In a decision which broke new legal ground, the Court of Appeal has upheld the right of two companies to close their membership registers to an ‘obsessed’ shareholder who was intent on airing stale complaints concerning their management.
The case was the first time that Section 117(3) of the Companies Act 2006 had been the subject of analysis by the courts. The provision enables judges to make ‘no access orders’, directing companies not to comply with requests for inspection of their membership registers which are made for ‘improper purposes’.
A shareholder had a number of long-standing complaints concerning the conduct of the companies’ business. He sought access to their membership registers in order to contact shareholders to express his concerns about the past conduct of directors and the proposed method of valuing the companies’ shares.
A registrar of the Companies Court had made a no access order on the basis that the motive for the shareholder’s request was, in part, improper. Although he was properly interested in the valuation of shares, his concerns in that respect were met by the companies agreeing to circulate a letter from him to shareholders.
In challenging that decision, the shareholder argued that he wished to see the membership registers in order to air his legitimate complaints and to vindicate his own integrity. There was no evidence that he wished to harangue his fellow shareholders and certainly not to harass them.
However, in dismissing his appeal, the Court noted that the shareholder’s concerns about alleged irregularities in the companies’ affairs were ‘very stale’. His communication of his various complaints to fellow shareholders would not confer any benefit upon either them or the companies.
He had not acted dishonestly or in bad faith but had become ‘sadly obsessed’ with alleged wrongs which were long in the past and had altogether lost sight of the interests of the companies and their shareholders. The evidence to back his allegations was ‘very thin’ and it was in the circumstances unnecessary to make a finding that his intention was to ‘make mischief’.