From 13 December 2010, individuals and entities who wish to access a register of a company or registered scheme must now disclose why they want access to the register. Where access is sought for an “improper purpose”, the company or registered scheme may refuse access to the individual or entity.
The new rules apply to all registers kept under Chapter 2C of the Corporations Act 2001 (Cth) including register of members, register of option holders and register of debenture holders.
Application for access to members registers
Under the new rules, an applicant seeking access to a register must apply to the entity and provide a statement regarding why the information is being sought. If the entity believes the information is sought for an “improper purpose”, it may refuse access. It is then up to the applicant to challenge the company in court and prove that the purpose was not an “improper purpose”.
If the entity is mislead on how the register is to be used, a criminal offence is committed. If the register is ultimately used for an “improper purpose”, another criminal offence is committed.
Improper purposes
The new rules aim to prevent access to those individuals and entities who seek shareholder information for inappropriate reasons. Under the current legislation, anyone has a right to inspect a member’s register. This rule has resulted in the common practice by certain entities of offering undervalued and often predatory unsolicited off-market share offers to unwary investors. In addition, shareholders are often angered when their personal information is given out by the company to charities, brokers and market research companies for what can be fairly described as marketing activities.
Under the new rules, “improper purposes” have been defined to include:
- seeking donations from securityholders (such as that by a charity);
- soliciting by a stockbroker;
- gathering information about a securityholder’s personal wealth; and
- making unsolicited offers to purchase securities other than for a d. takeover (i.e. “low-ball” offers).
Fees for access
Other changes include entities being no longer obliged to provide a free print-out of a register if it is kept on a computer database. Instead, the person must inspect the register on-screen (as a delimited text file) or pay for the print-out. Under the new rules, companies are permitted to charge fees in tiers - $250 as the base fee for entities with less than 5,000 members, 5 cents for every member between 5,000 and 19,999 and 1 cent for every member greater than 19,999.
With the introduction of the new rules, companies are now able to screen out and refuse inappropriate access of a member’s register. The new rules apply to requests to access a register made on and after 13 December 2010, however the restrictions on the use of information apply irrespective of whether it was obtained before or after this date.
Alfonso Grillo
Partner
Phone: 61 3 9602 9716
Alfonso_Grillo@tresscox.com.au
Garrick Higgins
Partner
Phone: 61 3 9602 9705
Garrick_Higgins@tresscox.com.au
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