The role of beneficial ownership reporting obligations and the reckless trading provision to prevent front companies in terms of the Companies Act 71 of 2008

by | May 20, 2023 | JCCL, JCCL V8 I2

The role of beneficial ownership reporting obligations and the reckless trading provision to prevent front companies in terms of the Companies Act 71 of 2008

Author: Neha Dhana

ISSN: 2521-2575
Affiliations: LLM candidate, University of Witwatersrand
Source: Journal of Corporate and Commercial Law & Practice, Volume 8 Issue 2, 2022, p. 29 – 54
https://doi.org/10.47348/JCCL/V8/i2a2

Abstract

The corporate form has the potential to be abused by natural persons. A front company is an example of such abuse. A front company is an incorporated company that is used as a vehicle to conduct illegal activities. The natural persons that control this front company and ultimately benefit from proceeds derived from the illicit conduct conceal their identity by hiding behind the company’s separate legal personality to escape civil and criminal liability. A report indicates that billions of rands are obtained through illegal activities perpetrated against the corporate form in South Africa. This means that natural persons can successfully misuse the corporate form as a front. For this reason, it is imperative that a legal framework is in place to circumvent the formation and operation of front companies. Foreign jurisdictions such as the United States of America and Kenya deter front companies by recognising beneficial ownership and placing a reporting obligation on beneficial owners to reveal themselves to a regulatory body. The abuse of the corporate form as a front is a company law issue and ought to be regulated by the South African Companies Act 71 of 2008 (Companies Act). However, the Companies Act does not recognise beneficial ownership per se. The Companies Act recognises beneficial interest only in relation to persons that exercise a legal right held in securities. It is argued that to prevent front companies in South Africa, the Companies Act should be amended to fully recognise beneficial ownership and place a report obligation on these persons to reveal themselves to the Companies and Intellectual Property Commission. It is further argued that the statutory remedy, the reckless trading provision, should be expanded to apply to beneficial owners to act as an instrument to prevent the operation of front companies.

Revisiting class action litigations against corporations in Nigeria: Lessons from the US experience

by | May 20, 2023 | JCCL, JCCL V8 I2

Revisiting class action litigations against corporations in Nigeria: Lessons from the US experience

Author: Kalu Kingsley Anele

ISSN: 2521-2575
Affiliations: Lecturer: Pusan National University, Busan, South Korea
Source: Journal of Corporate and Commercial Law & Practice, Volume 8 Issue 2, 2022, p. 55 – 83
https://doi.org/10.47348/JCCL/V8/i2a3

Abstract

Class actions remain one of the most plausible mechanisms to aggregate and ventilate corporate grievances in court effectively. Despite its advantages, including recurrent corporate malfeasance, the class action procedure in Nigeria is limited in scope. This article uses a comparative analysis methodology and the class action regime in the United States (US), which is general in nature under Rule 23, to interrogate the application of the procedure in Nigeria. It argues that Nigeria’s extant class action legal framework is limited in scope since it focuses only on intellectual property infringements. By comparatively analysing the application of Rule 23 in the US in bankruptcy, competition, securities, and human rights cases, the article submits that introducing a general class action framework is imperative in Nigeria. Consequently, this article suggests using legislation, courts, public enlightenment strategy, and guidelines for attorney fees to introduce, strengthen, and implement a general class action regime in Nigeria. This would engender corporate behavioural change, encourage policy regulation, bolster the use of class action by legal practitioners, and facilitate access to court.

Practice Note: Responding to stockholder proposals, director elections and say-on-pay votes

by | May 20, 2023 | JCCL, JCCL V8 I2

Practice Note: Responding to stockholder proposals, director elections and say-on-pay votes

Authors: James J. Hanks Jr., Michael D. Schiffer, Michael F. Sheehan

ISSN: 2521-2575
Affiliations: Partner, Venable LLP, Baltimore, MD; Partner, Venable LLP, Baltimore, MD; Partner, Venable LLP, Baltimore, MD
Source: Journal of Corporate and Commercial Law & Practice, Volume 8 Issue 2, 2022, p. 84 – 89
https://doi.org/10.47348/JCCL/V8/i2a4

Abstract

As boards of directors of public companies prepare for their 2023 annual meetings and, relatedly, consider the voting results from 2022 annual meetings, we are being asked for advice concerning (I) the duties of directors of Maryland corporations and (II) the policies and current practices of the proxy advisory services relating to stockholder proposals, director elections, and Say-On-Pay votes.

Book Review: Corporate Law and Corporate Governance – A Global Picture of Business Undertakings in South Africa, 2 ed

by | May 20, 2023 | JCCL, JCCL V8 I2

Book Review: Corporate Law and Corporate Governance – A Global Picture of Business Undertakings in South Africa, 2ed

Authors: Tshepo Mongalo and Tshepiso Scott

ISSN: 2521-2575
Affiliations: N/A
Source: Journal of Corporate and Commercial Law & Practice, Volume 8 Issue 2, 2022, p. 90 – 94
https://doi.org/10.47348/JCCL/V8/i2a5

Abstract

None

The myth of a central role by institutional shareholders in corporate governance

by | Nov 19, 2022 | JCCL, JCCL V8 I1

The myth of a central role by institutional shareholders in corporate governance

Author: Ntombizodwa Lucia Zikhali

ISSN: 2521-2575
Affiliations: Candidate Legal Practitioner, Gildenhuys Malatji Inc
Source: Journal of Corporate and Commercial Law & Practice, Volume 8 Issue 2, 2021, p. 1 – 20
https://doi.org/10.47348/JCCL/V8/i1a1

Abstract

The need for transparent and high standards of corporate governance is expressly highlighted in s 7 of the Companies Act 71 of 2008. There has been a wide call by those concerned with corporate governance for institutional investors to take a central role in ensuring corporate governance reform is successfully achieved. A number of concerns are highlighted that stand in contrast with this expectation of institutional investors taking on such a lead role. These concerns relate to competition in the investment market, performance incentives, short-termism, unwarranted interference with director authority, lack of expertise, the burden of investment and existing statutory mechanisms making this expectation unrealistic and a potential for more problems rather than a solution.

Personal liability of non-executive directors in South Africa: A global comparative analysis

by | Nov 19, 2022 | JCCL, JCCL V8 I1

Personal liability of non-executive directors in South Africa: A global comparative analysis

Author: Mutsa D Danha

ISSN: 2521-2575
Affiliations: Tutor and LLM candidate, Learning Space Tuition and Wits Law School
Source: Journal of Corporate and Commercial Law & Practice, Volume 8 Issue 2, 2021, p. 21 – 34
https://doi.org/10.47348/JCCL/V8/i1a2

Abstract

The South African Companies Act 71 of 2008 (SA Companies Act) contains extensive provisions detailing the circumstances under which directors may be held personally liable for their actions completed while carrying out their duties. These statutory provisions are a partial codification and modernisation of the existing commonlaw provisions that had previously regulated this area of company law. These provisions still apply to the extent that they comply with the Act’s statutory provisions. The common-law tradition in South African company law has its roots in the English common law, which has spawned many other legal traditions, from that applicable in Australia to the tradition that has emerged (and diverged) in the United States of America. This article examines whether, in applying the statutory provisions of the SA Companies Act, the manner in which personal liability may be ascribed to directors would amount to a standard more onerous than jurisdictions with similar legal traditions to South Africa and, as such, render the position of director in South Africa as (comparatively) undesirable. A further examination of whether a director is an executive or a non-executive director is relevant to establish whether liability will ensue and to confirm the position in South African law on this matter. Some of the distinctions between such directors are laid out in the seminal case of Kaimowitz v Delahunt. Overall, this article seeks to ascertain whether the trajectory of South African company law is aligned with the modern forms of the same law that have evolved in its ‘sibling jurisdictions’ (legally speaking). It further seeks to establish whether any variance thereof would result in unintended detriment to the aims of the concerned laws – that is, promoting good corporate governance, and thus attracting good corporate leaders to the Republic.