If passed, the Bill will limit access to a register of members for "proper" purposes, and introduce a new three-tiered fee structure.
The rules governing access to registers of members may be about to change dramatically.
The Corporations Amendment (No 1) Bill 2010 aims to eliminate improper uses of registers, particularly "predatory", unsolicited, off-market share offers. At the same time, it will make it easier for a third party to use electronic copies of registers.
The Bill and proposed new Regulations will:
- apply a "proper purpose" test to the right to obtain a copy of a register of members;
- prescribe the fee which can be charged by a company for a person to obtain a copy of a register;
- specify certain format and device mediums in which a copy of an electronic register must be provided; and
- provide that, where a register is maintained electronically, it is to be inspected electronically.
Proper purpose test
At present, a person can get access to a company's register of members without having to indicate why that information is sought. Increasingly, members' contact details are being used for a number of purposes which are considered inappropriate or undesirable, including unsolicited off-market low-value offers to purchase shares.
The Bill will amend the Corporations Act to apply a "proper purpose" test before a person can obtain a copy of the register.
A person wanting a copy of a register will need to tell the company why they want to access the register. Where an applicant has an improper purpose, the company must refuse to provide a copy.
New Regulations will specify a list of improper purposes. The proposed list currently stands as follows:
- the solicitation of a donation from a member of a company;
- the solicitation of a member of a company by a broker;
- gathering information about the personal wealth of a member of a company;
- making an unsolicited off-market offer to purchase securities in a listed company, other than for the purposes of a takeover.
This list can be adjusted over time to reflect market practice.
It will be an offence:
- for a person to use information obtained from the register for an improper purpose; and
- for a person to disclose such information knowing that it is likely to be used for an improper purpose - this will extend to the company providing a copy of the register where it knows it is likely to be used for one of the specified improper purposes.
Fees for copies of the register - proposed tiered fee structure
In 2008, the Federal Court held that a company could charge only $250 for providing a copy of its register of members. Although that decision only applied to one company, it has subsequently been used as a general rule of thumb by many companies.
The Government believes that $250 does not reflect the true cost of the service. Accordingly, it proposes a three-tiered fee structure for obtaining a copy of a register:
- up to 5,000 members - flat fee of $250;
- between 5,000 and 20,000 members - $250 plus $0.05 for each member in excess of 5,000; and
- more than 20,000 members - $1,000 plus $0.01 for each member in excess of 20,000.
Prescribed format for copies of the register
Currently, where a register is kept on a computer and a person asks for an electronic copy, it must be provided in a readable format - of the company's choosing.
Alternatively, a person can ask simply to inspect the register, rather than be given a copy. If the register is electronic, this can require the company to print out a hard copy for the person to inspect.
Neither of these is a particularly optimal procedure:
- companies can effectively restrict the use of a electronic copy by providing it in a form from which the information can't easily be electronically extracted;
- companies are not entitled to charge for the expense of printing out a hard copy of their register for inspection.
The Bill and proposed Regulations will address both these issues.
If a person asks for an electronic copy of a register, the company will have to supply that copy in a readily usable format (specified in the Regulations). The idea of specifying the allowable formats in the Regulations is that the company will not be able to prevent electronic use of the data by providing it in an essentially unreadable form. The same change will also ensure that companies are not be forced to the expense of providing the data in some rare format not specified in the Regulations.
On the other hand, companies will not have to produce a hard copy if the person only wants to inspect the register. The Bill will require a person seeking to inspect an electronic register to inspect the register by computer, unless they wish to apply for a copy of the register.
The Bill was introduced into Parliament on 24 June 2010, but was effectively terminated with the calling of the Federal election. When Parliament recommences following the election, the Bill will need to be reintroduced into the House of Representatives.
If passed by Parliament, the amendments will not be retrospective and will only apply to requests for access or copies of company registers made after commencement of the amendments.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.