November 14, 2017
Professionals | QLD
If you are a director of a company you have rights to access certain information about the operation and financial position of the company. These rights arise under the Corporations Act 2001 (Cth), any Shareholders Agreement for the company or a Deed of Access and Indemnity.
What rights do directors have to access company information?
General rights of access
A director has the right to obtain all “internal” information (i.e. books and financial records) regarding the company’s affairs to enable that director to carry out his or her functions as a director. If a director holds shares in the company, they also have the rights of a shareholder.
Directors may inspect, and make copies of, the company’s books at all reasonable times for the purposes of a legal proceeding to which they are a party or a legal proceeding which they expect to bring or have brought against them. This right also applies to former directors for up to 7 years after they ceased to be a director.
“Books” is broadly defined, and includes any document, register or other record of information.
Company financial records
Directors of a company have the right to access the financial records of that company at all reasonable times. A director may apply for a court order to authorise another person to inspect or make copies of the financial records on their behalf.
“Financial records” include, among other things, invoices, receipts, orders for the payment of money and cheques as well as working papers and other documents needed to explain financial statements.
Modified rights of access in company documents
The company constitution, any Shareholders Agreement or/or a Deed of Access and Indemnity may specify additional rights, procedures or time frames for accessing information. It is worth reviewing the constituent documents before agreeing to be a director (if becoming a director after the company is registered) or when the documents have been prepared (if becoming a director on registration of the company).
A Deed of Access and Indemnity should set out what information the directors have access to (e.g. board and committee papers, presentations) and how this information may be used. It should also set out the procedure to be followed when a director is requesting company information.
rights of directors if the company is in receivership
When a company goes into receivership, a “managing controller” is appointed to manage the property of the company and make it available for distribution to the company’s creditors. The managing controller has ongoing obligations to maintain financial records to explain any transactions the he or she enters into. A director of the company may inspect these records.
It may be possible for this access to be refused if it would interfere with the proper exercise of the functions of the managing controller.
what if access to the company information is denied?
Practically speaking, your first action should you wish to obtain access to company information would be to approach the chairman, the board or the CEO of the company.
If you continue to be refused access, you should seek legal advice before commencing legal proceedings against the company or its directors.
As a last resort, you may apply to the courts to resolve the dispute. A court with federal jurisdiction may make an order compelling any person to permit the inspection of any book or supply a copy of any book of the company if that person is refusing to do so in contravention of the Corporations Act 2001 (Cth).
how mcinnes wilson lawyers can help
- We can assist with drafting or amending a company’s constitution – our application form to update a company’s constitution is available here.
- We can prepare Deeds of Access and Indemnity for directors to ensure adequate access to information – our application form can be accessed here.
- We can also assist with drafting Shareholders Agreements to govern the company and the obligations and rights of the directors and shareholders – our application form is available here.
- We can advise you on your rights of access to information as a director and the company’s obligations to permit access to company information.