In London City Equities Limited v Penrice Soda Holdings Limited [2011] FCA 674 the Federal Court made orders under section 247A of the Corporations Act 2001 permitting a dissatisfied shareholder to access certain categories of company records.

Since May 2008 LCE invested $7.6 million in shares in Penrice which by May 2011 had an unrealised loss of approximately $6.25 million.

LCE was seeking to investigate three areas: the non-disclosure or misleading disclosure of certain financial information and whether Penrice or one or more of the directors of Penrice was responsible, whether in 2008 Penrice paid dividends other than from profits and whether Penrice funded the defence by two of the directors of their positions on the Board.

Judge Robertson accepted that the application was brought in good faith and for a proper purpose, without seeking to determine the substantive questions in dispute.

Judge Robertson said that Section 247A did not permit a wholesale inspection and examined the categories of documents requested before agreeing to the application with some modifications. He paid particular relevance to the request for “All documents recording, referring or relating to Penrice’s Directors and Officers insurance policies from 1 July 2008”.

He accepted that it is a proper purpose to inspect the company’s books, including the relevant insurance policies, for the purpose of investigating whether there are good grounds for seeking to bring a derivative action or a personal action against the company. He limited the order to policies betwen 1 July 2008 and the present date.