Directors Are Entitled To Accounting Records At All Times

Directors are entitled to accounting records at all times. That is what Section 388(1)(b) of the Companies Act 2006 says and to prove the point is the case of Suzui v Suzui [2024] EWHC 457 (Ch).

It is not a matter of debate, discussion or negotiation. It is plainly not a trivial matter; it is an absolute right. 

The legislation highlights the mandatory character of Section 388(1)(b) of the Companies Act 2006 when it launches the obligation with its deployment of the word “must”:

(1) A company’s accounting records—
(a) must be kept at its registered office or such other place as the directors think fit, and
(b) must at all times be open to inspection by the company’s officers.

Not much room for debate there is there?

The Claimant in Suzui sought from the other director various company accounting records. This was initially refused by the Defendant on the grounds the Claimant was:

‘forgetful and poses a security risk’

This was a family setting in which two sisters were joint shareholders of three companies and the only directors.

The judge sets the scene by referring to correspondence commencing in August 2019 by virtue it seems of the Claimaint feeling she was kept in the dark in respect of the companies’ finances.

It seems the matter did not get sorted out until August 2023. The Defendant agreed to provide the documents sought by the Claimant before proceedings were issued. She then changed her mind and opposed the application.

It seems that she changed her mind again after the proceedings were issued upon receipt of legal advice and did provide certain outstanding records.

The matter then descended into a hearing about costs. The Defendant refused to be liable for the Claimant’s costs. The judge’s decision fleshed out the reason costs were ordered (not on the indemnity basis) to be paid by the Defendant to the Claimant notwithstanding the serious allegations that sprouted in the evidential skirmishes that followed the disclosure of the company records.

The position on costs appears to have been decided by the simple fact that not all records were provided before the proceedings for their production were issued. In other words, the matter of costs was determined based on the application issued.

It was not an application to determine the serious allegations ventilated; it was an application simply to obtain documents:

As I have set out above, there is no dispute that there were documents which had not been provided by the time that the Claim was issued. I do not accept that in some way I should assess the number or value of those documents in determining the costs issue. I have dealt above in my summary that requests were made and there was a failure to provide the documents. Only after the proceedings were issued was there compliance by the provision of what had not been provided beforehand. Additionally, whilst Mr Phillis submits that due to the conduct of the Claimant, the court would not have exercised its discretion in favour of making the order, I do not accept that would have been the case. Firstly, as I have set out above, there is a serious conflict in the evidence before me and it is inappropriate for me to seek to go behind the veracity of either of those witness statements. Secondly, whilst there is some conflict in the evidence relating to what was offered to be supplied, it is clear that requests had been made for some time covering a lengthy period of time and that as at the time that the Claim Form was issued and served, there were outstanding requests which, in my judgment, the Claimant was entitled to pursue. In my judgment, the Claimant would have succeeded in obtaining an order. The evidence is clear that there was a refusal to produce the documents sought and in my judgment, had I exercised my discretion, I would have made the order. The Defendant was refused access to the records. The correspondence makes it clear that the Claimant’s request for access to the records was neither unreasonable or excessive bearing in mind her position as an officer and the various disputes as between the parties. It is not, in my judgment, a defence to allege that the Claimant must repay money before she could be provided with documents.