Text in Afrikaans / The Companies Act, 1973 ("the Act") contains no specific provision dealing
with the relationship between a nominee shareholder and its principal, the
beneficial shareholder. The Act merely contains a variety of references to this
unique relationship without specifying the content thereof or elaborating on
the rights of the beneficial shareholder. It is clear from the Act that no legal
connection exists between the company and the beneficial shareholder and a
company is only obliged to recognise its registered members.
It has become apparent that beneficial shareholders need more protection than
is currently afforded to them in terms of our common law. Currently beneficial
shareholders have a common law right to claim return of their shares from any
person (even bona fide third parties) in the event of the misappropriation of
such shares by their nominee shareholders. Beneficial shareholders are
unprotected if their nominee shareholders were to act contrary to their
instructions, for example by not voting at the general meeting in accordance
with the instructions of the beneficial shareholders. Having regard to the fact
that the relationship between the beneficial shareholder and the nominee
shareholder is based on agency or trusteeship, the beneficial shareholder will
be entitle to compel its nominee to transfer the shares to another person. This
may, however, have stamp duty implications and if the nominee refuses to give its cooperation in respect of such transfer, costly legal action may be the
only solution for the beneficial shareholder.
In deciding which section of the Act should be adapted to include the rights of
beneficial shareholders, the following sections have been considered: Section 266 (statutory derivative action), section 252 (statutory remedy in the event of
prejudice), section 440K (compulsory acquisition of securities of minorities)
and section 344(h) (liquidation on grounds of equity). The only one of these
sections which provides the court with a wide enough discretion to afford the
required protection is section 252.
An important point in this regard is that section 252 cannot effectively be
extended to beneficial shareholders unless they also acquire the right to have
access to the same company information as the members of the company
would receive. In an attempt to create a balance between the needs to greater
protection of beneficial shareholders and the avoidance of unnecessary
cumbersome administrative obligations on companies, it is suggested that a
register of beneficial shareholders be created and that companies be obliged to
inform all beneficial shareholders appearing on such register of the same
company information as is provided to registered members.
The Act must make it clear that :
• a beneficial shareholder can only be recorded in the register with the
assistance of its nominee shareholder;
• the relevant nominee shareholder must satisfy the company secretary that
the person which is recorded in the register is in fact its principal;
• the only two instances where the company secretary will be entitled to
remove the beneficial shareholder is in the first instance where the
beneficia] shareholder consents to such removal and secondly where the
shares held by the registered member is transferred. The latter ground will
avoid continued provision of company information to persons not
involved with the company.
No duty will be placed on companies to ensure that the names and addresses
of beneficial shareholders are correct. This will be the responsibility of
beneficial shareholders.
The improved flow of company information will facilitate the improved
awareness by beneficial shareholders of relevant events and together with the
appropriate extension of section 252, will go a long way in improving the much
needed protection of beneficial shareholders. / Mercantile Law / LL.M. (Handelsreg)
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:unisa/oai:uir.unisa.ac.za:10500/17950 |
| Date | 11 1900 |
| Creators | De Bruyn, Frederik Anton |
| Contributors | Vermaas, Maria Rosina |
| Source Sets | South African National ETD Portal |
| Language | Afrikaans |
| Detected Language | English |
| Type | Dissertation |
| Format | 1 online resource (32 leaves) |
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