25 November 2016 by

There must be a ‘purpose’ before providing shareholders’ personal information

Any person can make a request to a company to inspect or be given a copy of a company’s register of shareholders or members.  This register will include the names and addresses of the shareholders.

Within 5 working days of receiving the request, a company must either comply with the request and provide its shareholders details or apply to the court for permission not to provide the information. A company cannot just ignore requests made. Non-compliance can result in fines against the company and the directors.

Since 2006, if a company decides to apply to the court, then in deciding whether or not to order that the information is provided, the court will now consider what is called the “proper purpose test”.

This test changed the law and was needed to help protect shareholders from those who were seeking their personal information for dubious reasons.  For example before the change in the law, animal rights activists requested personal shareholder information from Huntingdon Life Sciences plc. The activists then used this personal information to harass the Life Science’s shareholders in an attempt to close down the company.

Now, when making a request for the company’s register of shareholders, the applicant must, amongst other things, set out the specific purpose(s) for which the information provided will be used. The court can then use this information to decide whether the request for the information has a “proper purpose”.  If there is no proper purpose then the company will not have to provide the information.

The tricky part is that the legislation itself does not actually define what a ‘proper purpose’ is and, as such, it is for the court to decide each case on an individual basis – this creates uncertainty.

Our advice to our clients concerned about whether to provide information requested is to put in place procedures for dealing with such requests quickly, given the stringent 5 working day time limit and the consequences of missing the deadline.  They should then quickly contact a solicitor for advice on whether, given the facts of their particular case, the ‘proper purpose test’ has been passed and whether the information requested must be provided.

If you require further advice on this matter or other company law issues contact Sej Lamba on 020 7288 5756 or by email at SehajLamba@boltburdon.co.uk .

You can also contact one of our other solicitors in the Corporate and Commercial team here.

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