What are the rights of members in requesting information? Section 247A of the Corporations Act provides a statutory code for members in obtaining information from their company in appropriate circumstances.
Of course, members are entitled to certain information (annual accounts, annual reports etc) under the Act, but section 247A provides a statutory code enabling members to obtain additional information so that they can decide, for example, whether they wish to pursue an action against directors for breach of duties or whether, they wish to ask the company to pursue certain initiatives in appropriate circumstances.
Other provisions of the legislation enable members to obtain information about members of the company, for example, to see if they would support a particular course of action that some members wish to pursue against others (including directors).
Two cases, both reported in the CCH Company Law Cases, and both from the Supreme Court of Western Australia, raise interesting and different issues in relation to this right and are worthy of comment.
In Caveat Pty Ltd v Baillie ((2003) 21 ACLC 42), the issue was what steps a member could force a company to take in order to inspect information opened up to him as a result of a court order under section 247A.
The Master of the Supreme Court of Western Australia held, that once a member had obtained an order to inspect under the particular provision, that member was free to go through the company's books without restriction subject only to the constraints contained in section 247B. This provides that the court may limit the range of inspection in particular circumstances (not relevant in this case). On this occasion the company sought an order from the court trying to restrict what the members could examine. However, the court said that if particular members showed they were acting in good faith, then the court would not interfere with their rights.
The Master of the Supreme Court, further noted that an order under section 247A "allows the court, when certain conditions are satisfied, to make orders allowing [wide scale] inspection. Once the order is made the successful [member] is, to all intents and purposes, placed in the same position as the company's directors ..." (para 10).
In refusing the application to restrict the investigation, the Master referred in particular to earlier cases such as Re Claremont Petroleum NL (No 2) ((1990) 8 ACLC 548). In this case McPherson J provided some degree of conservatism in evaluating these particular issues. However, that decision was based on the earlier provisions of the Corporations Code (of Queensland) which, Master Sanderson, in this case, believed was not relevant because of language of that statute are not consistent with the current provisions. He added these interesting comments in evaluating the current section:
"What section 247A envisages is inspection by [a member] of the 'books' of companies. The section does not anticipate the company taking any positive steps to obtain documents to which it might be entitled. In this respect there is a clear distinction to be drawn between a right to inspect under section 247A and an obligation on the party giving discovery. (At para 14)
Discovery is an order of the court in relation to evidence that is to be produced as a result of litigation. In the context of section 247A, the provision, in the view of the court, enabled the particular member to go through the books of the company with far greater freedom than might otherwise apply.
If the relevant information was not in the books of the company then the particular member would not be entitled to obtain a copy of other information that might be available to the member if litigation proceeded and discovery (that is court discovery) was later ordered. The section did not anticipate that the company would take any positive steps to obtain documents to which it might have been entitled (and thus present them to the member). The company was only obliged to disclose to the member the information that was within its control.
The second case which again gives a reasonably generous interpretation to a member is Westgold Resources NL v Precious Metals Australia Ltd ((2003) 21 ACLC 204). This case is again reported in the CCH Company Law Reports.
Westgold was a shareholder of Precious Metals. Westgold wished to communicate with former members of the company who had purchased shares in Precious Metals in reliance on information contained in one or more of three prospectuses issued by the company, with a view to enlisting their support in a proposed class action against the company and its directors for breaches of the Corporations Act .
Westgold sought access to the share registry on specified dates. The company was willing to provide Westgold with lists of the shareholders on three specified dates. However, those lists would contain only shareholder names and the balances of the shareholdings on those dates and would not include the addresses of the shareholders.
Westgold contended that section 167(7) of the Corporations Act required the company to keep, as part of its register of former members, all the "details" required to be kept by section 169 when the person was a member of the company, which included the addresses of former members.
Westgold sought relief under section 1303, compelling supply of a copy of the registers containing addresses of former members. As well as declaratory relief, the company sought an interlocutory injunction pursuant to sections 1324(4) and 177 of the Act to restrain Westgold from using the information to contact or send material inviting former members to express an interest in, or to join Westgold in, the proposed class action.
No evidence was given about the nature of the claim or claims the subject of the proposed class action, or how any interests which the former shareholders might have had in the past could have survived the sale or disposition of their respective shareholdings.
The court held that under section 169(7) of the Corporations Act the company was required to keep a register of its former shareholders and to include in that register the last known address and other details of the shareholder as recorded. Consequently Westgold was entitled to a declaration that the relevant share register should include those details.
However, the court held that Westgold was not entitled to a copy of the share registers of the company. The legislation did not require a company to keep "live" a register of every member of the company over the last few years. While information relating to former members whose names and details had been recorded in the company's register pursuant to section 169(7), this information should not be directly provided to an applicant. The court agreed it was still possible to argue that the information about those shareholders might be useful in vindicating a claim brought by members in relation to actions based on oppression or a statutory derivative action - but on the facts of this case those rights did not seem to be a relevant issue. In these circumstances the injunction was felt to be appropriate.
These two decisions illustrate, although the results in both cases did not result in members getting everything they wanted, that shareholders' rights are being given a greater priority both under the legislation and by a generous interpretation, in most circumstances, of the cases.
The purpose of this database is to provide a full-text record of all articles that have appeared in the CDJ since February 1997. It is aimed to assist in the research and reference process. The database has a full-text index and will enable articles to be easily retrieved.It should be noted that information contained in this database is in pre-publication format only - IT IS NOT THE FINAL PRINTED VERSION OF THE CDJ - therefore there might be slight discrepancies between the contents of this database and the printed CDJ.
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