CIVIL AND COMMERCIAL LITIGATION AND DISPUTE RESOLUTION LAWYERS AND SOLICITORS FOR BRISBANE, THE GOLD COAST, AND THE SUNSHINE COAST, QUEENSLAND
As a shareholder, it is your right to ensure that the company you are invested in is operating transparently and responsibly. If you suspect financial mismanagement or misconduct, such as the misappropriation of assets, excessive compensation for directors, unaccounted dividends, or discrepancies in taxation, you may wish to inspect the company’s books to verify your concerns. However, the law does not grant shareholders an automatic right to access these records.
While shareholders generally lack a statutory right to inspect the company’s books, there are provisions under the Corporations Act 2001 (Cth) that allow access by Court Order in specific circumstances. If there is no express provision in the company’s constitution or shareholder agreement granting access, shareholders can apply to the court under section 247A(1)(a) of the Corporations Act to seek an order allowing inspection of the company’s books.
The court will grant access only if the shareholder demonstrates that the application is made in good faith and for a proper purpose – meaning a purpose related to the legitimate interests of a shareholder.
Obtaining access to company documents can be extremely helpful for a shareholder that is being oppressed – see the Corporate Oppression provisions of the Corporations Act at sections 232 and 233 – or that is otherwise in dispute with the director(s) or members of the company.
Shareholders seeking access must meet certain conditions to satisfy the court. This includes demonstrating that the application is made in good faith and for a proper purpose. Additionally, the onus of proof lies with the applicant, who must show that the concerns raised are genuine and not speculative or contrived.
A significant holding in the company and a longer-term involvement (shareholders with a more substantial stake and a longer duration of ownership will more easily meet this burden).
The court is unlikely to grant access for vague or frivolous purposes, such as:
“Good faith” refers to acting with honesty, sincerity, and without the intent to deceive. It means that any request for information must be made with a genuine belief that it will serve the broader interests of the company and its shareholders. It is not necessarily a high bar.
“Proper purpose” means the inspection request must relate directly to the rights of a shareholder, such as:
Examples where shareholders have successfully sought access include:
While the section of the Act contemplates ‘inspection’ of the company’s books and records, the Court may actually order that copies of the company’s books and records be sent to the shareholder, or an agent on behalf of the shareholder may inspect and photocopy books and records of the company.
Our firm has obtained these orders for clients in previous cases.
Directors have rights to access company records, including statutory rights under the Corporations Act 2001 (Cth).
A current director has ‘more’ or broader rights to company documents than former directors.
Under section 198F(1), a current director has the right to inspect the company’s books (excluding financial records) at reasonable times for specific purposes, such as ongoing or potential legal proceedings.
Financial records are excluded from this section, but section 290 of the Corporations Act if needed for the purposes of financial reporting or legal proceedings.
Section 290 of the Corporations Act specifically contemplates that a director of a company has a right to access any financial records at all reasonable times. On application to the Court by a director, the Court may allow a person to inspect the financial records, and make copies of them, on behalf of the director.
Former directors retain similar rights for up to 7 years after they cease to be a director, including access to financial records for the purpose of a legal proceeding under section 198F(2) of the Corporations Act.
The term “books” under the Corporations Act includes a wide range of documents such as:
Financial records, as defined under the Corporations Act, encompass:
Understanding your rights as a director or shareholder seeking access to company documents is crucial for maintaining transparency and accountability in corporate governance. If you have concerns about the conduct of your company, or a particular director, seeking professional legal advice on the appropriate steps to take can help protect your interests and ensure that your rights are upheld under the law.
Our team of experienced lawyers are available to assist you in navigating these complex legal issues, whether you are a shareholder seeking information or a director needing guidance on your rights and obligations.
Aitken Whyte Lawyers are focused on results. Our lawyers will make sure your rights are protected.
Contact us on 07 3229 4459 for legal advice and representation:
Brisbane
Aitken Whyte Lawyers Brisbane
2/414 Upper Roma Street
Brisbane QLD 4000
