The Parliamentary Secretary to the Treasurer, the Hon David Bradbury MP, has today reintroduced the Corporations Amendment (Sons of Gwalia) Bill 2010 into Parliament to give effect to the Government's decision to reverse the High Court's decision in Sons of Gwalia v Margaretic.
The Sons of Gwalia decision determined that, in a corporate insolvency, certain shareholder claims against a company ranked equally with the claims of other unsecured creditors. This decision went against the commonly understood order of claims in a corporate winding-up. The Bill returns the order of claims to that which existed prior to the Sons of Gwalia judgment.
'The Government has carefully considered submissions from stakeholders on how to respond to the Sons of Gwalia decision. The Government is of the view that it is unfair for shareholder claimants to rank equally with ordinary unsecured creditors,' Mr Bradbury said.
'It is important that investors who have been misled when investing have the ability to seek damages, however, they should not be able to do so at the expense of unsecured creditors. These creditors are often small businesses who are simply owed money for work they have already done, or for materials they have supplied.'
'The Government is also concerned about the uncertainty created by the Sons of Gwalia decision and its impact on the cost and availability of credit.'
The Bill also makes procedural reforms relating to notices to creditors and shareholder voting, designed to remove a cost burden on companies in external administration, and will clarify the position of shareholders bringing claims for damages against companies.
Specifically, the Bill removes the right of persons bringing claims regarding shareholdings to:
- vote as creditors in a voluntary administration or a winding-up, unless they receive permission from the Court; or
- receive reports to creditors, unless they make a request in writing to the external administrator.
The Bill also eliminates a number of restrictions on the capacity of a shareholder to recover damages against a company based on how they acquired the shares or whether they still hold the shares.
29 September 2010