Shareholders’ Right of Access to Information: Understanding Section 26 of the Companies Act

Introduction

One of the most common questions raised by shareholders is: “Am I entitled to see the company’s financial records?” While shareholders have important rights of access to company information, those rights are not unlimited. The Companies Act 71 of 2008, as amended (hereafter the “Act”) provides transparency rights for shareholders while balancing those rights with the protection of the company’s internal management.

A central provision with reference to a shareholder’s right to access to information regarding the company is section 26 of the Act. Section 26 specifically governs access to company records. Section 26 expressly provides that a shareholder is entitled to access to the annual financial statements of the company.

Many shareholders assume that since holding shares entitles shareholders to access to the company’s annual financial statements, such access automatically extends to the company’s full books of account—but South African company law is clear on the fact that this is not the case.

Section 26 of the Act: Rights and Limits

Section 26 gives a shareholder (or any person holding a beneficial interest in securities of a profit company) the right to inspect and copy, without charge, certain company records. These include:

• The company’s Memorandum of Incorporation (MOI) and any amendments.
• Records relating to the company’s directors.
• Reports to annual meetings and annual financial statements.
• Notices and minutes of annual meetings and communications sent to shareholders.
• The securities register of the company.

The key point here is that the Act specifically refers to annual financial statements—not to the raw accounting records that form the basis of those statements.

Shareholding Does Not Automatically Confer Access to Accounting Records

Annual financial statements are prepared to give shareholders an accurate overview of the company’s financial position. These documents are subject to accounting standards, and in many cases, independent review or audit. In contrast, accounting records such as ledgers, journals, invoices, and cashbooks are day-to-day operational documents.

While financial statements must be disclosed under section 26, the same obligation does not extend to accounting records. This means that:

• A shareholder cannot insist on inspecting the company’s ledgers or invoices merely due to the fact that they own shares in the company.
• Directors may rightly refuse a shareholder’s request for access to accounting records.

This distinction ensures that shareholders are informed of the company’s performance without unduly interfering in the directors’ management of the business.

It is a common misconception that share ownership gives an automatic right to “look behind” the financial statements. In reality, company law is structured to prevent disruption of business operations by limiting shareholder access to the level of financial statements, unless more extensive rights are granted contractually.

This approach was clearly reinforced in the Supreme Court of Appeal decision of Clutcho (Pty) Ltd v Davis 2005 SCA (the “Clutcho Case”).[1]

The Clutcho v Davis Case: Access Denied

In this case, a shareholder sought access to the company’s books of first accounting entry its ledgers, journals, invoices, and cash books. He argued that this was necessary to value his shareholding, and claimed to suspect that the audited financial statements were inaccurate and did not reflect the true value of the company.

Because the company’s articles of association (the equivalent of today’s MOI) did not entitle him to such records, the shareholder applied in terms of Part 3 of the Promotion of Access to Information Act 2 of 2000 (“PAIA”), enacted under section 32 of the Constitution. He argued that access was required to exercise or protect his right to properly value his shares for sale.

The Supreme Court of Appeal (“SCA”) considered the matter but ultimately dismissed the application. The court held that:

1. Company law already provides significant protection to shareholders, particularly through their right to receive financial statements and through the oversight of auditors.
2. Parliament could not have intended that the books of account should be “thrown open” to shareholders merely because they suspected inaccuracies or irregularities.
3. Allowing unrestricted access would undermine the balance between directors’ authority to manage the company and shareholders’ right to financial transparency.
4. On the facts, the shareholder failed to demonstrate that the information sought was necessary for the exercise or protection of his asserted right.

In short, while shareholders may access financial statements, they are not entitled to detailed accounting records, unless expressly granted by the company’s constitutional documents or ordered by a court in exceptional circumstances.

How to Grant a Shareholder the Right of Access to Accounting Records?

While the Act does not automatically entitle ordinary shareholders to access a company’s detailed accounting records, there is a way to secure such a right. This can be achieved by expressly providing for access in the company’s Memorandum of Incorporation (“MOI”).

Including such a clause at the outset ensures that shareholders are not dependent solely on the statutory framework, which limits their rights to annual financial statements. Instead, the MOI can grant shareholders the contractual right to inspect and obtain copies of the company’s accounting records as and when necessary.

This proactive step is particularly important in closely held companies, family businesses, and joint ventures, where transparency plays a key role in maintaining trust and preventing disputes.

If access rights are not stipulated in the MOI, shareholders may only approach a court for disclosure under exceptional circumstances, a process that is costly, time-consuming, and uncertain. By contrast, enshrining the right to access records in the MOI provides clarity and avoids unnecessary litigation.

In practice, companies that wish to attract investors or maintain long-term shareholder confidence often adopt this approach. It signals a commitment to accountability and can reduce the risk of shareholder mistrust. Therefore, careful attention should be paid when drafting the MOI, as it is the cornerstone document that defines the rights and obligations of all stakeholders.

Conclusion

The Act strikes a careful balance between transparency and the efficient management of companies. While directors and prescribed officers are entitled to full access to accounting records, shareholders are limited to the right to receive annual financial statements. This limitation often comes as a surprise, particularly to minority shareholders who expect broader oversight rights.

The Supreme Court of Appeal’s judgment in the Clutcho Case underscores the principle that shareholding alone does not entitle one to the company’s books of account.  However, the absence of a statutory right to access detailed accounting records does not mean shareholders are without recourse. By ensuring that such rights are expressly included in the MOI, shareholders can protect their interests and secure a level of financial transparency that aligns with their expectations.

For both companies and investors, the takeaway is clear: the MOI matters. Careful planning at the formation stage—or when negotiating shareholder arrangements—can prevent future disputes, foster trust among stakeholders, and ensure the company’s governance framework supports long-term growth. At SchoemanLaw Inc., we help clients draft customised MOIs, resolve disputes, and structure access rights. Contact us for assistance today!  

[1] https://www.saflii.org/za/cases/ZASCA/2005/16.pdf: accessed 4 November 2025.

For further assistance, consult an attorney at SchoemanLaw Inc.