Companies and managed investment schemes have always been required to keep a register of their members and to provide a copy of the register to anyone who requests it. While access to these registers facilitates good corporate governance and ensures transparency, some entities are misusing the information to make unsolicited off market share offers to vulnerable investors at less than market value. Other issues have also arisen in regard to the fees charged for access to these registers and the format in which companies and responsible entities provide copies of their registers. Earlier this year the Australian Government released a proposals paper to reform the current laws regulating access to company and scheme registers.

Current law

Chapter 2C of the Corporations Act 2001 (Cth) deals with the maintenance of and access to registers. All companies and registered schemes must maintain a register of members. While there are some exceptions, the register must generally include:

• an index of members’ names (if there are more than 50 members)
• the date on which every allotment of shares/units takes place
• the number of shares/units in each allotment
• the shares/units held by each member and the price of those shares/units
• the share numbers or share certificate numbers of the shares (if any)
• the amount paid on the shares/units
• whether the shares/units are fully paid
• the amount unpaid on the shares/units (if any), and
• the names and details of anyone who ceased being a member and the date they ceased within the last seven years.

A company or responsible entity on behalf of the scheme must allow anyone to inspect the register of members and must provide a copy of the register within seven days of any request and paying the prescribed fee.

Use of information on registers

A person is not allowed to use the information obtained from registers to contact members or disclose information likely to be used to contact members unless they have company approval or use of the information is relevant to the holding of the member’s interests or the exercise of the rights attaching to them.

While the company or responsible entity may attempt to obtain an undertaking from the applicant that it agrees not to misuse the information, there is not an actual way to prevent the information from being misused and if the applicant declines to provide the undertaking the company or responsible entity must still provide a copy of the register.

Fees for access to registers

A fee may be charged to non members to inspect the register and a fee may be charged to any person for a copy of the register. The Corporations Regulations 2001 (Cth) prescribe the fees that can be charged to inspect or obtain a copy of a register. While fees are listed for registers that are not kept electronically, there is no explicit fee with respect to accessing electronic registers. Instead, the regulations state that the fee must be reasonable and must not exceed the marginal cost of the company of providing an inspection or a copy. There has been much debate as to what constitutes marginal cost.

The concept of marginal cost was discussed in Direct Share Purchasing Corporation Pty Ltd v AXA Asia Pacific Holding Limited (the AXA case) and was considered to be very difficult and exceedingly expensive to calculate in practice. In this case, Justice Finkelstein focused primarily on what would be considered a reasonable amount (rather than what the marginal cost is) to provide a copy of a register of members, holding that $250 was a reasonable fee. While this decision was confirmed in the Federal Court, many companies argue that this amount does not necessarily reflect the cost of producing a copy of the register.

Format for copies of registers

While a person can obtain a hard copy of the register, issues arise when the register is electronic. If requested, the company or responsible entity must provide an electronic copy of the register. There is, however, no requirement for the copy to be provided in the format requested by the applicant enabling the company or responsible entity to legally provide a copy in a format that is difficult to use. While this may be advantageous in

situations where a person may be likely to misuse the information, the Court in the AXA case disapproved of this practice.

Proposed reforms

A proper purpose test for access to registers

In response to the continued practice of some entities making undervalued and unsolicited off market offers to vulnerable investors, the Australian Government has proposed a proper purpose test for people seeking a copy of a register. Rather than allowing access to simply anyone and risking the misuse of shareholder/unitholder information, this test should limit access to people who are genuinely entitled to the information.

Essentially, a person would have to include in their request:

• their name and address
• the purpose for which the information will be used, and
• whether the information will be disclosed to a third party.

It is proposed that the Corporations Regulations be amended to include an example list of what would constitute an improper purpose. If the company or responsible entity decides the applicant’s purpose is improper, the applicant will have 20 days to apply to a court for review of the decision. Among other things, it would be considered improper to use the information from the register to make an unsolicited offer to purchase securities other than for a takeover or to seek shareholder/unitholder participation in a class action. It would also be an offence to knowingly or recklessly make a statement on the application that is false, misleading or deceptive.

The use of a proper purpose test should reduce costs to companies in dealing with requests as well as discourage people from seeking access for improper purposes.

Three tiered fee structure

To overcome the complexities with the current marginal costs test, the Government has proposed to eliminate this element and impose a three tiered fee structure based on the number of members in the company or scheme. The fee base would be $250 for a copy of the register with fewer than 5,000 members. For a company with 5,000 to 20,000 members, an additional fee of five cents per member would be payable. For a company or scheme with over 20,000 members, a $1,000 fee would be payable plus one cent for each additional member over 20,000. Finally, a copy of the register with 500,000 members would be $5,800.

Format for copies of registers

It is proposed that a register should be provided in the format requested by the applicant and for the Corporations Regulations to prescribe a number of different formats currently used in the business community. Also, if registers are kept electronically, an applicant will be able to view them on computer rather than asking for a hard copy.

Further information

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