New controls on access to share registers received the green
light from Parliament last Thursday.
Although aimed primarily at "low-ball" unsolicited share
offers, the Corporations Amendment (No 1) Bill will also restrict
access to registers for a far wider range of users.
On the other side of the coin, companies will now have considerable
power to control who gets to look at their list of
How the Bill works
At present, anyone can access and obtain information from a
share register, provided they pay the required fee. The only legal
restriction is that they cannot subsequently use the information
for a purpose unrelated to the shareholding (the most obvious
example being the use of the register to create a mailing list for
The Bill completely rewrites those rules.
A person who applies to access the register will have to tell the
company how they intend to use the information.
If that is a "prescribed purpose", the company will be
able to refuse access.
This gives rise to three obvious issues.
What is a "prescribed purpose"?
The Bill doesn't say what a prescribed purpose is.
Instead, the Government will make Regulations to define
"prescribed purpose". It has flagged that the following
are likely candidates:
"specific groups in the community (such as charities)
soliciting donations from shareholders";
"brokers soliciting clients";
"obtaining information about the personal wealth of
"making off-market offers to purchase securities (other
than for a takeover or an unlisted company)".
What happens if the applicant lies?
What's to stop someone lying about why they want access to
the register and then using the information for a different
The Bill creates a double disincentive:
it would be a criminal offence to put a false purpose in the
written application to the company; and
once you'd got the information, it would also be an offence
to use it for a prescribed purpose.
What happens if the applicant doesn't
This is one of the controversial areas of the Bill.
Some critics have claimed that the Bill effectively gives
companies the power to delay providing access to a register, even
for legitimate purposes.
Under this scenario, a company could simply refuse to allow
access by claiming that the applicant wanted the register for a
prescribed purpose. The applicant would then have to take the
company to Court to force the company to open the register.
Defenders of the Bill claim that going to Court in these
circumstances would be a fair and readily speedy process.
The second problem is that the Bill could deter applications
even for legitimate purposes.
The company is the gatekeeper, and so has an interest in
preventing its shareholders from being targeted by people with
dubious objectives. But what about legitimate purposes, such as the
planning process for takeovers and board spills? The Bill
effectively requires those intentions to be notified to the company
as the price of getting access to the register.
At first glance, the solution appears to be simple: an existing
shareholder can apply for access to the register for the legitimate
purpose of checking that his details are right, then use the
register for the (also legitimate) purpose of takeover bid
However, that would appear to be a breach of the new provisions.
As noted above, it is an offence to make a false statement in an
application. It would seem, therefore, that you couldn't apply
for access for one legitimate purpose and then use the register for
a different (but still legitimate) purpose.
When does the Bill start?
The Bill will presumably come into operation after the
Government publishes the regulations which define the
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.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
We discuss whether certain clauses commonly found in ordinary commercial contracts could be considered to be penalties.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).