Mi­nor­ity share­hold­ers heard

Finweek English Edition - - INSIGHT - SVET­LANA DONEVA svet­lanad@fin­media24.com

THE PRO­VI­SION for class ac­tion in South Africa’s new Com­pa­nies Act that came into ef­fect at the start of this month is a wel­come op­por­tu­nity to give a voice to mi­nor­ity share­hold­ers, who tend to re­main largely silent when it comes to dis­puted ac­tions by direc­tors. How­ever, its suc­cess in eas­ing mi­nor­ity share­holder ap­a­thy will de­pend on the prac­ti­cal ap­pli­ca­tion of its class ac­tion clause.

In­de­pen­dent share­holder ac­tivist Theo Botha says the ex­or­bi­tant ex­penses that are part and par­cel of legal ac­tion in SA will re­main a ma­jor de­ter­rent to share­hold­ers, even when acting as a group. He says cor­po­rate lawyers should adopt a pro bono ap­proach, where there’s no charge if the case is lost. Legal ac­tion against a com­pany can be taken by any­one suf­fer­ing the con­se­quences of its ac­tions, in­clud­ing com­mu­ni­ties and pri­vate in­di­vid­u­als.

An­other hopeful pos­i­tive of the Act is that it will pro­vide share­hold­ers with more back­ground in­for­ma­tion on the de­ci­sions made by the com­pany’s direc­tors. Deloitte reg­u­la­tion an­a­lyst Jo­han Eras­mus says direc­tors will have to pub­lish a “short doc­u­ment” – in re­al­ity, around 30 pages – sep­a­rate from their an­nual re­port that out­lines the risks and op­por­tu­ni­ties in the en­vi­ron­ment the com­pany oc­cu­pies. “The idea is that it will mit­i­gate the risks, as share­hold­ers will have a bet­ter un­der­stand­ing of the con­text of the de­ci­sions taken by man­age­ment,” Eras­mus says.

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