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- AmaBhungane is in court today to challenge the secrecy of an investigation into the collapse of armored vehicle manufacturer Paramount Combat Systems, part of a politically connected group.
- In these inquiries, witnesses are questioned about the whereabouts of the assets and the reasons for the failure of the company. They are confidential by default.
- AmaBhungane asks the High Court to grant her access on the basis that the public has an interest in the matter.
The notion that commercial activities are totally private is anachronistic.
Society and the law have moved away from that idea, recognizing that the activities of corporate entities have a direct impact on stakeholders, including employees, customers, and suppliers.
These effects can also extend to the broader public sphere, affecting even those who are not affiliated with the company at all; think, for example, of the far-reaching effects of the Enron scandal, or for local examples, VBS and Steinhoff.
Many ordinary South Africans lost value in their pension funds after years of diligent saving. Public funds were embezzled, which means less for municipalities to deliver public goods and services.
When companies go unruly, where is the responsibility? Private companies have the benefit of limited liability, which means that shareholders can protect themselves from risk in the event that the company fails. They may lose their investment in the business, but creditors cannot personally pursue them.
Directors are exposed to liability in terms of the Companies Act, but are only required to act in the “best interest of the company.” They do not have a similar responsibility to people who may be affected in the world at large.
Only in limited cases, such as certain specific crimes, can directors be held accountable for the impact felt by those outside the company.
In short, the public has little or no recourse against companies whose activities have the potential to cause harm. In these circumstances, increased transparency enables scrutiny of a company’s affairs, which can help expose corporate wrongdoing or even prevent it.
What companies do matters, including how (and why) they fail.
And when they fail, it is important that the proper processes are followed so that the results of the liquidation procedures are fair and mismanagement or fraud is exposed.
It is for this reason that amaBhungane has turned to Superior Court, urgently, to request access to witness cross-examination, a so-called “section 417 investigation,” in the liquidation of Paramount Combat Systems (PCS), an armored vehicle manufacturer. .
Witness examinations
Witness interviews are governed by sections 417 and 418 of the Companies Act of 1973.
This is an extraordinary process in which a wide range of people can be convened, including officers, directors, or indeed anyone who is deemed “capable of providing information on trade, transactions, affairs or property. of the company “to present evidence under oath as to what caused the collapse of the company.
They can be an effective tool in the hands of liquidators, particularly since the law states that witnesses cannot refuse to answer questions, even if they can incriminate themselves.
Section 417 (7) establishes that such examinations are confidential by default, unless the Master of the Superior Court, or the court itself, orders otherwise. This can be in general or with respect to a particular person.
Access to these exams has the potential to reveal important information that would otherwise be nearly impossible to find. That is why we argue that when this information concerns the interests of the public, it should not be automatically hidden under a cloak of secrecy.
The public interest in Paramount
PCS is just one entity within the Paramount group, a network of companies with global reach whose core business is the manufacture and supply of weapons.
AmaBhungane and others have reported on the group’s activities in general over the years, including supplying weapons to foreign countries.
In our court request, we noted that the public has an interest in Paramount’s activities for various reasons.
These include its international footprint, even in “under scrutiny” jurisdictions and with countries that are at war or implicated in serious human rights violations.
Examples include a “partnership agreement” in Saudi Arabia, a key player in the devastating war in Yemen, where indiscriminate bombing campaigns are alleged to have killed thousands of civilians.
There is concern that by operating in under scrutiny jurisdictions, the Paramount group could have positioned itself outside of oversight structures in South Africa that restrict military trade.
In addition, questions have been raised about the alleged funding of political interests ranging from the ruling party in South Africa to politicians abroad, and whether political connections have allowed the company to expand outside of South Africa.
How PCS has failed is also a matter of public concern.
If mismanaged, this could mean that South Africa would have unnecessarily suffered losses of its national high-tech industrial capacity and the possible loss or export of South African intellectual property accumulated over many years.
More than that, it is the public’s interest that the liquidation process itself be carried out correctly, with due adherence to procedure and free from tampering.
Our courts are subject to the principle of open justice, which is the idea that procedures should be accessible to the public as a check on injustice.
Finding the right balance
AmaBhungane does not argue that there should be unrestricted access to such witness examinations.
Rather, our argument is that the door to these procedures opens a little. The public interest must be carefully considered when the master or the court exercises the discretionary power to decide whether or not to grant access.
This allows the public not only to be informed of the relevant content, but also to have confidence in the integrity of the procedures themselves.
Corporations wield immense power, and there are few tools outsiders can use to counter that influence. Transparency is one of those tools.
The Business Law establishes that secrecy is the default position. It does not have to be immovable.
* Thakur is an advocacy coordinator at the amaBhungane Center for Investigative Journalism.
*The Beetles Center for Investigative Journalism, an independent non-profit organization, produced this story. Like? Bean AmaB supporter to help us do more. Register in our Newsletter to get more.
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