What does the Act Say?
S 116-119 now make inspection or requesting a copy of a share register (by members or others) subject to a “proper purpose” test.
S 116, anyone requesting access to a share register needs to provide details of their name, address and organisation and the purpose for which they require the register, as well as contact details of anyone to whom the information will be disclosed.
S 117, companies required to provide a copy or allow inspection within 5 days of receipt of the request or else they must apply to the Court on the grounds that the request is not for a proper purpose.
No definition given of “proper purpose” although ICSA Guidelines do give some examples of proper and improper purposes.
This is effective from the date of submission of the company’s annual return following 30 September 2007.
P roper Purposes
Checking own personal details or that of a deceased shareholder
Contacting fellow shareholders about company related maters eg. exercise of rights, requisitioning meetings
Regulatory or statutory requests
Takeovers / bidder having access to register before bid announced
Register analysis for statistical research
Improper Purposes
Identity Fraud
Threaten harass or intimidate members
Credit or identity checks
Commercial mailings
The Practicalities
5 day turn around is very tight window for companies to comply
Need to take care not to infringe member’s data protection rights
Recommend that conditions are imposed when register provided for research purposes for example that information not passed on to third parties or shareholders contacted directly.
Who is going to admit they require the information for an improper purpose?
Which company will be the first to oppose a request in the Courts?
What Prudential is Doing
Wait and see when we start to receive requests.
Preparing response letter setting out conditions for granting access to the share register
Will exercise rights under S 116 to request details of all individuals to whom the information might be passed
Unlikely to go to Court unless there is a very clear “improper purpose”
Information Rights - What does the Act say?
New rights given to underlying beneficial shareholders under s145 and 146
Registered shareholder may nominate another to receive information rights (ie to receive a copy of all communications the Company sends to its members generally, including Annual Report and Accounts)
Person being nominated must first request the shareholder to make the nomination and provide an address. Otherwise company can supply documents by means of website.
S 148 gives company right to enquire on an annual basis if nominated person wishes to continue the receive information rights.
These sections came into effect on 1 October 2007 and nominees are being given until the end of the year to develop their lists of nominated persons, presumably in time for next year’s AGM season.
THE PRACTICAL IMPLICATIONS
How many copies will be required for “nominated persons” in future?
Companies need sufficient notice from nominee shareholders in order to print enough copies and organise distribution. How long is reasonable notice?
Will nominees send multiple nomination to companies or will they send one notification in a convenient spreadsheet covering all the underlying beneficiaries requiring copy documents?
Need a mechanism for maintaining “list” of “nominated persons” presumably via the registrars.
Need to consider timing and logistics for managing this list and removing those who no longer require shareholder information
What Prudential is Doing
S 150 (4) states that if a company’s articles specifies an entitlement date to receive documents or information, (eg a record date) then the company needs not send documents or information to persons whose nomination is received after that date. We shall take advantage of this section.
We are working with our registrars to specify the format in which we expect to receive nominations from our nominees. The registrars are working together to develop a consistent format across the industry.
We shall work with nominees to determine in advance of printing how many additional copies might be needed. Preliminary indications are that relatively few nominees and their underlying beneficiaries will take advantage of these sections, but it is still an “unknown”.
We will develop a process to ensure that these lists are actively managed and cleansed on a regular basis, so that we only send hard copies to those who really want them.
