Directors: Company records; can you access them if you need to? A reminder to directors of the importance of record keeping

If you are a director of a company, or are considering becoming a director of a company, one of the issues you should consider is your ability to access the company’s records.

Introduction

Section 198F (1) of the Corporations Act 2001 (Cth) provides that, as a director, you have the right to access the books of a company at all reasonable times for the purpose of  legal proceedings to which you are a party, or legal proceedings which you are seeking to bring in good faith, or in relation to proceedings that you believe may be brought against  you (Section 198).

The term ‘books’ is broadly defined and includes a document, register or a record of information.  Financial records include invoices, receipts, orders for the payment of money, cheques, working papers and other documents needed to explain financial statements.

Minutes of meetings must recorded in the company’s minute books within one month of a meeting which records: 

  • proceedings and resolutions of the meetings of its members;
  • proceedings and resolutions of directors’ meetings; 
  • resolutions passed by members or directors without a meeting; and
  • if the company is a proprietary company with one director, director declarations.

The minutes must be signed by the chairperson of the meeting within a reasonable time after the meeting. The recorded and signed minute is then  evidence of the proceedings or resolution to which it relates, unless someone can prove otherwise.

The minute books must either be kept at the company’s registered office, principal place of business, or another location approved of by ASIC.

Accordingly, if you are considering becoming a director of a company, you should give careful consideration to the wording of any Deed of Access and Indemnity (Deed) to ensure that your know your rights in relation to access to documents, and that any proposed time frames, are practicable.  The Deed should clearly set out what information you have access to, how this information can be used, and set out a procedure to be followed when company information is requested.

If you are subsequently involved in a dispute and your request for access to information is refused, you can apply for an order that the information is produced to you.

In circumstances where the Deed sets out clear parameters for your rights of access, it is far less likely that disputes as to your entitlements will arise.

If you are already a director, you need to give very careful consideration to the storage and retention of company documentation.

Most people are working off at least two mobile devices on a daily basis and it become an expensive and cumbersome task to then try and collate records, should a dispute arise.

Lavan comment

Directors should adopt the practice of ensuring that all company records are stored and recorded in a central location, and in a manner that they can be easily accessed and produced if required.