Telkom splutters over register mystery

lukev said:
Hey All,

I'm a noob with law and all that - what's the importance of the member register?
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Each company should know who its members are at all times. To do this the Companies Act requires that each company to keep a register of members.

a) The register of members must record the following important information on each member:

Full name - important if there are two people with the same first and last name
Current address - proper mailing address so information can be sent by mail
Date joined - shows how long they have been a member
Date ceased - shows they are no longer a member

b) The register should be kept up to date. It is the company's responsibility to ensure that this happens. In Telkom's situation, it would be the company secretary.

c) Information about ceasing memberships or new members should be entered in the register as soon as possible after the meeting in which the decision is made.

d) The register of members must be kept by the public officer/company secretary at the corporation's official address.

e) The public officer shall take such action as is required to ensure that the register of members is open for inspection, at all reasonable times, to members of the public.

However, before a person is put on the register of members, they need to agree to be a member.

Hope this helps.
 
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lukev said:
I'm a noob with law and all that - what's the importance of the member register?
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Hi, lukev. I'm going to try to answer your question in the abstract, if I may, rather than with reference to Telkom in particular. In other words, the comments which I'm about to make are general ones which apply in respect of any company.

Although it is common to talk about a company's "shareholders", that is in fact a rather wide term which includes anybody who owns shares in the company beneficially. (I'll explain what I mean by "beneficially" in a further post in this thread if you want me to --- but I'm not going to do so in this post, otherwise the post will become unmanageably long). And the Companies Act does not give all "shareholders" (in this wide sense) the right to attend and vote at company meetings ("general meetings"): that right belongs exclusively to people who are referred to in the Act as the company's "members".

Every company is supposed to keep a "register" --- very roughly, a list (with certain details) --- of its members; and this register is called "the register of members".

The "register of members", if properly kept (in the manner envisaged by the Companies Act), generally comprises at least a hard-copy register --- usually to be found at the "registered office" of the company in question (though it can in fact be kept elsewhere, subject to certain conditions) --- which satifies a number of requirements (as to form and content) set out in section 105 of the Act. In what follows, I will call this the "section-105 register". The entire "register of members" can, however, sometimes include (in addition to the section-105 register) certain other things --- e.g. a number of electronically-maintained "subregisters" of "uncertificated securities" (within the meaning of section 91A of the Act) --- which, if they exist, are supposed to be treated as forming part of the register of members. It is, incidentally, just such "subregisters" that asmith evidently had in mind when writing post #14 in this thread (which reads "Its an electronic share register folks [etc]"). But asmith seems to have assumed that a register of members can consist of such "subregisters" alone --- regardless of whether there exists any section-105 register --- and after a very careful reading of various relevant parts of the Companies Act considered as a whole I don't in fact agree with that. [Also, by the way, in the case of Telkom the situation is made considerably more complicated by certain provisions in the company's "articles of association" concerning two special shares ("the Class A Share" and "the Class B Share") which --- for various reasons --- one wouldn't expect to find mentioned on any electronically-maintained "subregister" in any event; but for the sake of trying to keep this post simple (and generalized) I won't go into these complications here].

The present controversy concerning Telkom's "register of members" has to do with --- amongst other issues --- whether Telkom has (or has at any time since the end of March 2003 had) a section-105 register and/or, indeed, any valid register of members at all. I'm not at present going to enter into discussion concerning this controversy on the Internet, but will instead stick to trying to explain the importance of such a controversy as this in the abstract.

The importance lies in the Act's definition of what it means to say that someone is a "member" of a company. A company's "members", remember, are the only people normally permitted to attend and vote at general meetings of the company (e.g. for the purpose of electing directors, appointing auditors, and so on). And the word "member" (as used/defined in the Act) means a person who has agreed to become a member of the company in question and whose name has been entered in its register of members. It follows from this definition that if a company has no register of members then it has, in fact, no members. And if it has no members then it can hold no valid general meetings --- because, of course, there is nobody entitled to attend or vote at such meetings. And if that is the case then no company resolution requiring to be passed at a general meeting --- e.g. a resolution electing directors, or a resolution appointing auditors --- can be validly passed. Thus, the company can end up with no valid board of directors, no auditors, etc etc --- the potential problems are legion (and, in my view, could well be potentially fatal to the company).

That, very roughly, is the importance of a company's register of members.

Michael Alachouzos
 
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These are very serious allegations. I am keen to see if Telkom responds to Business Day's article.
 
How does a shareholder become a member? Is it invite only? Do you apply? Do you have to promise to hold the stock for a certain period?
 
Well done Alacos!

A few of us were involved with similar issues in a badly run Section 21. Amazing to see how attitudes change when directors are faced with contraventions of the Act and the prospect of having to face court. (fortunately no fraud etc - only badly run)

The "hard copy" requirement was very important in solving the above problem. The mere fact of it having to be compiled by the directors already improved the management issues. It is the only sure way of presenting a "fixed in time snapshot" record of members who had voting rights at an AGM - especially when disputes follow.

It doesn't take much to have a computer printout ready at an AGM. The lack thereof is going to haunt Telkom and its directors.

A very tough nut for Papi to crack!
 
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Hi, ic and kaspaas. Your above posts aren't completely accurate (as a matter of law) --- but never mind.

Look, everyone, this register-of-members issue is actually quite complex --- and I would have to write a mini-thesis on various aspects of company law in order to explain it properly. Indeed, in emails recently sent by me to the lawyer currently dealing with the matter on behalf of the Registrar of Companies I have pretty-much had to do just that (in order to get him to understand it). If I try to do the same "on the fly" for the benefit of members of this forum, there is a very substantial risk that I will end up making some inadvertent mis-statement of the relevant law --- which Telkom's people will then be able to pick up on. So I'd much rather that everyone here just stopped even trying to work it all out for the time being --- since that makes me feel that I ought to step in with explanations whenever anyone gets something wrong --- and in any event I don't think I'm going to try to add to this thread any further at present. If and when there are further developments which I can report on without confusing everyone (and without breaching confidences or giving away tactics or arguments which may at a later stage need to be used in litigation), I will do so.

Meanwhile, any MyADSL member who wants to inspect Telkom's register of members (IF any such register exists --- which I frankly don't believe it does) is welcome to try; and I would be very interested indeed to learn of the results (if any) of their attempts (which results can either be posted here or reported to me by PM or by email addressed to [email protected] ).

The section of the Comapnies Act which is of most relevance to anyone wishing to try is section 113, subsection (1) of which reads as follows:

"The register of members of a company shall, except when closed under the provisions of this Act, during business hours (subject to such reasonable restrictions as the company in general meeting may impose, so that not less than two hours in each day be allowed for inspection) be open to inspection by any member or his duly authorized agent free of charge and by any other person upon payment for each inspection of an amount of R10 or such lesser amount as the company may determine".

My copy of the Companies Act is somewhat old, and I believe that the R10 statutory inspection fee may have been increased somewhat --- but not to any large amount (i.e. it may be R20 or R30, or whatever) --- since it was printed. However, in view of the experiences which Debbie Love, Esther Schoultz and various others seem to have had when attempting to obtain access to Telkom's "register of members" (if it exists) and inspect it, I have to say that anyone intending to attempt an inspection (whether at Telkom's registered office at 152 Proes Street in Pretoria or anywhere else) would in my view be well advised to obtain the assistance of an attorney for that purpose.

Michael Alachouzos
 
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Alacos thanks for your responses and your patience with us!

I find this whole thing shattering - massive breach of basic corporate governance by a company listed not only here but on the NYSE! :eek:

I mean, this is BASIC stuff!
 
Skip said:
How does a shareholder become a member? Is it invite only? Do you apply? Do you have to promise to hold the stock for a certain period?
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Basically, you are entitled to be a member of a company if you hold shares in it otherwise than merely as a beneficial owner. Let me give you an example:

Suppose that X (a stockbroker, say) has bought shares in ABSA for clients A, B and C and is holding them on those clients' behalf. Then (in the normal course of events) X will be a member of ABSA in respect of the shares in question --- even though he's really just holding them as a nominee or trustee for A, B and C --- whilst A, B and C won't be. (I'm sorry, but I'm having to oversimplify all this a little bit in order to avoid having to write what would otherwise amount to an Internet essay on the subject).

In the above example, A, B and C would be "beneficial owners" of the shares held by X. That means (e.g.) that they can tell X how to vote on their behalf at general meetings, and that they can demand that X hand over to them any dividends which he (as a member) may receive in respect of the shares which they (A, B and C) own beneficially. But their rights in these respects are rights as against X only (rather than as against ABSA). If X defaults on his obligations to them (e.g. by voting otherwise than as instructed, or by pocketing the dividends and failing to hand them over), then A, B and C can take legal action against him --- but not against ABSA, because ABSA has discharged its obligations in the matter by accepting the vote of X (the member) and paying the dividends to him.

I hope that helps.

Michael Alachouzos


PS: In the above example, A, B and C would normally be entitled --- if they wanted --- to demand that X legally transfer to them the shares held by him on their behalf; and if that were done then X would (in the normal course of events) cease to be a member (because ABSA would delete his name from its register of members) and A, B and C would become members instead. However, for reasons of administrative convenience most people prefer to have their shares held for them by their stockbroker (or bank, or other agent) since that results in greater ease (and less expense) in dealing with the shares (and the various rights attached to them) and less paperwork and other headaches for the client. [As I've already stated, though, everything which I'm saying here is deliberately somewhat simplified: posting to an Internet forum is not the best way of giving law lessons!]
 
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Well, look at it from the 'alternatives' angle. Telkom cant be closed down - the government cannot and wont allow that - Telkom cant be put under administration as this doesnt usally lead to a "nice" resolution. If the Companies act takes Telkom for mismanagement , then the shareholders will drop their shares and run...

is there a good way to resove this problem? or will SNO help this.
 
Alacos, in terms of your above posts, who gets to go to the AGM? X, or A,B,C? In other words, if I wanted to attend an AGM what would I have to do apart from tell the broker to buy 100 shares?
 
Peter_J said:
Alacos, in terms of your above posts, who gets to go to the AGM? X, or A,B,C?
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X

Peter_J said:
In other words, if I wanted to attend an AGM what would I have to do apart from tell the broker to buy 100 shares?
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ic (see post #40 above) is right. As the beneficial owner of the shares, you could demand of the broker that he appoint you as his proxy (to attend, speak and vote at the meeting, "on his behalf", in respect of the shares which appear in his name on the company's register of members but which are in fact beneficially owned by you).

Michael Alachouzos
 
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@alacos

What would be the remedy if Telkom cant produce the list ? What are the typical legal repercussions(spelling?) if this list doesnt exist? Is the company Secretary liable for this "Mishap" or will the Telkom cleaners get a bigger carpet to sweep this mess under?

or will Telkom get a "Naughty Boy" penalty (e.g. R1000000) and then all is OK again.

I am speaking hypothetically of course ;-)
Richard
 
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RichardP said:
Well, look at it from the 'alternatives' angle. Telkom cant be closed down - the government cannot and wont allow that - Telkom cant be put under administration as this doesnt usally lead to a "nice" resolution. If the Companies act takes Telkom for mismanagement , then the shareholders will drop their shares and run...

is there a good way to resove this problem? or will SNO help this.
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This actually highlights the crisis: Government publicly wants clean, responsible corporate governance. If Telkom is allowed to get away with this, it could become an issue of "different rules for the ANC" in the public.

Also: Business wants a fixed firm environment to trade in. If Telkom is allowed to get away with this, who will be allowed to get away with what next? It breaks down the confidence investors need to invest money.

The big ones have to set the example for all others. If they go outside the book, and are allowed to, it has a domino effect right down the whole of society. If Telkom does not have to stick to the laws, why should the pavement trader?
 
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