The High Court case addressed the “proper purpose” test under the Companies Act (CA) 2006 for granting a non-member access to a company’s register of members, specifically evaluating whether a purely commercial goal in seeking to profit from an arbitrage opportunity, conducted through a discounted mini-tender offer, constituted an abuse of the statutory right.

Facts:

Litani LLC, a member of Aviva Plc, requested access to Aviva’s register of members under Section 116 of the CA 2006, on 30 September 2024. Section 116(4) requires a member to state the purpose of the inspection, and the company may refuse such a request if it believes that the motive is not for a “proper purpose”. Aviva refused, arguing that Litani’s stated purpose – specifically to make a “mini-tender offer” to certain retail shareholders to purchase their shares at a discounted price, which it would then aggregate and sell on the stock market – was too vague.

Aviva applied to the Court on 4 October 2024 under Section 117 of the CA 2006, arguing that the request was not sought for a “proper purpose” because: 1) it would subject the majority of members who would not receive an offer to private data disclosure risks by a third party (i.e., an “unknown quantity”); 2) it would be an “unwelcome inconvenience” for those who receive but decline the offer; 3) accepting shareholders would be economically disadvantaged by the discount with no compensating practical advantage, as full market value could be obtained elsewhere; and 4) there were concerns about the safety and convenience of Litani’s service, given its lack of transparency and concerns expressed by the US Securities and Exchange Commission (SEC) regarding mini-tender offers.

Decision:

The High Court dismissed Aviva’s application as it failed to satisfy the Court that access to the register was not sought for a proper purpose. Litani’s proposed mini-tender offer, despite being economically disadvantageous to shareholders relative to Aviva’s services, did not constitute commercial exploitation, oppression, or immorality sufficient to deem the purpose improper.

The Court held that it is the shareholders’ responsibility to assess the value of the offer and compare it with alternatives. The Court’s role is not to substitute its own commercial judgement or to “eliminate all but the most economically advantageous commercial choice”. The offer was therefore not explicitly unlawful, misleading, or inherently improper. Its terms included clear disclosure of the discount and a 14-day cooling-off period, which placed the conduct squarely within the limits of “commercially acceptable” practices.

The Court distinguished Litani’s offer from the objectionable conduct in Fox-Davies v Burberry Plc. In Burberry, the tracing agent was seeking to “extract” a fee before revealing the value of the asset, potentially exploiting a shareholder’s ignorance. Litani’s offer, conversely, provided full disclosure of the discount and market price upfront. This transparency meant that the shareholders were not being held commercially to “ransom” and were making an informed, deliberate choice, even if that choice was economically poor.

Implications:

This case has significant implications for how companies manage their share registers, how courts interpret “proper purpose,” and the boundary between acceptable competition and unacceptable exploitation. The case establishes a high threshold for a company to prevent access to its register based on a commercial objective. A request is not deemed to be improper merely because the purpose is to make a profit. The Court will only intervene if the commercial purpose involves an element of “genuinely exploitative or unscrupulous” conduct that is “beyond the pale”. Transparency is also key, as the conduct stood in stark contrast to the opaque, high-pressure, high-commission conduct that the CoA rejected in Burberry.

The case reinforces the principle that the Court is not a commercial regulator or a protector of shareholders from poor economic decisions. If a proposal is lawful and adequately disclosed, the Court will generally allow the market and the shareholder to decide its success. This avoids the Court being drawn into complex, costly, and granular “mini-trials” about the desirability of every commercial proposition.