The Australian Institute of Company Directors recently appeared before the Senate Economics Legislation Committee discussing the issue of company member registers.
Senator Nick Xenophon has put forward a Private Senators’ Bill that seeks to amend s 169 of the Corporations Act 2001 to require companies to include email addresses of members on the register. Senator Xenophon’s proposal is partly a response to recent issues facing CPA Australia, where members seeking to use the details on the company’s register have argued that access to email lists would facilitate communication with other members at lower cost.
In its submission on the Corporations Amendment (Modernisation of Member Registration) Bill 2017, the AICD recognised that the ability to communicate with company members about matters relevant to their interests and rights is integral to good governance.
As such, the AICD’s submission supports the intent of the Bill as it relates to facilitating communication between members for a proper purpose relevant to their rights and interests.
The AICD is also a strong supporter of amending the Corporations Act to promote technology neutrality including in the distribution of notices and material to members. We have provided submissions to Treasury on this matter.
However, the AICD raised with the Committee several issues that would need to be considered and argued that change would be best achieved by a comprehensive and holistic review of technology neutrality across the Act.
We noted that s 169 of the Corporations Act applies to all companies in Australia, from small proprietary companies, companies limited by guarantee through to unlisted and listed public companies. The requirement to maintain the member register in compliance with s 169 is a mandatory obligation on companies, and failure to maintain the register is a strict liability offence.
Because of the Bill’s impact across all company types and sizes and the strict liability nature of the offence, the AICD argued that it is particularly important that practical, compliance and legal impacts of the proposed change are carefully considered.
This strict liability offence would create problems for companies who have trouble obtaining member or shareholder email addresses, or ensuring they are current and up to date. While the AICD itself has a high percentage of member emails, this is not the case for all organisations, including many on which our members sit as directors.
As an example, in its submission to the Committee, the Australian Shareholders Association noted it had no email addresses for approximately 10 per cent of their own members. Another submission from AMP noted that despite the organisation’s “ongoing significant efforts to increase shareholder engagement via electronic means, we hold email address details for only 34 per cent of our shareholders”. This is despite AMP running campaigns over the last 10 years to increase the number of email addresses it holds, at considerable expense.
Furthermore, Privacy Act considerations mean that existing email addresses held by a company would likely not be able to be assigned to the register without express consent.
It is for practical reasons such as these that the lack of a transition process in the Bill is problematic. For companies with large shareholder or membership bases, the cost of attempting to comply with the requirement would be substantial, and a phased approach to implementation would be important.
Separately, adding emails to member registers has the potential to exacerbate existing privacy concerns and potential misuse of members’ personal information, including exposing member or shareholder bases to new risks of cyber fraud or targeted email scams.
The AICD suggested that the Committee might consider whether there are better ways of balancing these concerns with the critical need to facilitate communication between and to members of companies for a proper purpose.
This could include reviewing the construction of proper purposes, or providing distribution options (such as independent mailing houses) for sending information to members, rather than providing copies of the register to members or third parties.