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Electronic Delivery

Communication has steadily become mediated using technology. As such, you need an effective way to communicate with your stakeholders in the digital age. With Ince’s Electronic Distribution solution, you can now communicate notice of shareholder meetings in an affordable, modern and efficient way. Using our wide iRegister shareholder database, our Electronic Distribution solution offers you with three streams in which to communicate with your stakeholders; email, SMS and print.

The Electronic Distribution solution enables you to analyse your communication using our Analytics service, which tracks if your shareholders have opened and read the communication. This reduces printing and registered mail fees, modernises the stakeholder communication process and offers you an efficient and interactive solution to disseminate information.

Outline

  1. Regulatory framework
  2. Participation
  3. Democratisation

Regulatory framework

“Electronic communication” is defined in the Companies Act as having the meaning set out in section 1 of the ECTA.

In terms of section 1 of the ECTA:

  • “electronic communication” means “a communication by means of data messages”;
  • “a data message” means “data generated, sent, received or stored by electronic means and includes

(a) voice, where the voice is used in an automated transaction; and
(b) a stored record”;

  • “email” means “electronic mail, a data message used or intended to be used as a mail message between the originator and addressee in an electronic communication”;
  • “data” means “electronic representations of information in any form”.

In terms of section 12 of the ECTA a requirement in law that a document or information must be in writing is met if the document or information is

(a) in the form of a data message; and
(b) accessible in a manner usable for subsequent reference.

NOTICES OF SHAREHOLDER MEETINGS

In terms of section 62 of the Companies Act:

  • a company must deliver a notice of each shareholders’ meeting in the prescribed manner and form to all of the shareholders of the company as of the record date for the meeting (section62(1)); and
  • a notice of a shareholders’ meeting must be in writing (section 62(3).

DELIVERY OF A NOTICE OF A SHAREHOLDERS’ MEETING

– Companies Act Requirements
In terms of section 6 of the Companies Act:

  • if a notice is required or permitted to be given or published to any person, it is sufficient if the notice is transmitted electronically directly to that person in a manner and form such that the notice can conveniently be printed by the recipient within a reasonable time and at a reasonable cost (section 6(10));

In terms of section 11 of the ECTA information is not without legal force and effect:

(i) merely on the grounds that it is wholly or partly in the form of a data message;
(ii) merely on the grounds that it is not contained in the data message purporting to give rise to such legal force and effect, but is merely referred to in such data message.

In terms of regulation 7 of the Companies Regulations promulgated under the Companies Act:

  • a notice or document to be delivered for any purpose contemplated in the Companies Act or Regulations may be delivered in any manner

(a) contemplated in section 6(10) or (11) of the Companies Act; or
(b) set out in Table CR3 of the Regulations (Regulation 7(1));

” Electronic communication” is defined in the Companies Act as having the meaning set out in section 1 of the ECTA.
In terms of section 1 of the ECTA:

  • “electronic communication” means “a communication by means of data messages”;
  • “a data message” means “data generated, sent, received or stored by electronic means and includes

(a) voice, where the voice is used in an automated transaction; and
(b) a stored record”;

“email” means “electronic mail, a data message used or intended to be used as a mail message between the originator and addressee in an electronic communication”;

“data” means “electronic representations of  information in any form”. “email” “electronic mail data message “data” “electronic representations of information in  any form”.

Companies Act, 2008 (Act No. 71 of 2008)

Chapter 2: Formation, Administration and dissolution of companies
Part B: Incorporation and legal status of companies
15. Memorandum of Incorporation, shareholder agreements and rules of company
(2) The Memorandum of Incorporation of any company may

(a) include any provision-
(i) dealing with a matter that this Act does not address;
(ii) altering the effect of any alterable provision of this Act; or
(iii) imposing on the company a higher standard, greater restriction, longer period of time or any similarly more onerous requirement, than would otherwise apply to the company in terms of an unalterable provision of this Act;

(b) contain any restrictive conditions applicable to the company, and any requirement for the amendment of any such condition in addition to the requirements set out in section 16;
(c) prohibit the amendment of any particular provision of the Memorandum of Incorporation; or
(d) not include any provision that negates, restricts, limits, qualifies, extends or otherwise alters the substance or effect of an unalterable provision of this Act, except to the extent contemplated in paragraph
(a)(iii).

ELECTRONIC PARTICIPATION IN SHAREHOLDER MEETINGS

In terms of the Companies Act:

  • unless prohibited by its memorandum of incorporation, a company may provide for a shareholders’ meeting to be conducted entirely by electronic communication or one or more shareholders, or proxies for shareholders, to participate by electronic communication in all or part of a shareholders’ meeting that is being held in person as long as the electronic communication employed ordinarily enables all persons participating in that meeting to communicate concurrently with each other without an intermediary and to participate reasonably effectively in the meeting (section 63(2));

Sasol obtained a High Court Injunction a few weeks back to deliver documents  electronically, as the SA Postal service was on strike and had been for over 15 weeks after a  history of prolonged strikes over a three year  period.

The Injunction was obtained as the documents  had been printed and delivered to the SA Post  Office and as such met the regulatory  requirements.

However, Sasol knew that due to the strike the  documents could not be delivered, nor could  SA Post give a written guarantee of this effect. The Sasol MOI allowed for electronic delivery. To prevent any legal challenge to the validity of  the Notice being delivered electronically, Sasol  took the trouble to obtain the injunction.

POPI

  • In terms of section 50 (2) of the Companies Act, a company is obliged to record only the name and (physical) address of its registered and beneficial shareholders in its securities register.
  • The MOI of a company may in addition entitle the company to request and use email addresses and/or mobile phone numbers for purposes of company communications with its shareholders, but there is no obligation on a shareholder either to have access to such device or facility or to furnish its contact particulars relating thereto, or of course to agree to the use thereof for purposes of receiving company communications.
  •  Audit the processes used to collect, record, store, disseminate and destroy personal information: in particular, companies must ensure the integrity and safekeeping of personal information in their possession or under their control. They must take steps to prevent the information being lost or damaged, or unlawfully accessed.
  • Define the purpose of the information gathering and processing: personal information must be collected for a specific, explicitly defined and lawful purpose that is related to a function or activity of the company concerned.
  •  Limit the processing parameters: the processing must be lawful and personal information may only be processed if it is adequate, relevant and not excessive given the purpose for which it is processed.
  • Take steps to notify the data subject: the individual whose information is being processed has the right to know this is being done and why. The data subject must be told the name and address of the company processing their information. In addition, he or she must be informed as to whether the provision of the information is voluntary or mandatory.
  • Check the rationale for any further processing: if information is received via a third party for further processing, this further processing must be compatible with the purpose for which the data was initially collected.
  • Ensure information quality: the company processing the information must make sure the information is complete, accurate, up to date and not misleading.
  • Notify the information Protection Regulator: POPI envisages the establishment of a statutory body to be known as the Information Protection Regulator. If or when POPI is enacted and the Regulator is established, organisations processing personal information will have to notify the Regulator about their actions.
  • Accommodate data subject requests: POPI allows data subjects to make certain requests, free of charge, to organisations holding their personal information. For instance, the data subject has the right to know the identity of all third parties that have had access to their information. A data subject can also ask for a record of the information concerned.
  • Retain records for required periods: personal information must be destroyed, deleted or ‘de-identified’ as soon as the purpose for collecting the information has been achieved. However, a record of the information must be retained if an organisation has used it to make a decision about the data subject. The record must be kept for a period long enough for the data subject to request access to it.

Democratisation

The same principals apply in the Stock Exchange Listed Company world.

The investor in Pension and Provident Funds. The investor in Stocks. All have far more information and tools available to make investment decisions themselves as opposed to only trusting these decisions to be made by professional investment houses as is the current norm.

Conclusion

Although the Regulations allow for electronic communication, the market has been slow in its uptake.

The SA Postal strike, now in its 16th week, has precipitated this change to electronic delivery.

Its not only about delivering the document electronically, its also about the Shareholder being able to vote. Currently the option is to fill in the Proxy Form and Post it. The SA Post Office is unable to get this back to the Company, so electronic proxy voting must be the norm.

Communication with Shareholders and potential investors must be more than fulfilling the regulatory requirements. In this digital, connected world it is important to communicate well to develop relationships and to recognise long standing shareholders, even if they sell their shares as an example. Technology allows for this.