Register Of Members: Court Of Appeal Guidance On 'Proper Purpose'

Author:Ms Elizabeth McClenan and Tanya Shillingford
Profession:Goodman Derrick LLP
 
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In Burry & Knight Limited & Another v Knight [2014] EWCA Civ 604 the Court of Appeal considered, for the first time, the prevention of access to a company's register of members under section 117 of the Companies Act 2006.

Background

Prior to the Companies Act 2006 ("CA 2006"), it was easy to identify the members of a company. Any person could pay a fee to obtain a copy of the register of members, and a list of members would in any event be included on the company's annual returns filed at Companies House. This level of transparency, however, was open to abuse. For instance, there were incidents where animal rights activists used the register of members to harass and intimidate members of companies they were seeking to close down.

Aiming to safeguard against the potential for abuse, the CA 2006 has modified the right to inspect a copy of the register of members of a company. It is still possible for any person to request access to the register (upon payment of the proper fee, of course) but sections 116 and 117 CA 2006 introduce a test to determine whether the request to inspect the register is made for a 'proper purpose'.

The 'Proper Purpose' Test

Anyone wishing to access the register of members must submit a request to the company stating, amongst other details, the purpose of the request. The purpose must be 'proper' within the meaning of section 116 CA 2006. If the request is not 'proper', the company may refuse to provide access to the register and apply to the court for a 'no access order' under section 117 CA 2006.

Crucially, a company must either provide access to the register or apply to the court for a 'no access order' within 5 working days of receiving the request. If the company fails to take any action, a criminal offence is committed by the company and by every officer in default. It is therefore essential to determine quickly whether the purpose is 'proper', and whether there is any basis to apply for a no access order.

What constitutes a 'proper purpose'?

Until recently, the main source of guidance on what constitutes 'proper purpose' was that of the Institute of Chartered Secretaries & Administrators (ICSA). The guidance sets out examples of proper and improper purposes and whilst useful, the guidance is non-exhaustive and non-binding. The judgment of the Court of Appeal in Burry v Knight therefore provides some welcome further guidance as to the approach to be adopted when requesting, or receiving a request, to access the...

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