In a significant decision, the Corporate Affairs Ministry (MCA) has said that companies need not make available certain personal information of shareholders to those who inspect their register of members. The information barred from sharing include e-mail ID, unique identification number, PAN, and address or registered address (in case of a body corporate) of shareholders.
The move — which will apply to both, public and private companies — is expected to ensure the privacy of personal information of shareholders and prevent misuse by third parties, said company law experts, many of whom welcomed it.
In current times, when most registers of members are maintained in electronic format, the MCA decision enables corporates to create software tools to hide the information so that access is provided only for the information that needs to be shared, said experts.
Under the previous Companies Act, 1956, only members were allowed to inspect the register of members. Now, the law says any person (even non-members) can approach a company and seek information, including personal details. In fact, large corporates have, for long, been making a case with the government for ensuring confidentiality and restricting access on personal information, citing privacy concerns.
The latest MCA move might have come in the wake of someone having been adversely impacted, added experts. Because of SEBI’s KYC requirement, every folio maintained in the register of members will have data such as the PAN. There have been instances of PAN misuse, loans being availed and leading to credit scores getting affected for investors, sources said.
“A member or public has the right to get shareholding details. Why should personal email-ID or PAN or unique identification number of a person have to be shared by the company to another conducting the inspection? Large companies have always been reluctant to share such information. Genuine corporates have not given such data. It is good that the government has finally made the required change,” a practising company secretary said.
Pritika Kumar, Founder — Cornellia Chambers, said this will ensure the privacy of the member, thereby preventing privacy violations and other data related breaches. The amendment has been brought in only for ensuring privacy of shareholders whose personal information was otherwise accessible to the public at large.
Abhishek Sanyal, Partner, Economic Laws Practice, said the amendment would ensure privacy of personal information of shareholders.
Restricting shareholder access
Maneet Pal Singh, Partner, IP Pasricha & Co, had a different take on the issue and noted that this new rule, while on one hand, secures the privacy of a member, on the other, it will restrict the right of stakeholders’ access to information. However, they can have access to inspection of other details/documents in the register of members or annual return, etc.
He added that this could result against the right of stakeholders like debenture holder, security holders, etc. as they have financial interests in the company, so they should know the key details about the members who take the important decisions through their voting rights.