Refusing access to the register of members
Burberry Group plc has succeeded in an application to court for a direction not to comply with a request for a copy of its register of members, as the request was found to have been made for an improper purpose. This is only the second case where the proper purpose test for access to the register of members, introduced by the Companies Act 2006, has been considered by the courts.
The Companies Act provides that a company's register of members must be available for inspection by members and by the public, and that copies can be requested. A prescribed fee is payable for copies, and for inspection by someone who is not a member of the company. In order to exercise these rights, a request must be made to the company containing specified information, including whether the information is to be disclosed to anyone else and the purpose for which the information is to be used by the person making the request or anyone to whom he discloses the information.
When a company receives the request, it must within five working days either comply with the request or make an application to the court for a direction not to comply. The court must make such a direction if it is satisfied that the inspection or copy of the register is not sought for a proper purpose. The Institute of Chartered Secretaries and Administrators (ICSA) has issued guidance on the proper person test, which was considered useful, but not definitive, by the Court of Appeal in the first case to consider this issue (Burry & Knight Ltd v Knight).
Burberry Group received a request for a copy of its register of members from Mr Fox-Davies. His stated purpose was to "assist and allow shareholders who may otherwise be unaware of their entitlements to reassert ownership or recover benefit of their property" and he indicated that information would be shared with a company incorporated in Gibraltar called Interum, which would use it for the same purpose.
It became clear that Mr Fox-Davies passed information to Interum, which collated it to identify lost company members. But then this information was passed on to other companies and individuals to trace the lost members. Mr Fox-Davies had not identified these "specialist researchers" in his request for access to the register of members.
Burberry Group was not happy with the request, its major concern being that it was not clear who would be given access to personal information relating to shareholders, there was no evidence of how the information would be kept confidential and no protection for members in respect of potential fraud or other wrong-doing.
In addition, Burberry Group had already engaged a tracing agent to help it re-establish contact with its "lost members" and it alleged that "a nakedly commercial enterprise" such as that run by Mr Fox-Davies was not in the interests of shareholders when a secure and controlled tracing company was already doing the same job.
Mr Fox-Davies contended that he had the same purpose in accessing the register of members as the tracing agent already engaged by the company, and that this purpose was approved by the company.
The court referred to the ICSA guidance, which considers it an improper purpose if the request is made by an agency "specialising in identifying and recovering unclaimed assets for their own commercial gain by then contracting and extracting commission or fees from the beneficiaries… where the company is not satisfied that such activity is in the interests of shareholders". The judge thought that this provided a working guide for a company.
In this case, the judge concluded that the interests of Burberry Group shareholders would not be advanced because:
- there may be confusion if two separate tracing agencies contacted the same lost member;
- different terms and conditions would apply to a lost member depending on which tracing agency contacted him first, with one agency's terms being less beneficial to the member;
- Mr Fox-Davies was based out of the jurisdiction;
- his commercial practice as a tracing agent was in doubt or unknown; and
- nothing was known about his sub-contracted "specialist researchers".
In addition to deciding that Mr Fox-Davies did not have a proper purpose in requesting access to Burberry Group's register of members, the court also addressed a preliminary argument that the company was out of time in making its application to the court for a direction not to comply with his request.
Mr Fox-Davies made two requests to the company, one in March 2013 and one in April. It was accepted that Burberry Group had made its application to court within the five working day time limit of the second request. However, Mr Fox-Davies argued that it was out of time as it had not made its application within five working days of the first request.
The court decided that the five day time limit did not start to run on receipt of the March request, as the request did not comply with the statutory requirement to state the names and addresses of those with whom Mr Fox-Davies was going to share the information.
Companies should however note that the five day time limit is strict, and the court has no discretion to waive or extend it. It is important that companies have procedures in place to respond promptly when they receive a request for access to their register of members.
This case might also prompt companies to consider engaging a tracing agent to help them re-establish contact with lost members, if they have not already done so. The company can then find a tracing agent with whom it is happy to work and this is likely to help in persuading the court that it should not be required to pass information to other tracing agents.