Shareholder Inspection Rights in Australia: Then And Now

Information asymmetry between shareholders and corporate managers can subvert contemporary calls for increased institutional investor oversight. In jurisdictions where controlling shareholders are common, information asymmetry can also arise between minority shareholders and controlling shareholders, impeding the monitoring of the latter by the former. Shareholder inspection rights provide an important corporate governance technique that can potentially address this problem and provide a basis for enhanced investor oversight and activism.

This paper examines the trajectory of shareholder inspection rights in Australia. It describes and evaluates the effectiveness of an important development in the mid-1980s, which saw a shift from the highly narrow and prescriptive U.K. common law inspection right to a statutory regime that conferred broad discretion on the courts to decide whether inspection is appropriate in the particular circumstances. The paper analyses the evolution of this shift and the extent to which the operation of shareholder rights today reflects the original goals of the statutory inspection right. The paper also explores the interesting issue of how modern securities laws designed to promote market integrity for all investors should interact with laws granting inspection rights to individual shareholders, and also the extent to which modern securities law may alter the contours of the statutory shareholder inspection right.

The paper argues that the Australian experience is valuable in providing international law makers and researchers with important insights into the efficacy of different models of regulating shareholder inspection rights and the interface of individual shareholder inspection rights with broad market-based disclosure rules. Shareholder inspection rights will inevitably become increasingly important in practice, given increasing shareholder activism and the growing focus of investors on ESG-related matters.