Article by listed Attorney: Nanika Prinsloo
Access to financial statements or related information can be important to some people. Companies possess a lot of financial information. The question arises who has the right to access this information and when can it be assessed. Companies have an obligation to keep all financial statements or related information and records securely. The Companies Act, Act 71 of 2008, sets out clearly who can access this financial information and will discuss that in this article. One also has to keep the PAIA Act (the Promotion of Access to Information Act, Act 2 of 2000) in mind and we will briefly discuss here as well.
In terms of the Companies Act, any person who holds any shares in the Company is entitled to receive any annual financial statements of the Company without having to make a demand for it. In other words the Company must send the information to these persons, they should not have to ask for it. Big Companies publish their annual financial statements either in brochure form or in the newspaper. If it is published, then the shareholders should be warned in advance of the publication date. If it is printed, then the shareholders should receive one copy thereof without being charged for it.
A situation can arise where the Company owes money to a creditor and the Company cannot pay the debt. The creditor could issue a Summons, obtain judgment against the Company and subsequently issue a Warrant for Execution to attach any property (assets). Under a Warrant for Execution the assets will be attached and then sold on an execution sale so that the creditor can be paid. If the assets are not sufficient to cover the debt, then that creditor is entitled to demand a copy of the recent annual financial statement of the Company. The Company must make the financial statement available to the creditor within 5 business days after having received the request.
The Companies Act states that trade unions must be given access to the financial statements for the purposes of initiating the Business Rescue Process. Read our articles on the Business Rescue Process .
In terms of this Act, individuals have a right of access to certain records of any “private body”. A “private body” is any Company, Close Corporation, Trust, Partnership or Individual who trades on a commercial basis. We will refer to “Company” in this article as this article applies to Companies, but please keep in mind that the PAIA Act applies to all commercial entities.
Any person or entity must be given access to any record of a Company if that record is required for the exercise or protection of any rights and if that person follows the correct procedure in requesting the information.
Any Company was supposed to have put together and keep available a manual within six months after the commencement of the PAIA Act, which was in 2001. If your Company has not done so, please contact us that we can assist with the drafting of such manal. This manual must, inter alia, contain the following information:
(a) the postal and street address, phone and fax number and, if available, electronic mail a address of the head of the body;
(b) a description of the manual, and how to obtain access to it;
(c) if new requirements are published in the Government Gazette, then the manual must be updated to contain that information;
(d) a description of the records of the body which are available in accordance with any other legislation;
(e) sufficient detail to facilitate a request for access to a record of the body, a description of the subjects on which the body holds records and the categories of records held on each subject; and
(f) any other information as may be prescribed.
The Company may not refuse to give any of the following information to the person/entity requesting it, if
(a) information is about an individual who has consented to it; (certain procedures must be followed to obtain the consent);
(b) information that is already publicly available;
(c) information that was given to the Company by the individual to whom it relates and the individual was informed by or on behalf of the Company, before it is given, that the information belongs to a class of information that would or might be made available to the public;
(d) information about an individual's physical or mental health or well-being, who is either under the age of 18 or incapable of understanding the nature of the request, who is under the care of the person who is requesting the information. The information must be in the interest of the individual who is under such care;
(e) information about an individual who is deceased and the person who requests the information is the individual's next of kin; or is making the request with the written consent of the individual's next of kin;
(f) if the information is about an individual who is or was an official of a Company and which relates to the position or functions of the individual, including, but not limited to the fact that the individual is or was an official of that Company and the following information may be given:
i. the title, work address, work phone number and other similar particulars of the individual;
ii. the classification, salary, scale or remuneration and responsibilities of the position held or services performed by the individual; and
iii. the name of the individual of a record prepared by the individual in the course of employment.
The following information of a Company is automatically protected and the Company must refuse access if it is requested, namely:
(a) trade secrets of a third party;
(b) financial, commercial, scientific or technical information, other than trade secrets, of a third party, the disclosure of which would be likely to cause harm to the commercial or financial interests of that third party; or
(c) information supplied in confidence by a third party, the disclosure of which could reasonably be expected-
i. to put that third party at a disadvantage in contractual or other negotiations; or
ii. to prejudice that third party in commercial competition.
The Company may not refuse to give information insofar as it consists of information about-
(a) a third party who has consented (after certain procedures were followed);
(b) the results of any product or environmental testing or other investigation supplied by, carried out by or on behalf of a third party and its disclosure would reveal a serious public safety or environmental risk.
(c) For the purposes of the afore going paragraph (b), the results of any product or environmental testing or other investigation do not include the results of preliminary testing or other investigation conducted for the purpose of developing methods of testing or other investigation.
(d) A Company may not refuse information that is requested, if the requested information consists of information about the results of any product or environmental testing or other investigation supplied by, carried out by or on behalf of the Company and its disclosure would reveal a serious public safety or environmental risk.
(e) For the purposes of the afore going paragraph, the results of any product or environmental testing or other investigation do not include the results of preliminary testing or other investigation conducted for the purpose of developing methods of testing or other investigation.
Certain confidential information of a third party must be protected. Any information that would constitute an action for breach of a duty of confidence owed to a third party in terms of an agreement may not be disclosed.
Any information that would be reasonably expected to endanger the life or physical safety of an individual must not be given to anybody. Further, the information must not be given if it may be likely to prejudice or impair the security of a building, structure or system, (this includes computers or communications systems), or a means of transport; or any other property; or methods, systems, plans or procedures for the protection of an individual in accordance with a witness protection scheme; the safety of the public, or any part of the public; or the security of property.
A Company must refuse a request for access to a record of the Company if the record is privileged from production in legal proceedings unless the person entitled to the privilege has waived the privilege.
The commercial information of a Company may not be disclosed if the records contain:
(a) trade secrets of the Company;
(b) financial, commercial, scientific or technical information, other than trade secrets, of the Company, the disclosure of which would be likely to cause harm to the commercial or financial interests of the body;
(c) information, the disclosure of which could reasonably be expected-
i. to put the Company at a disadvantage in contractual or other negotiations; or
ii. to prejudice the body in commercial competition; or
iii. is a computer program. as defined in section I (I) of the Copyright Act 1978 (Act 98 of 1978) owned by the Company, except insofar as it is required to give access to a record to which access is granted in terms of this Act.
Research information of a third party, and research information of Company are automatically protected and may not be disclosed. If the records requested contain information about research being or to be carried out by or on behalf of a third party, the disclosure of which would be likely to expose-
(a) the third party;
(b) a person that is or will be carrying out the research on behalf of the third party;
(c) the subject matter of the research, to serious disadvantage of the third party.
A Company cannot refuse to give information to a party who requests it and therefore must disclose it, if : -
(a) the disclosure of the record would reveal evidence of a substantial contravention of, or failure to comply with, the law; or
(b) imminent and serious public safety or environmental risk; and if the disclosure will be in the interest of society.
Companies have 30 days to respond to your request. If your request is refused, you must be told why in writing. You must also be told in terms of which section of the PAIA Act was used to refuse your request.
You must also be told that you may apply to court to get the Company to provide you with the information. You must also be told how much time you have to submit your appeal. The Company may charge you nominal fees to give you the information, but if you are unable to pay the fees, you can apply to be exempted from payment.
Read our other articles in the series on Companies.
This article was written by Nanika Prinsloo of Prinsloo and Associates Attorneys and Conveyancers.
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