Jonathan Casson
We are often asked the question, particularly around the time of Annual General Meetings, the requirements of a company to provide its members with access to or copies of the Register of Members (“Register”) and, what is considered a proper use of the Register. Often it is the case that members will request a copy of the Register for the purpose of contacting other members to, for example, rally numbers to vote in a certain way on a particular resolution which is to be put forward at the AGM, or to commence a class action against the company, or to use the details to advertise a member's business which is unrelated to the company.
Section 168(1) of the Corporations Act 2001 requires companies and registered schemes to set up and maintain a Register which must contain each member's name and address and the date the member's name was entered on the Register. (This note is confined to Companies limited by Guarantee).
When looking at this issue, Sections 173 to 178 of the Act must be examined.
Section 173
Section 173 of the Act provides a company must allow anyone to inspect the Register or provide a copy of the Register to that member within seven (7) days of the request being made (upon payment of a prescribed fee). Members are entitled to simply inspect the Register without charge: however other people may inspect the Register only on payment of a prescribed fee required by the company.
Section 177
Section 177 (1) of the Act provides that a person must not use the information of a person from a Register to contact or send material to that person or disclose the information knowing that the information is likely to be used to contact or send material to the person.
Of course, the company can agree to the requested use. But that assumes that the company has had regard to the interests of the members when agreeing to that use.
Section 177 (1A) of the Act also allows information contained in the Register to be used if it is for a purpose “relevant to” the member's interests recorded in the Register or the exercise of the member's “rights attached to” those interests.
In considering whether information obtained from a Register has been used in accordance with the Act, the questions that must be addressed are:
- what does “relevant to” mean?; and
- what does “rights attached to” mean?
These questions have in the past been determined on a case by case basis and have, in more recent times, been addressed by the Courts. In deciding whether a particular use of information obtained from a Register is appropriate, consideration must be given to the recent findings of the Courts.
Recent Case Law
The Courts have held the following in relation to the term “relevant to”:
- “relevant to” means “bearing upon, connected with, pertinent to the matter in hand”.
- the use of the information “must have relevance, in that sense, to the act of holding the interest or to the exercise of relevant rights.”
- “the delivery of material concerning candidates of an upcoming office holder election was found to be relevant to the exercise of rights attaching to the interests recorded in the register.”
The Courts have held the following in relation to the term “rights attached to”:
- “a right that is a necessary incident of holding the interest and … the right to participate in a shareholder class action against the company in regards to the circumstances surrounding the purchase of shares (not the mere holding of the shares) was not a right attaching to the interests recorded in the register. Merely because the right to sue depended upon the holding of shares, that the use of the information satisfy the requirement for a ‘and direct connection between the right and the shareholding’”.
- So, for example, using the information to inform others about a class action is not proper use of the information, but using the information to canvass proposed changes to the Constitution or election of directors is proper use.
Privacy
The leading decision in relation to Section 177(1A) of the Act is the decision of the Full Federal Court in the matter of IMF (Australia) Ltd v Sons of Gwalia Ltd (2005) 143 FCR 274. In that matter, Moore J. held that:
“the object of the section [section 177] is to protect the privacy of people whose names can be ascertained from a register to which any member of the public can have access, by limiting the use that may be made of that information.”
The Judge adds that the prohibition In Section 177(1) is consistent with the National Privacy Principles.
Even though that case deals with shareholding, not members of a not-for-profit, it is relevant to all companies.
Information
As noted above, Section 168 (1) prescribes the information that must be recorded in the Register. It does not extend to telephone or facsimile numbers, nor to email addresses, and there is no obligation to record these in the Register.
Use
The use (and therefore the prohibition in Section 177) may be direct or indirect. For example, if the name and address in a Registry was used to search a telephone directory with a view to telephoning a member, that would constitute use of information obtained from the Register.
Penalty
Anyone who breaches Section 177, that is, a person who uses information from a Register for a prohibited purpose, is liable to compensate anyone else who suffers loss or damage because of the breach. In addition, a person who makes a profit as a result of their breach owes a debt to the company and the amount of the debt is the sum of the profit made. In addition, any offence in relation to Section 177 is a strict liability offence, which renders the person in breach liable to a fine and/or imprisonment for three months.
In Summary
- The company can allow use of the Register but it should have regard to the member's rights in giving permission.
- A member who has obtained the Register must only use the Register for, essentially, a relevant purpose in respect of the rights attaching to membership.
- The object of Section 177 is to protect the privacy of members whose information is contained in the Register.
- Take care as to the information in the Register.
- An assessment of particular circumstances as they arise will need to be made on a case by case basis with reference to the Act and relevant Court decisions.
Jonathan Casson is a partner at Holman Webb Lawyers and can be contacted at jonathan.casson@holmanwebb.com.au.
This article was first published in associations forum news, Editions 23: December 2009