STUART THEOBALD: Is a radical shift in transparency on companies near?

Is a radical shift in transparency on the beneficial owners of companies and trusts on the way?

A bill before parliament will make it a requirement that companies file their share registers and the people who have a beneficial interest in those shares to the Companies and Intellectual Property Commission (CIPC). The CIPC must then make this information available to any person “as prescribed”. A similar amendment is slated for the Trust Property Control Act to disclose beneficial owners of trusts.

On the surface, the bill, which amends various laws in an effort to get SA to comply with the recommendations of the Financial Action Task Force (known as the “General Laws Amendment Bill”), does not say that information will be made public.

But consider the Companies Act provides that companies must make the register of members and directors available to any member of the public on payment of a R100 fee, and case law has made it clear that share registers must be made available to anyone who asks for them, plus section 32 of the Bill of Rights of the constitution that reads: “Everyone has the right of access to any information held by the state”.

It is easy to see how the CIPC could be required to make these records available to the public.

Shock to the system

This will be a shock to the system. Corporate transparency in SA has recently taken a radical step backwards. The entering into force of the Protection of Personal Information Act in mid-2021 was used as an excuse for the share registers of JSE-listed companies to be removed from the public domain. Strate, the company responsible for all electronic share records, ceased to supply shareholder information to data services citing legal confusion over the Protection of Personal Information Act.

Strate shrugged and said it was waiting for guidance from the Financial Sector Conduct Authority, who in turn said it was waiting for guidance from the Information Regulator set up in terms of the act. That was more than a year ago, and we’re still none the wiser on when we can see the share registers of listed companies again.

Strate always struck me as giving a convenient excuse. The instinct in corporate SA is to default to secrecy, despite it being a core principle of the constitution that the default should be openness (and therefore Strate should have asked for guidance on whether it should stop providing the information, rather than ceasing immediately and seeking guidance on whether it should continue).

Since Strate’s move, much of the analysis routinely undertaken of shifts in ownership of SA companies has been impossible. Whether to assess progress in black empowerment, or shifts in foreign ownership, or creeping takeovers, much of the insight we used to have on listed companies has been obscured. Journalists are therefore much less able to hold companies and shareholders to account.

Strate, if it really was not able to interpret the law itself, could have obtained an opinion from senior counsel on whether it could continue to provide such information, but instead went for the option least likely to resolve quickly.

With the General Laws Amendment Bill, there is the prospect of share registers becoming available not just of public companies, but all companies, as well as the more meaningful step of identifying the natural people who are the ultimate beneficiaries. The CIPC should start preparing to make this information easily publicly accessible.

But what of privacy? I hear more discrete shareholders ask. The Protection of Personal Information Act defines personal information as many things, but it does not include what people own. The act is about information regarding the personal characteristics of people and identifying information such as ID and phone numbers.

This seems miles away from the information contained in the share registers that routinely used to be made public, which was no more than the shareholders’ names, most of whom were legal entities rather than flesh-and-blood people.

As a legal principle we should be far less concerned about personal information regarding companies. UK law, from which much of SA companies and privacy law takes inspiration, is clear on this point. Companies House, the UK’s equivalent of the CIPC, states: “In return for the benefits of limited liability, your company must be open and transparent.” That includes details about directors and “people of significant control”.

South Africans are often shocked when I show them how easy it is to freely look up the directors, shareholders and the financial records of any UK company. It is all in the public domain, including the personal addresses of many directors (though they have the option of providing a corporate address).

That future may be in store for SA. It would have helped if this future had been made explicit in the omnibus bill, with the CIPC required to maintain not just a register of all shareholders, but an explicitly public one.

The CIPC can still prescribe that it be public, after consulting the minister of finance and the Financial Intelligence Centre. I hope it will embrace the constitutional principle establishing a “democratic and open society”.

 Theobald is chair of research-led consulting firm Intellidex. This article first appeared in Business Day.