Access to information in a derivative action in terms of the Companies Act 71 of 2008: A comparative analysis

The separate legal personality of a company is foundational to its existence. Where a wrong is done to a company, it, as a juristic person, acts as the proper plaintiff. The authority to initiate legal proceedings in the name of, or on behalf of, the company ordinarily resides with the board of directors as the authority to manage the company's affairs is bestowed upon them. In general, this arrangement appears both reasonable and logical. However, the rule can give rise to injustice and inequity - particularly in situations where the alleged wrongdoers are themselves in control of the company. The derivative action comes into play in instances where the majority shareholders or board of directors decline to institute an action on behalf of the company to vindicate a corporate wrong or where they themselves are the cause of such a wrong. The derivative action is a remedy by which a shareholder in a company (generally a minority shareholder) can institute legal action on behalf of a company to protect its rights and interests. To institute a derivative action an applicant may need access to the information of a company as proof of the wrongdoing. The necessary information to initiate a derivative action is often controlled by the company's managers and directors. A lack of access to inside corporate information presents a significant barrier to possible applicants, potentially deterring or preventing many derivative actions from its inception. The right to access to company records and information is essential in bringing such an action. This article evaluates the applicant's right to access company information in a derivative action in terms of the South African Companies Act. Furthermore, a comparative legal analysis with the positions in Ghana, Australia and Canada is conducted with the view of enhancing the position in South Africa.