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The “proper purpose” for inspection of the register of members by a non-member

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05/05/2015

Under section 116 of the Companies Act 2006 (the Act), any person may request a copy of the company’s register or part of it. The request must contain certain prescribed information, including the purpose for which the information is to be used.

Under section 117 of the Act, a company in receipt of such a request has five working days in which to allow inspection and/or provide a copy of the register or, if it believes the request was not made for a proper purpose, to refer the request to the court. “Proper purpose” is not defined in the Act or any accompanying guidance, leaving the meaning of the term to be interpreted by the courts.

In Burberry Group plc v Fox-Davies [1], Mr Fox Davies requested a copy of the company’s register of members “to assist and allow shareholders who may otherwise be unaware of their entitlements to reassert ownership or recover the benefit of their property”. Mr Fox-Davies was not a member of the company.

Burberry asserted that the request was not a proper one within the meaning of section 117(3) and it applied to court for a direction that it did not need to satisfy Mr Fox-Davies’ request.

The High Court held that a company did not have to comply with a request for inspection or a copy of the register unless it contained all the information required by section 116(4) of the Act, namely:

  • in the case of an individual, his name and address
  • in the case of an organisation, the name and address of an individual responsible for making the request on behalf of the organisation
  • the purpose for which the information is to be used
  • whether the information will be disclosed to any other person and, if so, the information set out above.

“Proper purpose” was to be given its ordinary meaning and courts had

The High Court drew a distinction between applications made by members and applications made by non-members. It described the difference thus:

“a result of a ‘strong presumption’ in favour of shareholder democracy, a policy of corporate transparency and the promotion of good corporate governance the approach of the courts to a request by a member will be that he or she should be granted access where the purpose relates to his or her rights… Where a member of the public makes a request the same principle will not apply”.

The real purpose behind Mr Fox-Davies’ request was consistent with his motivation to extract fees from located shareholders. His interest in finding missing shareholders was a commercial self-interest.

WM comment
A company will only be required to provide a copy of its register of members where the application satisfies all the requirements of the Act.

Whether the applicant has a “proper purpose” will depend on whether it relates to the exercise of a shareholder’s rights or shareholder protection.

Regardless of the outcome of this case, companies should review their procedures for dealing with section 116 requests to ensure that they are able to respond within the statutory five working day period.

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[1] [2015] EWHC 222 (Ch)

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