For many commercial and not for profit organisations, ultimate power lies with their members, since members can attend and vote at general meetings to change the organisation’s rule book and appoint new members of the board. For that reason, UK law includes rules and regulations about keeping up to date registers of members that are open to inspection.
The Companies Act 2006 sets out specific rules requiring companies to keep a register of members. These must be available for inspection by any company member or, subject to the payment of a prescribed fee, to any member of the public. Anyone making a request to access the register of members must give certain details to the company, including the purpose for which the information is to be used. Upon receipt of a request, a company then has 5 working days to allow inspection, or if it believes the request is not for a proper purpose, to refer the request to the court, who will determine whether or not access should be granted under section 117 of the Act based on whether the request has been made for a proper purpose or not.
The Act does not define what is meant by “proper purpose” but the Court of Appeal has given some useful guidance. The Court of Appeal made the following observations:
- The Act reflects a strong presumption in favour of members for transparency. The onus is therefore on the company to satisfy the court that a request is for an improper purpose.
- The words “proper purpose” under section 117 should be given their “ordinary, natural meaning”. For a member, proper purpose ought generally relate to the member’s interest in that capacity and to the exercise of shareholder rights.
- Whilst it was not possible to provide an exhaustive definition of what is proper purpose, the courts could have regard to a guidance note from the Institute of Chartered Secretaries and Administrators (ICSA) which gives examples of proper and improper purpose, although the guidance is non-binding.
- Where there are multiple purposes (some proper and some improper), a proper purpose is not necessarily tainted by being coupled with an improper purpose.The right approach is to read the words “a proper purpose” in section 117 as including “proper purposes” where there is more than one of them. Minor additional purposes of no consequence can be disregarded as de minimis.
- The court can grant conditional access. In one case, a member was permitted to contact the other members via the company, whereby a letter would be drafted and agreed between the member and the company’s solicitors and this would then be forwarded by the company to other members.
Perhaps surprisingly, CIO records are less accessible. Membership records are always accessible by members and trustees, but others may only access the members register if the CIO is being wound up, and they are chasing for a contribution of payment of an outstanding debt from the members. (Paragraph 7 of Schedule 1 to the Charitable Incorporated Organisations (General) Regulations 2012).