The Supreme Court of Appeal has reserved judgement in the potentially precedent-setting case through which Moneyweb is seeking to access the shareholder registers of three companies related to the restructured Sharemax investment scheme.
The appeal was heard in Bloemfontein on Tuesday, nearly three years after Moneyweb journalist Julius Cobbett made the initial application in terms of Section 26(2) of the Companies Act, to access the shareholder registers of Nova Property Group, Frontier Asset Management and Investments and Centro Property Group.
These companies currently own and manage the properties of the failed Sharemax investment scheme, while an overwhelming number of the 33 000 Sharemax investors have lost their shareholder status and now own debentures linked to the properties.
Impact much wider than access to these shareholder registers
The SCA judgement may have a much wider relevance than the Moneyweb case, as it will provide clarity on whether Section 26 offers an applicant an unqualified right, or not, to access the shareholder register of a company.
The provisions of Section 26 are supposed to be an easy and quick way for the media and the public to do this.
Moneyweb believes the provision gives the public an unqualified right to access the shareholder registers and that companies cannot deny access on any grounds.
This view is shared by the M&G Centre for Investigative Journalism or amaBhungane who joined the case as an amicus curia with the exclusive mandate to argue for the protection of the unqualified rights afforded by Section 26.
The directors of the three companies argue that the right is not unqualified and that the companies should be allowed to refuse access to their registers if they believe access is sought for an improper purpose. They contend that Moneyweb is waging a vendetta against the directors and will use the shareholder information to discredit or defame them. Consequently, the directors have vehemently denied us access.
The case ended up at the SCA after the directors appealed an interlocutory judgement in the North Gauteng High Court in 2014 denying their request for numerous additional documents which they claim are relevant to the case.
Advocate Geoff Budlender (Snr) SC, acting on behalf of amaBhungane, started off proceedings and argued that a company cannot refuse an applicant access to a shareholder register if the prescribed application procedure was followed. “There is no qualification for this right and it is clear that Parliament’s intention was that it is an unqualified right.” He argued that the right to establish a company does not entitle one to a right to anonymity. The public is entitled to know who they are doing business with, Budlender said.
He added that Parliament has amended two draft versions of the law to entrench this unqualified right, and that it does not accommodate any right to secrecy.
amaBhungane played a decisive role in introducing these amendments.
Budlender (Snr) also argued that the information sought through the application is not private. “The only information requested is the names of the people behind the company and their shareholding? How can this information be abused?
Advocate Steven Budlender (Jnr), appearing for Moneyweb, emphasised that the case has been dragging on for nearly three years and that Moneyweb is not a step closer to accessing the information. “The intention of the Section 26 is that it is an easy and affordable way to access these registers.”
He argued that the SCA must provide clarity on the rights afforded by Section 26 to ensure that there is a quick solution to this case. He said it is in the “interest of justice” that the SCA hears the appeal and provides legal precedent that will remove all confusion regarding the interpretation of Section 26.
Budlender (Jnr) also strongly argued that Section 26 does not afford a company any right to secrecy and that three companies cannot base their refusal on what Moneyweb intends to do with the information. “The three companies have access to other remedies should they be unhappy with the reporting that results from accessing the shareholder registers. These remedies include the ability to submit a claim at the Press Ombud and they can sue for defamation.”
He said the core of the case is that the directors are concerned that Moneyweb will use the information to produce a negative report. “The companies can not prevent this by refusing access to the shareholder registers. They cannot merely block access at the source because they are concerned about negative reporting,” he said.
Nova, Frontier and Centro’s defence
The legal team representing the companies focused on two defences: the shareholders’ right to privacy and the need for the directors to access the further documents, which they contend are crucial for their defence.
Advocate Jose Brett SC, appearing for the directors of the three companies, argued that the shareholders have a constitutional right to privacy and that this supercedes the rights of Moneyweb or a third party to access the companies’ shareholder registers.
This view was shared by Advocate Kevin Hopkins, who also appeared for the three companies. He said the directors must be afforded protection from potential harassment. He raised a constitutional point and said if such information was available freely to all, it would cause possible harm to the shareholders as they are entitled to protection from the disclosure of personal information, such as their religious beliefs, and sexual persuasion.
“This could lead to journalists harassing people because they want more and more. If you do not have the right to refuse it, they can harass people.”
Hopkins said it is a simple question whether a statute can ever bestow an unqualified right, in the light of constitutional values.
Brett also argued extensively on the merits for its appeal against the North Gauteng High Court interlocutory judgement and said it is critical that the three companies get access to the documents requested from Moneyweb and Cobbett in terms of Rule 35, as it will enable the directors to formulate a defence.
He said this would be the only way the directors would be able to defend themselves and to prove that Moneyweb and Cobbett are waging a vendetta.
These documents demanded by Nova and its associates include all Cobbett’s correspondence with all individuals he has ever consulted in his investigations relating to Sharemax, Nova, Frontier and Centro and their directors.
Moneyweb’s position is that these documents are irrelevant to a Section 26 application. At the hearing, the court questioned whether the companies are not merely on a “fishing expedition” meaning they are simply searching for evidence to support their argument.
Why are the ownership structures important?
The public interest in this case is immense and Moneyweb believes it is critical that the shareholder structure of these companies is made public, as this information is key to investors’ interests.
Nova is the company that owns all the various properties that used to belong to Sharemax investors. During the restructuring, the overwhelming majority of these investors’ direct shareholding in underlying properties was transferred to debentures. The properties were consolidated in Nova Properties and it is of critical importance to know who now owns the shares and per definition the properties.
With the announcement of the scheme of arrangement in 2011, the executive directors of the erstwhile Sharemax group, Dominique Haese, Rudi Badenhorst and Dirk Koekemoer held 43.2% of Nova’s issued shares.
Moneyweb wants to see whether this shareholding has changed since 2011 and who owns the balance of the issued shares. Moneyweb also wants to know what Haese, Badenhorst and Koekemoer paid for their shares to acquire such a large slice of a company with assets exceeding R2.5 billion.
The ownership structure of Frontier and Centro is also important. Frontier provides a range of administrative services to Nova and Centro manages the property portfolio.
This story was first published by Moneyweb and is republished here with the permission of the editor.