Clarity About Investors Will Aid Graft War
SOUTH African company law has historically favoured those wishing to obscure corporate ownership.
The clandestine section 15A of the Companies Act of 1973 allowed apartheid ministers of trade and industry to disallow the disclosure of certain categories of subsidiaries published in the annual reports of JSE-listed companies in cases where such publication was deemed to be not in the “national interest”.
It was common knowledge that these undisclosed subsidiaries were engaged in sanctions-busting or supplying goods and services to the state security apparatus. Between the publication of the 1988 edition of Who Owns Whom and the 1992 edition, about 900 subsidiaries of JSE-listed companies “disappeared”.
In terms of section 113 of the Companies Act of 1973 (amended 1978 and 2001), the shareholder registers of private companies were open to inspection by the public: “Any person may apply to a company for a copy of or extract from the register of members and the company shall either furnish such copy or extract on payment by the applicant of an amount of R10 or such lesser amount as the company may determine for every page of the required copy or extract, or afford such person adequate facilities for making such a copy or extract.”
Twelve years into our new democracy, this right was dropped from the initial drafts of the New Companies Act of 2008. Fortunately, this omission was picked by up Stefaans Brummer of the Mail & Guardian and a successful joint submission was made by the Mail & Guardian and Who Owns Whom to have that prerogative reinstated in section 26.
This now reads: “The register of members and register of directors of a company must, during business hours for reasonable periods, be open to inspection by any member, free of charge and by any other person, upon payment for each inspection of an amount not more than R100.”
Unfortunately, we neglected to request to have the word “beneficial” inserted before the word “members”, so companies are only required to provide the primary register, and not subregisters listing underlying beneficial holders where these exist.
The global fight against corruption, money laundering and terrorist-funding activities has made the issue of increased transparency an international trend. The subject of corporate beneficial ownership is high on the agenda of the Group of 20 (G-20) countries and all members, including SA, have undertaken to introduce legislation that ensures the disclosure of corporate beneficial ownership. “The G-20 considers financial transparency, in particular the transparency of beneficial ownership of legal persons and arrangements, as a high priority. The G-20 Leaders’ Declaration from St Petersburg states, ‘We encourage all countries to tackle the risks raised by the opacity of legal persons and legal arrangements.’ (2014 G-20 summit in Brisbane).”
David Lewis of Corruption Watch says: “Our demand is that all companies bidding for public contracts be required to disclose who their beneficial owners are. This would go a long way towards curbing the conflicts of interest and corruption.”
Who Owns Whom has made a further submission to the Department of Trade and Industry to amend the act as follows:
wTo include the requirement to disclose beneficial owners of private companies;
wThat a list of beneficial members be included in the audited accounts submitted with annual returns to the Companies and Intellectual Property Commission (CIPC); and
wFor company annual returns to be made publicly available, as is currently the case with CIPC company registration data.
While it can be argued that companies wishing to hide beneficial shareholding will find ways to do so, it is also true that as the transparency of law-abiding companies increases, so does the isolation of those that do not abide by the law.
• McGregor is MD of Who Owns Whom
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