You are a director/company secretary of a company. It is Friday morning and you have just been handed a note that came in from an individual requesting access to the company’s register of members. What do (should!) you do?

The general rule in the UK is that a company’s register of members can be inspected by any person (whether they are a shareholder or not) provided that the individual (i) pays a prescribed fee, and (ii) submits a request which contains certain compulsory information as set out under section 116 Companies Act 2006 (section 116 request), including the purpose for which the information accessed is to be used.

In short, your company is not required to comply with a request, and would be directed not to do so, if a court was satisfied that the inspection was not sought for a ‘proper purpose’. However, unless your company obtains an order from the court not to comply with the request, non-compliance would be a criminal offence committed by the company and every officer of the company who is in default.

A company only has five working days to either comply with a section 116 request for access or apply to the court for a no access order. Therefore, it is very important that you consider what procedures you have in place for ascertaining whether a request is being made for a proper purpose or not.

The onus is on the company to show that the purpose is improper. Unhelpfully, the Companies Act 2006 does not define what a 'proper purpose' is. In addition, the Court of Appeal has held that it is not possible to provide an exhaustive definition.

The purpose (and whether or not it is appropriate) has to be assessed objectively looking at the facts and evidence of each request. Reference can be made to the Institute of Chartered Secretaries & Administrators which has published guidance on the proper purpose test, as well as recent case law such as Burry & Knight Limited & Another v Knight (where the intention to identify who the current shareholders were and to write to these shareholders detailing concerns about past conduct of the directors - a concern which had no substance, was deemed an 'improper purpose') or Richard Charles Fox-Davies v Burberry plc (where requests by a commercial tracing agent to view a company's register of shareholders to extract a commission from tracing lost members, was also deemed an 'improper purpose'.)

Lastly, you should be mindful of the following general points raised from case law:

  • the words 'proper purpose' should be given their ordinary, natural meaning;
  • where there are multiple purposes of which some are proper and some are not, a proper purpose is not necessarily tainted by being coupled to an improper purpose;
  • in deciding whether a purpose is proper it may be necessary to look at both the objective and the means of achieving that objective;
  • the test is the same for members and non-members requesting access; and
  • whether a purpose is proper does not depend on whether the request is in the best interest of the shareholders.

Requests to inspect a company’s register of members may be few and far between, however, a clear policy for what your company deems a 'proper purpose' should be in place to avoid any criminal liability arising from a delay whilst you consider the point.