During 2013, the disclosure of shareholder information became a topical subject for the market following changes to legislation, receiving quite a lot of attention from the South African financial media. The legislative changes resulted in a number of questions being raised about the electronic securities register, which is why we have taken the opportunity to clarify some of the confusion regarding the requirement to disclose a shareholder’s email address in the beneficiary download (BND).
The Companies Act 71 of 2008 (section 50) and the Companies Regulations of 2011 (section 32) prescribe the minimum information that must be entered into the BND of a company. In terms of section 50(3) of the Companies Act, other information may also be prescribed by the CSD Rules. It is important to note that in terms of section 50(3) of the Companies Act, a record of uncertificated securities ‘must be administered and maintained by a participant or central securities depository in the prescribed form’.
The statement ‘in the prescribed form’ places a duty on the Participant or CSD to ensure that the prescribed information (as required by the Companies Act, the Companies Regulations, CSD Rules and Directives, etc.) is entered into the BND. In terms of section 32(2)(a)(ii) of the Companies Regulations, the securities register must, among other things, contain:
‘The person’s email address, if available, unless the person has declined to provide an email address’. It appears that this statement can be misinterpreted to suggest that a shareholder’s consent is required before an email address is entered into the BND. Seeking a shareholder’s consent would seem to be an impractical exercise and ought not to be the intended legislative result. It is important to take note of one of the objectives of the Companies Act, being ‘to define the relationships between the companies and their respective shareholders or members …’.
It is evident from the Companies Act that communication between the company and its shareholder is of significant importance in the establishment and maintenance of this relationship, for example the duty of the company to send financial statements to the shareholders (section 31); send notices of shareholders’ meeting to the shareholders (section 62); publish a record date to the shareholders (section 59); send resolutions for voting by the shareholders (section 60 and 65(2)) etc. As such, this objective of the Companies Act must be considered when interpreting this requirement for email addresses to be provided. The intention of the lawmakers with this statement is to promote communication between the company and its shareholders.
The first part of the statement (‘the person’s email address if available, …’) makes it compulsory for an email address to be entered into the BND, if the shareholder has one. The second part of the statement (‘… unless the person has declined to provide an email address’), merely gives the shareholder an option to refuse to provide an email address. Therefore, based on the first part of the statement (‘the person’s email address if available …’), an email address of a shareholder, by default, must always be entered in the BND if the shareholder has an email address. A shareholder’s consent is not required. Seeking a shareholder’s consent seems impractical and does not support the objectives of the Companies Act.
A practical step would be to request email addresses from the shareholders or clients and enter into the BND those email addresses as may be provided. In instances where a shareholder has already provided an email address, it must as a default, be entered into the BND as required by the Companies Regulations.
Should you have further queries on this subject, please email Strate’s Legal & Regulatory Division via Strate-