as beneficial interest holders has access to more information.
• Confirm whether the exemption in not allowing access to the annual financial statements to external people applies.
• Prepare a list of information that must lawfully be disclosed and train staff to deal with requests.

It should be noted that it would be classified as an offence if a company fails to accommodate any reasonable request for access or where the company unreasonably refuse access to the information. It would also be an offence if a company impedes, interferes or frustrate any reasonable request for information.