When is a request to view a company’s register of members ‘for a proper purpose’?
Pursuant to section 116 of the Companies Act 2006 (the “Act”), any person may inspect a company’s register of members on payment of any relevant… Read more
Pursuant to section 116 of the Companies Act 2006 (the “Act”), any person may inspect a company’s register of members on payment of any relevant fee, provided they first submit a request containing prescribed information to the company, including the purpose for which the information is to be used.
Upon receipt of a request, the company must, within five working days, either comply with the request or refer the request to court if the company believes the request is not made for a proper purpose.
Section 119 of the Act provides that, in relation to a request made under section 116, it is a criminal offence if someone knowingly or recklessly makes a statement that is materially misleading, false or deceptive, or discloses information obtained or fails to prevent the disclosure of that information knowing or having reason to suspect that the recipient may use the information for an improper purpose.
The Act does not provide guidance on what is meant by ‘proper purpose’.
In Fox-Davies v Burberry PLC  EWCA Civ 1129, the court gave consideration to the meaning of this phrase. Here, an individual, who ran a tracing agency that located lost members of public quoted companies, submitted a request to inspect a company’s register, citing his reason as being “to assist and allow shareholders who may otherwise be unaware of their entitlements to reassert ownership or recover the benefit of their property.” The individual was not a member of the company.
In response, the company referred the request to court in order to obtain relief from disclosing the register to the applicant, arguing that his purpose was not proper, as it was not clear who would have access to the shareholders’ personal information or how it would be kept confidential. It is worth noting that the company had already engaged a tracing agent itself in order to assist with locating lost members.
At first instance, the High Court held that the company did not have to comply with the request because it was both invalid, as it did not identify the names and addresses of the persons to whom the information would be disclosed (as required by section 116(4)(d)) and made for an improper purpose, as the stated purpose was not the real purpose of the request (the real purpose being to extract a commission or fee from lost members). The individual appealed the decision.
The Court of Appeal dismissed the appeal and upheld the Registrar’s decision that the request was invalid and for an improper purpose (though their reasoning as to why the purpose was improper differed). In doing so, the Court gave the following guidance in relation to the meaning of ‘proper purpose’:
- the proper purpose test is objective and the onus is on the company to show that the purpose is improper;
- there is no requirement that a request be in the interests of shareholders – this is not specified in the Act and there is no reason why it should be implied;
- the court can look beyond the purpose stated in the request and consider surrounding circumstances that may be relevant; and
- the test is the same whether a request is submitted by a member or a non-member.
If a company receives a section 116 request, it should carefully ensure it meets all the requirements of section 116(4) and closely examine the reasoning given by the applicant. If there is doubt as to whether the stated purpose is proper, the company should seek advice as to the merits of referring the request to court.