The Steinhoff Corporate Scandal and the Protection of Investors Who Purchased Shares on the Secondary Market
The December 2017 revelations of accounting irregularities in the Steinhoff group resulted in the share price dropping more than 95%. Investors, including pension funds, lost millions. This contribution deals with some of the legal issues arising from the misstatement of the financial position of...
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| Format: | Article |
| Language: | Afrikaans |
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North-West University
2022-10-01
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| Series: | Potchefstroom Electronic Law Journal |
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| Online Access: | https://perjournal.co.za/article/view/14876 |
| _version_ | 1811192559818506240 |
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| author | Kathleen E Van der Linde |
| author_facet | Kathleen E Van der Linde |
| author_sort | Kathleen E Van der Linde |
| collection | DOAJ |
| description |
The December 2017 revelations of accounting irregularities in the Steinhoff group resulted in the share price dropping more than 95%. Investors, including pension funds, lost millions.
This contribution deals with some of the legal issues arising from the misstatement of the financial position of Steinhoff International Holdings NV and its South African predecessor Steinhoff International Holdings Ltd, which resulted in the inflation of its quoted share price. It considers how retail and institutional investors who had acquired their shares through trades on the regulated secondary market might recover the losses they suffered. The administrative penalty provisions in relation to market abuse are briefly considered but shown to be of very limited application as regards compensation to investors.
Common-law delictual liability and statutory civil liability in terms of section 218(2) and section 20(6) of the Companies Act are considered in the context of the first reported attempt at the certification of a shareholder class action. Unfortunately, both the potential statutory remedies were interpreted so restrictively by the court in the class action certification application that they would hardly serve any purpose. The interpretations are shown to cause anomalies in the context of the Companies Act and to be out of step with established principles of company law. Also, the certification court's application of the reflective loss and proper plaintiff principles is questioned.
Some of these issues might have been solved through further litigation, but for statutory compromise and composition mechanisms that brought a mutually acceptable early end to the uncertainty of protracted litigation.
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| first_indexed | 2024-04-11T23:55:43Z |
| format | Article |
| id | doaj.art-eec660bc2be845fb9018f5741f57e976 |
| institution | Directory Open Access Journal |
| issn | 1727-3781 |
| language | Afrikaans |
| last_indexed | 2024-04-11T23:55:43Z |
| publishDate | 2022-10-01 |
| publisher | North-West University |
| record_format | Article |
| series | Potchefstroom Electronic Law Journal |
| spelling | doaj.art-eec660bc2be845fb9018f5741f57e9762022-12-22T03:56:23ZafrNorth-West UniversityPotchefstroom Electronic Law Journal1727-37812022-10-012510.17159/1727-3781/2022/v25i0a14876The Steinhoff Corporate Scandal and the Protection of Investors Who Purchased Shares on the Secondary MarketKathleen E Van der Linde0University of Johannesburg The December 2017 revelations of accounting irregularities in the Steinhoff group resulted in the share price dropping more than 95%. Investors, including pension funds, lost millions. This contribution deals with some of the legal issues arising from the misstatement of the financial position of Steinhoff International Holdings NV and its South African predecessor Steinhoff International Holdings Ltd, which resulted in the inflation of its quoted share price. It considers how retail and institutional investors who had acquired their shares through trades on the regulated secondary market might recover the losses they suffered. The administrative penalty provisions in relation to market abuse are briefly considered but shown to be of very limited application as regards compensation to investors. Common-law delictual liability and statutory civil liability in terms of section 218(2) and section 20(6) of the Companies Act are considered in the context of the first reported attempt at the certification of a shareholder class action. Unfortunately, both the potential statutory remedies were interpreted so restrictively by the court in the class action certification application that they would hardly serve any purpose. The interpretations are shown to cause anomalies in the context of the Companies Act and to be out of step with established principles of company law. Also, the certification court's application of the reflective loss and proper plaintiff principles is questioned. Some of these issues might have been solved through further litigation, but for statutory compromise and composition mechanisms that brought a mutually acceptable early end to the uncertainty of protracted litigation. https://perjournal.co.za/article/view/14876Shareholder lossescivil liability under the Companies Actsecurities fraudshareholder class actionsmarket abusereflective loss |
| spellingShingle | Kathleen E Van der Linde The Steinhoff Corporate Scandal and the Protection of Investors Who Purchased Shares on the Secondary Market Potchefstroom Electronic Law Journal Shareholder losses civil liability under the Companies Act securities fraud shareholder class actions market abuse reflective loss |
| title | The Steinhoff Corporate Scandal and the Protection of Investors Who Purchased Shares on the Secondary Market |
| title_full | The Steinhoff Corporate Scandal and the Protection of Investors Who Purchased Shares on the Secondary Market |
| title_fullStr | The Steinhoff Corporate Scandal and the Protection of Investors Who Purchased Shares on the Secondary Market |
| title_full_unstemmed | The Steinhoff Corporate Scandal and the Protection of Investors Who Purchased Shares on the Secondary Market |
| title_short | The Steinhoff Corporate Scandal and the Protection of Investors Who Purchased Shares on the Secondary Market |
| title_sort | steinhoff corporate scandal and the protection of investors who purchased shares on the secondary market |
| topic | Shareholder losses civil liability under the Companies Act securities fraud shareholder class actions market abuse reflective loss |
| url | https://perjournal.co.za/article/view/14876 |
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