Where inspection and a section 219 request are not enough, section 220 of the Companies Act 1997 provides the strongest information remedy in the Act.
Section 220(1) — what the Court may order
The Court may, on the application of a shareholder or creditor, make an order authorising a person named in the order, at a time specified, to inspect and to make copies of, or take extracts from, the records or other documents of the company — or such of them as are specified — and may make such ancillary orders as it thinks fit, including an order that the accounts of the company be audited by that person.
- A creditor may apply, not only a shareholder. That matters where a creditor suspects the company is being stripped, or is trading while insolvent.
- It reaches “the records or other documents of the company” — wider than the section 164 records, and far wider than the nine categories a shareholder may inspect under section 216.
- An independent person does the work, not the applicant — so the company’s confidential material is not simply handed to a rival shareholder.
- The Court may order that the accounts be audited by that person — a full examination, not merely an inspection.
Section 220(2) — the two conditions
(a) in making the application, the shareholder or creditor is acting in good faith and the inspection is proposed to be made for a proper purpose; and
(b) the person to be appointed is qualified in accordance with section 193.
The applicant must show a genuine concern connected with their position as a shareholder or creditor — suspected misapplication of assets, undisclosed related party dealings, doubts about solvency, or a need to assess a section 152 claim or a derivative action.
An application made to obtain a competitor’s information, to harass the board, or as leverage in an unrelated dispute fails paragraph (a). Evidence of what has already been tried — a section 216 inspection, a section 219 request and the company’s response — is usually the best material to establish good faith.
Paragraph (b) requires the appointee to be qualified as an auditor under section 193. So the inspector is a professional, subject to professional standards.
Sections 220(3) to (5) — the report and control of the material
(3) The person appointed shall diligently carry out the inspection and, having done so, shall make a full report to the Court.
(4) On receiving the report, the Court may make such order in relation to the disclosure and use that may be made of records and information obtained as it thinks fit.
(5) An order under subsection (4) may be varied from time to time.
This is the key structural protection. The inspector reports to the Court, which then decides — under subsection (4) — what may be disclosed, to whom, and for what use. The applicant does not automatically receive the company’s books.
That is what allows the Court to order a genuine investigation into a company with legitimate commercial secrets. It parallels section 219(8), under which the Court may specify the use that may be made of information and the persons to whom it may be disclosed.
Sections 220(7) and (8) — misuse is an offence
A person may only disclose or make use of information or records obtained under this section in accordance with an order made under subsection (4) or (5).
A person who discloses or makes use of such information otherwise commits an offence, and is liable on conviction to the penalty in section 413(2).
The prohibition binds any person who obtains the material — the inspector, the applicant, and anyone to whom it is passed on. A shareholder who obtains an order and then circulates the findings, or uses them in a competing business, commits an offence.
Section 220(6) — the company pays
The reasonable costs of the inspection shall be met by the company unless the Court orders otherwise.
An investigation by a qualified auditor is expensive, and the material sought belongs to the company. Section 220(6) puts the cost on the company as the starting point — the same approach as section 144 for the costs of a derivative action.
The Court may order otherwise, and would be expected to where the application turns out to have been misconceived or the concerns unfounded. But the applicant does not begin by having to fund the exercise.
Section 220 compared with the other routes
| s 216 inspection | s 219 request | s 220 investigation | |
|---|---|---|---|
| Who | Shareholder | Shareholder | Shareholder or creditor |
| Court needed | No | Only if refused | Yes |
| Scope | Nine listed categories | Any information held, subject to refusal grounds | Records or other documents, plus possible audit |
| Who sees it | The shareholder | The shareholder | An independent qualified person, reporting to the Court |
| Timing | Inspection period: day 7 to day 14 after notice | One month for a response | As the Court orders |
| Cost | Prescribed fee | Reasonable charge, specified and explained | The company, unless the Court orders otherwise |
Independently of section 220, the Registrar has powers under sections 400 to 407 to require production of and inspect relevant documents, require explanations, and examine persons on oath — with section 407 controlling onward disclosure. A shareholder or creditor with serious concerns may bring them to the Registrar as an alternative to litigating.
Sources
- Companies Act 1997 — ss 143, 144, 152, 164, 166, 193, 216–220, 400–407, 413
Before relying on anything here, read the current text of the Companies Act 1997 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.