ACCOUNTABILITY, TRANSPARENCY AND DISCLOSURE

By Precious Mvulane CA(SA), RA


Accountability, Transparency and Disclosure

Retention of Records and Making Records Available to Shareholders

Any documents, accounts, books, writing, records or other information that a company is required to keep, In terms of the Act or any other public regulation must be kept in written form, or in a form or manner that allows the documents and information that comprise the records to be convertible into written form within a reasonable time for a period of at least seven years or any longer period of time specified in any other applicable public regulation.

Section 24 states that every company must maintain –

  1. A copy of its MOI, any amendments or alterations to it, and any rules of the company.
  2. A record of its directors including all the information required in respect of each current director at any particular time and with respect to each past director.
  3. Copies of all reports presented at an AGM of the company, including annual financial statements and accounting records.
  4. Notice and minutes of shareholders’ meetings including resolutions adopted and any document made available by the company to the holders of securities in relation to each resolution.
  5. Copies of any written communications sent generally by the company to all holders of any class of the company’s securities.
  6. Minutes of all meetings and resolutions of directors, directors committees or the audit committee.
  7. Every company must maintain a securities register or its equivalent as required by section 50 in the case of a profit company, or a members register in the case of a non-profit company, that has members and also the records required in terms of section 85 (where applicable).
  8. A company must notify the Commission of the location or of any change in the location of any company records that are not located at its registered office.

Access to Information

Section 26 of the Act states that a person who holds or has a beneficial interest in any securities issued by a profit company or who is a member of a non-profit company has a right to inspect and copy without any charge for any such inspection or upon payment of no more than the prescribed maximum charge for any such copy, the information contained in the records of the company.

Any other person has a right to inspect or copy the securities register of a profit company, or the members register of a non-profit company that has members, or the register of directors upon payment of an amount not exceeding the prescribed maximum fee for any such inspection.

Any such right of access may be exercised only in accordance with The Promotion of Access to Information Act 2000.

A company’s record of directors must include in respect of each director, that persons full name, former names, identity number or date of birth, (if not a South African, then passport number and nationality), occupation, date of most recent election as director, name and registration number of every other company or foreign company of which the person is a director, and the nationality of the foreign company (if applicable), and any other prescribed information.

In addition, with respect to each director, the company must keep a record of addresses for service, and, in the case of a company that is required to have an audit committee, any professional qualifications and experience of the director.

If a company receives a request for access, it must within 14 business days comply with the request. It is an offence for a company to fail to accommodate or impede any reasonable request. This also applies in the case of access to financial statements.

Registered Office

Every company and external company must have a registered office at which their documents are maintained. This office must be indicated on the Notice of Incorporation.

Subject to the requirements of the MOI, a Notice of Change of Registered Office must be filed with the Commission where applicable.

Annual Returns

Annual returns must be submitted by every category of company including external companies in the prescribed form with the prescribed fee and within 30 business days after the anniversary date of its date of incorporation (in the case of a company that was incorporated in the Republic, or the date that its registration was transferred to the Republic, in the case of a domesticated company).

Companies which are required to have their financial statements audited must file a copy of the latest approved audited financial statements together with its annual return.

A company that is not required to have its annual financial statements audited, may file a copy of its audited or reviewed statements together with its annual return.

A company that is not required to file annual financial statements and does not elect to file a copy of its audited or reviewed annual financial statements must file a financial accountability supplement to its annual return.

Each year, in its annual return, every company must designate a director, employee or other person who is responsible for the company’s compliance with the transparency and accountability provisions in the Act.

Section 32: Use of Registered Name and Number

A company or external company must:
  • Provide its full registered name or registration number on demand.
  • Not misstate its name or registration number in a manner likely to mislead or deceive any person.

The company’s registered name and registration number must be clearly displayed in legible characters on all forms, notices and correspondence, electronic or otherwise.

This requirement applies to all bills of exchange, promissory notes, cheques and orders for money or goods and in all letters, delivery notes, invoices, receipts and letters of credit of the company.

It is an offence to mislead the public in this regard.

Section 75: Disclosure of Personal Financial Interests

Based on a director’s fiduciary relationship with the company, directors have a duty to disclose their personal financial interests in the business of the company.

Section 75 applies to an extended definition of ‘director’ and includes:

  • An alternative director, prescribed officer and board committee member;
  • Related persons (including a second company or CC of which a director or related person is a director or member).

In terms of the Act, “personal financial interest” comprises a direct material interest of a financial, monetary or economic nature, or to which a monetary value may be attributed.

A director is not only obliged to disclose his own personal financial interests but also those of parties related to him (including natural and juristic persons).

A director must disclose his interest in advance, before it is considered by a meeting of the board and must recuse himself by leaving the meeting, without taking part in the discussion.

A director is required to deliver a written notice to the board (or shareholders where there is only one director, but a number of holders of beneficial interest in issued securities) setting out the nature and extent of that interest, to be used generally for the purposes of this section until changed or withdrawn by further written notice from that director.

Consequences of non-disclosure

  • The resolution and the transaction is void.
  • Director could be personally liable for losses, damages or costs sustained by the company, shareholders or third parties.

Section 75 will not apply where:

  • The sole director is also the sole holder of all the company’s securities (including shares).
  • Where decisions generally affect all of the directors in their capacity as such.
  • Where the decision relates to a class of persons even if that director belongs to that class (exceptions apply).
  • Where there is a proposal to remove a fellow director from office.

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