IN Telkom’s prospectus issued in a public offering in 2003 to attract investors, it stated: "In terms of (Telkom’s) shareholders’ agreement between government and other entities, government (and other entities) agreed to exercise its voting rights to ensure, among other things, that, to the extent legally possible:
1. Telkom pursues strategic objectives to operate in a commercial manner designed to maximise Telkom’s value, and to …
2. satisfy economically viable demands for basic telephony needs in South Africa and to increase coverage of priority customers, such as educational and medical facilities, community centres and governmental agencies, through an accelerated network roll-out programme..."
It was clear that, when shareholders first put up their hands to participate in the ownership of Telkom, the objectives of the business would be, first, profit maximising, and second — and then only to the extent that it is commercially viable — developmental.
The conduct and statements of government and its representatives during this year (and indeed probably long before) have been directly contradictory to this undertaking contained in the prospectus. It is thus my view that shareholders have recourse against the government and its representatives under section 163 of our new Companies Act, being "relief from oppressive or prejudicial conduct or from abuse of separate juristic personality of a company".
This section allows minorities who have been financially prejudiced, as a result of oppressive conduct from its shareholders-directors, to seek relief.
The section is far wider than the shareholder protections offered in the previous Companies Act as it allows shareholders to seek remedies against juristic or natural persons who are related parties to the company.
In other words, directors who are acting in the interests of government’s non-profit objective, may be equally open to being pursued under this section, as would the state itself.
The Companies Act also provides for a court to make an order of any remedy it deems fit to resolve the issue in question.
It is clear that the objectives of the government are strongly unaligned to that of public and institutional shareholders and this is not set to change.
Accordingly, one could surmise that a court would be compelled to resolve the conflict of objectives by making an order for the government to buy out all other shareholders or an order for the government to sell its entire shareholding to the public.
It would be really great if a Telkom shareholder took up an application on this basis.