A company is not operating transparently. Financial information is being withheld. You hold shares but have no idea what the business is worth or what the directors are doing with company funds. As a shareholder, you do not have an automatic right to inspect the company’s books. But the law gives you a mechanism to compel access — and courts have granted it in a wide range of circumstances where shareholders have genuine, reasonable concerns about the conduct of company affairs.
Financial information withheld is a warning sign. Act on it before the evidence deteriorates.
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The Difference Between Shareholder and Director Rights
Director rights: direct entitlement
Under section 290 of the Corporations Act 2001 (Cth), a director of a company is entitled to inspect and copy the books of the company at all reasonable times and without charge. This is a direct statutory right that does not require a court order. A company that refuses to allow a director to inspect its books is in breach of this obligation and can be compelled by court order.
Shareholder rights: court order required
Shareholders do not have a statutory right to inspect company books directly. Instead, under section 247A of the Corporations Act, a shareholder can apply to the court for an order authorising them, or a nominee such as an accountant or solicitor acting on their behalf, to inspect the books of the company. The court will only make the order if it is satisfied that the shareholder is acting in good faith and that the inspection is to be made for a proper purpose.
What ‘Proper Purpose’ Actually Means
The proper purpose requirement has been interpreted by courts in a line of decisions. In Enares Pty Limited v Nimble Money Limited [2022] FCAFC 126, the Full Federal Court clarified the test: the purpose must be related to the applicant’s rights as a shareholder, and the applicant must establish with admissible, objective evidence that their concerns are genuinely reasonable rather than speculative or motivated by something other than the legitimate exercise of their shareholder rights.
Most recently, in Daniel Groves v Tas Fumigation and Pest Services Pty Ltd & Anor [2025] FCA 1089, the Federal Court considered a section 247A application in the context of alleged oppressive conduct, confirming that the purpose of investigating whether directors have engaged in misconduct or breach of duty, or whether a shareholder is being oppressed, is a legitimate and proper purpose for which inspection can be ordered.
What courts will not accept as a proper purpose: idle curiosity about the company’s affairs, inspection motivated primarily by a desire to extract information to use against the company as a litigant, or inspection sought in bad faith or for a collateral commercial purpose unrelated to the applicant’s position as a shareholder.
What You Need to Show to Obtain the Order
- A genuine, reasonable concern about the company’s affairs — not mere dissatisfaction with management decisions. The concern must be supported by objective evidence: a pattern of financial irregularities, unexplained transactions, refusals to account, or specific incidents that give reasonable grounds for concern.
- Good faith: you must be seeking inspection for a purpose connected with your legitimate interests as a shareholder. A shareholder who seeks inspection primarily to assist in litigation they are pursuing against the company as a counterparty will struggle to establish good faith.
- A case for investigation: the Full Court confirmed in Enares that while a complete cause of action does not need to be established, there must be ‘something akin to some tangible support for the concern’ — a reasonable suspicion of breach of duty, not just a belief that something might be wrong.
What Books Can Be Inspected?
The term ‘books’ in section 247A is broadly defined and includes financial records, meeting minutes, registers, correspondence, agreements, and other documents relating to the company’s affairs. An inspection order is not a carte blanche for wholesale review of every document the company holds. Courts generally limit the inspection to documents reasonably connected to the purpose for which the order was made, and can impose conditions including confidentiality obligations on the use of documents inspected.
Using Section 247A Strategically in a Dispute
A section 247A application is often a precursor to, or run in parallel with, an oppression application under section 232. Where a shareholder suspects financial misconduct or oppressive conduct, the books inspection process can secure the documentary evidence needed to establish those claims before the other side has the opportunity to manage or limit disclosure. Equally, evidence obtained under a books inspection order can be used to assess whether the concern was well-founded before committing to full oppression proceedings.
Securing company books early, before documents are lost or moved, is often the most important step in a shareholder dispute.
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Frequently Asked Questions
Q: Do I have an automatic right to inspect the company’s financial records as a shareholder?
A: No. As a shareholder alone, you do not have a direct statutory right to inspect company books. You must apply to the court under section 247A of the Corporations Act for an order authorising inspection. The court will only grant the order if you satisfy the good faith and proper purpose requirements.
Q: What if I am both a shareholder and a director — do I have automatic access?
A: Yes, as a director. Under section 290 of the Corporations Act, a director has a direct statutory right to inspect and copy the company’s books at any reasonable time without charge. This right does not require a court order and cannot be legitimately withheld by the company.
Q: What is a ‘proper purpose’ for a section 247A inspection?
A: Courts have recognised purposes including investigating suspected misconduct or breach of duty by directors, assessing the value of a shareholding, investigating suspected oppression, and gathering information to determine whether further legal action is warranted. The purpose must be related to the legitimate exercise of your rights as a shareholder, not to pursuing some other collateral aim.
Q: What did Groves v Tas Fumigation decide?
A: In Daniel Groves v Tas Fumigation and Pest Services Pty Ltd & Anor [2025] FCA 1089, the Federal Court confirmed that inspecting company books to investigate alleged oppressive conduct and director misconduct is a legitimate proper purpose for a section 247A order. The decision reinforces that this mechanism is available as a genuine tool in shareholder disputes.
Q: Can the company impose confidentiality conditions on what I can do with the inspected documents?
A: Yes. Courts regularly attach conditions to inspection orders, including requirements that documents inspected be used only for the stated purpose and disclosed only to specified persons such as the applicant’s legal advisers or accountants. These conditions are a standard part of the order and should not deter a genuine application.
Q: Can information obtained under a section 247A order be used in other proceedings?
A: Generally, information obtained under a books inspection order can be used for the purpose for which the order was made. Courts are alert to attempts to use section 247A as a route to general disclosure that would not be available in ordinary litigation, and orders are usually subject to conditions limiting their use accordingly.
