A Shareholder’s Right to Inspect a Company’s Register: Practical Guide

Summary

• How to request a copy of the register as shareholders and non-members and the proper purpose test.
• How such a request fits in with an investigation into suspected fraud.
• Complying with a request or application for refusal.
• Next steps when faced with non-compliance and how Tenet can help.

Making the request: Elements and proper purpose

Requesting a copy of a company register is a statutory right that may be exercised by any person. Section 116 CA 2006 indicates that members, such as shareholders, may request to inspect and obtain a copy free of charge, while non-members of the company may do so at a prescribed fee.

The request must indicate the identity of the individual or company making the request, details as to whether the information will be disclosed to any other person and the purpose for which the information is sought. The use of the information must be a “proper” purpose, where proper is given its ordinary, natural meaning, generally relating to the member’s interests in their capacity to exercise their rights [1]. Some examples of proper purposes include seeking to verify that member information is correctly updated or registered, seeking general matters relating to the company or their shareholding and seeking to communicate with members about holding a general meeting. In Fox-Davies v Burberry Plc [2017] EWCA Civ 1129, the Court of Appeal found that a proper purpose is not one that is restricted to being “in the interests of shareholders”.

The courts have relied on the Chartered Governance Institute, formerly the Institute of Chartered Secretaries and Administrators (ICSA) Guidance and found that writing to shareholders about a director’s past conduct in pursuit of stale matters, harassing shareholders and extracting fees or commission from previous members were examples of improper purposes. However, there are no blanket bans on requests.

A request to inspect a company register should in theory be a quick way to establish whether or not a party has been registered as a member. Where a party suspects it has fallen victim to investment fraud (i.e. has paid for shares in a company but perhaps has not received a share certificate and cannot make contact with the company), a check of the register of members can usually clarify matters. However, further action may be required where a company has failed to update their register or fails to respond to a request.

Request received: How to respond

A company that has received a request is subject to a statutory obligation under Section 117 CA 2006, and must, within five working days, either comply with the request or apply to the court for the right to refuse on the grounds of improper purpose. The company applying to the court carries the burden to prove the impropriety of the purpose and must notify the individual or company making the request. If the court is satisfied that the request was not made for proper purposes, it will direct the company not to comply and may order the costs for the application to be paid by the party requesting. In Houldsworth Village Management Company Limited v Barton [2019] EWHC 3590 (Ch), the High Court confirmed that the purpose should be identified by the court from the evidence put forward on the balance of probabilities and is not restricted to the purpose indicated in the request. This case further emphasised the importance of the right to access the register.

If the request is refused or not complied with for any reason other than an order from the court, an offence will be committed by the company and every officer of the company who is in default. The court has, however, allowed a “Pelling order” where individuals may request to communicate with the shareholders, but their information remains private.

Request sent: No response or noncompliance

If you have made a request and the company has not complied or made an application to the court within 5 working days, they are in default and there are options available to you. The following recommendations are given on a general basis and are not to be taken as legal advice.

Escalate the request

The first course of action is to escalate the request with the company itself. This may be done by way of legal counsel who may outline and remind the company of their obligations and the consequences of noncompliance, including but not limited to liability for an offence under section 117 CA 2006.

Filing a Complaint with ICO or Companies House

Should you not receive a response or noncompliance continues, the second option would be filing a formal complaint with either the Information Commissioner’s Office within three months of last contact with the noncompliant company or with Companies House directly. While the ICO can punish an organisation, they will not act as a representative on your behalf or award compensation.

Companies House Enforcement Policy and the Economic Crime and Corporate Transparency Act 2023 (‘ECCTA 2023’) provide Companies House with various gatekeeping and custodian powers over the register. Companies House have a compliance framework based on the severity of the noncompliance and may issue financial penalties, pursue civil and criminal cases or refer a case to other agencies to ensure enforcement.

Legal action

You may, alongside escalating and filing complaints, seek legal action against the noncompliant company for enforcement through the court. This is of course not without cost and should be considered when weighing the options best suited to your situation. If you require further information about initiating legal proceedings, please contact Tenet and we can discuss the options best suited to your situation. We strongly recommend seeking professional legal advice when considering judicial remedies.

How Tenet can help

Recent cases emphasise the court’s expectation of strict adherence to the provisions of the CA 2006 when requesting information. In a 2021 Court of Appeal decision, Sir Henry Royce Memorial Foundation v Mark Gregory Hardy [2021] EWHC 714 (Ch), details as to the purpose of a request and information on its disclosure were “inadvertently omitted”. Though, the defendant attempted to rectify the request by offering the missing information, the Court found that the original request could not be rectified and the company was not required to comply. This suggests that missing or omitted information could invalidate a request, meaning appropriate care should be used when making a request.

Requests missing criteria or for purposes that are not tied to the exercise of rights as a member, or based on unsubstantiated allegations will not be granted. If you are seeking information about a company of which you are a member or are a company facing a request which you think is sought for an improper purpose, we are here to help.

Tenet can provide advice and support in obtaining information or dealing with applications for refusal. If your information request has been refused, contact us and we can advise you on next steps.

Conclusion

The courts confirmed there is a strong presumption in favour of granting requests by members to inspect company registers as principles of good corporate governance and transparency. However, the court will not permit requests with missing criteria or for purposes it deems as improper. The clarification on what constitutes a “proper” purpose has provided guidance but in cases of uncertainty, as a company, member or non-member speak with us and we will provide support. If your request is ignored, refused or denied, you may be able to escalate or seek enforcement through legal action.

How can we help?

Should you suspect fraud in a company, such as investor fraud or collective investment scheme fraud, please do not hesitate to get in touch. Our team can offer professional legal advice and help you gather evidence to support your case and provide the vital legal support you need.  To discuss your circumstances and learn more about how we can help please contact the author: Esther Phillips

Esther Phillips is an experienced litigator specialising in fraud and financial crime with expertise across a wide breadth of commercial litigation matters ranging from straightforward breach of contract claims to complex cross-border litigation.

Julie Leduc is a Trainee Solicitor with an E&W law degree from the University of Birmingham Graduate Honours Programme. Prior, she completed both international law and civil law training in Canada and is fully bilingual in English and French.

We hope this article has provided valuable insights and information on A Shareholder’s Right to Inspect a Company’s Register. Tenet is a Fraud Law Firm with an experienced team of specialist fraud and financial crime lawyers, who are dedicated to providing up to date and engaging content on disputes and compliance law relating to fraud and financial crime from a legal perspective.

If you have any specific topics or interests that you would like to see covered in future articles or would like to contribute your own perspectives to our Tenet Fraud Hub, please reach out to Paula Crowther.

Cases referenced in this article:

Burry & Knight Limited & Another v Knight [2014] EWCA Civ 604

Fox-Davies v Burberry Plc [2017] EWCA Civ 1129Houldsworth Village Management Company Limited V Keith Barton [2019] EWHC 3590 (Ch),
Sir Henry Royce Memorial Foundation v Mark Gregory Hardy [2021] EWHC 714 (Ch)

[1] Houldsworth Village Management Company Limited v Barton [2019] EWHC 3590 (Ch)