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Corporations Amendment (Sons of Gwalia) Act now law

by Hilary Kincaid 10. January 2011 15:10

The Corporations Amendment (Sons of Gwalia) Act commenced on 18 December. A copy of the Act as passed is available on Comlaw.

Broadly, the amendments mean that:

1.       Being a shareholder does not in itself preclude a claim for compensation in insolvency;

2.       BUT payment of all subordinate claims (broadly, claims as a shareholder or that relate to dealing with shares) is postponed until ALL other claims against, and debts payable by, the company in insolvency have been paid.

3.       A person whose claim against the company has been postponed is entitled to request and receive documents relating to the insolvency, and in some circumstances to vote at certain meetings regarding the conduct of the external administration (with the permission of the court). 


Subscribers are referred to the extensive discussion of the Bill's terms and likely effect in Ford's Principles of Corporations Law at [24.510].

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Insolvency | Law reform | Legislation

New Treasury discussion paper on clawback of executive remuneration

by Hilary Kincaid 7. January 2011 18:18

Treasury has released a discussion paper — The Clawback of Director and Executive Remuneration in the Event of a Material Misstatement, which is available as a pdf on the Treasury site.

The release of the discussion paper was accompanied by the release of an exposure draft bill, the Corporations Amendment (Improving Accountability on Director and Executive Remuneration) Bill 2011. The Bill will implement 16 of the 17 recommendations made by the Productivity Commission in its January 2010 report Executive Remuneration in Australia.

The discussion paper relates to a proposal, not identified in the Productivity Commission report, to clawback executive remuneration where a company has made a material financial misstatement.

The clawback would impose an obligation on a director or executive to repay remuneration that flows from materially misstated financial information: Discussion Paper [2.5]. This could involve recovery of funds, or the cancellation of a vested but unpaid entitlement to reward: [2.6]. ASIC would also have the power to commence action for recovery: [2.7].

The proposed reform purports to:

  • Simplify the process for recovery of overpaid remuneration ([2.9]);
  • Provide an incentive for directors and officers to meet their CA obligations to provide a ‘true and fair view’ of the company’s financial position ([2.10]);
  • Reflect the prevalence of clawback provisions in other jurisdictions ([2.11]);
  • Limit the role of remuneration in promoting risky behaviour ([2.12]- [2.14]); and
  • Have a “moral force” behind it ([2.15]). 

The moral force argument is that it is “unfair” for executives to retain remuneration based on profits that have not been “objectively verified”. Some clarification regarding objective verification is provided by the discussion of “material misstatement” (and alternative triggers for clawback) at [3.20]-[3.24].

Implementation questions raised in the paper (Pt 3):

  • Is a clawback reform needed to improve the regulation of executive remuneration?  
  • Do the benefits outweigh the compliance costs?
  • Should the reform apply to listed companies only; or to all entities, large proprietary companies and registered schemes with s 292 reporting obligations?
  • Should the reform be implemented by amendments to the Corporations Act, amendments to the ASX Listing Rules, amendments to the Corporate Governance Principles, or a combination?  
  • Who would the obligation apply to?  
  • What would trigger the obligation?   
  • What would be the quantum of bonuses clawed back?  
  • By when would the repayment need to be made?

Interested parties are invited to make written submissions by 30 March 2011. Submissions may be made by email to clawback@treasury.gov.au.  More information is available on the official Treasury page.



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ASIC | Disclosure | Law reform

Price signalling bill referred to House of Representatives Economics Committee for inquiry

by Hilary Kincaid 13. December 2010 12:05

The price signalling bill has been referred to the House of Representatives Economics Committee for inquiry.

The committee is keen to hear from consumer groups, business associations, academia, government departments and individuals. Submissions are open until Friday, 28 January 2010. The Committee has been asked to report by May 2011.


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Law reform | Parliament

Corporations Amendment (No 1) Act 2010 receives assent

by Hilary Kincaid 28. November 2010 18:44

The Corporations Amendment (No 1) Act 2010 has received assent (on 24 November 2010). It has not yet been proclaimed, but if unproclaimed within 6 months it will commence on 25 May 2011 by forced commencement. 

The text of the amending Act is on Comlaw.  Please see our previous post regarding the substance of the changes that it will make to the Australian Securities and Investments Commission Act and the Corporations Act.


ASIC | Law reform | Legislation | Parliament

Corporations Amendment (Sons of Gwalia) Bill passes Parliament

by Hilary Kincaid 28. November 2010 18:30

The Corporations Amendment (Sons of Gwalia) Bill 2010 passed the Senate on 26 November 2010.

The Bill reverses the High Court’s decision in Sons of Gwalia v Margaretic, which found that s 563A of the Corporations Act did not subordinate certain compensation claims by shareholders below the claims of other creditors.

As the Parliamentary Secretary to the Treasurer, David Bradbury, added: "The amendments also streamline the treatment of shareholder claimants in an external administration and eliminate common law restrictions on the capacity of a shareholder to recover damages against a company."

The revised text of the bill is available from its official Parliament House page. It is currently awaiting Royal Assent.



Law reform | Legislation | Parliament

Anti-price signalling bill introduced

by Hilary Kincaid 22. November 2010 17:35

Bruce Billson, the Shadow Minister for Small Business, Competition Policy and Consumer Affairs, introduced a private members’ bill into the House of Representatives this morning: the Competition and Consumer (Price Signalling) Amendment Bill 2010 (click here for official bill homepage with the text of bill and Explanatory Memorandum).


The key amendments proposed by the bill to the Competition and Consumer Act 2010 (the new name for the TPA as of 1 January 2011) are the proposed new s 45A(1): “[a] corporation must not engage in price signalling” and s 45A(2), which defines price signalling as the communication of price-related information to a competitor (s 45A(2)(a)) for the purpose of inducing that competitor to vary a price for supply or acquisition of goods or services (s 45A(2)(b)) where that communication has the effect, or is likely to have the effect, of substantially lessening competition in a given market ((s 45A(2)(c)).


Private communication between related bodies corporate or parties to a joint venture is excluded from the prohibition, as is communication permitted by a s 88 authorisation or s 93 notification: proposed new s 45A(11).


The Australian Bankers’ Association has promptly issued a media release warning that rushing the bill through could have the result “that customers, investors and analysts would end up being uninformed or misinformed.”


Law reform | Parliament

Amendments to ASIC Regulations

by Hilary Kincaid 18. November 2010 16:37

The Australian Securities and Investments Commission Amendment Regulations 2010 (No 4) were registered on 18 November 2010, and commence on 1 January 2011. 

The amending regulations amend the Australian Securities and Investments Commission Regulations 2001 to prescribe informational requirements for invoices that, if complied with, would allow a person to avoid the presumption that they have asserted a right to payment.  The amendments also provide recipients of requests for payment for unsolicited financial services with information that limits the scope for confusion about obligations to pay other people money in response to documents that assert a right to payment.

The amending regulations will insert new regs 2E and 2F.


ASIC | Law reform | Legislation

Federal Court expresses concerns about Civil Dispute Resolution bill

by Hilary Kincaid 27. October 2010 16:35

In a submission to the Senate Legal and Constitutional Affairs Committee, the Federal Court has flagged its serious concerns with the reforms proposed in the Civil Dispute Resolution Bill 2010.

Although the Committee's report is not due until 22 November 2010 (today is the closing date for submissions), submissions already received are publicly available.

In short, the court is concerned that the reforms as set out in the Bill :

  • are neither necessary nor desirable;
  • are not suitable for the nature of much of the court's work;
  • will increase costs and delays without corresponding benefit;
  • run the risk of creating satellite litigation - litigation about litigation; and
  • employ terminology which may be in conflict with the case management principles implemented in the Access to Justice (Civil Litigation Reforms) Act 2009, and case management reforms introduced in state jurisdictions. 

The submission also points out that the operation of the reforms in a personal or corporate insolvency context is unclear. 

The submission proposes an alternative approach of enacting legislation requiring a party contemplating litigation to serve a short statement outlining the factual and legal basis of its claim upon a potential respondent. If that step were taken, the court could then be given jurisdiction over ADR of the matter and the parties would be able to access court-annexed mediation (which is generally cheaper than external mediation, and integrated with existing case management powers).   

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Law reform | Litigation | Parliament

Wayne Swan delivers speech to New York Stock Exchange on Australia vs the GFC

by Hilary Kincaid 12. October 2010 11:11

We’ve got tough and effective regulators. And we didn’t suffer the financial market excesses of Europe and the US.

But it wasn’t only the strength of our banks. The Reserve Bank of Australia aggressively cut interest rates to emergency levels and the Government immediately put in place powerful fiscal stimulus to support jobs and growth. Our response was quick enough and big enough to not just arrest the decline in confidence, production and spending, but to turn them around.

We would not have done so well, however, without the benefits of the preceding decades of hardfought economic reforms. Reforms that opened our economy, improved the flexibility and efficiency of markets, and deepened linkages with our region.

From a speech entitled "The Australian Success Story", which sets out in broad terms the damage control strategies of the Rudd government and the future plans of the Gillard government. The Treasurer has some interesting things to say about the way forward for the mining industry:

So contrary to some of the debate you might be hearing, what we know is that Australia is about to embark on its biggest mining investment boom since the 1850s Gold Rush. This pushes us to pick up the pace of reform – to make Australia an even more attractive investment destination.

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Law reform

Closing date for submissions on Corporations Amendment (No 1) Bill set

by Hilary Kincaid 11. October 2010 11:54

The Senate Economics Committee has set the closing date for submissions on the Corporations Amendment (No 1) Bill 2010. Submissions must be received by 15 October 2010 - this Friday.

Please refer to our previous posts on the substance of the bill and how to make a submission to the inquiry.

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Law reform | Parliament


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