Australia: Treasury consultations - shareholder claims against insolvent companies + insolvent trading

In Sons of Gwalia Ltd v Margaretic [2007] HCA 1 the Australian High Court held that a shareholder's claim in respect of a loss caused by a company's misrepresentation or defective market disclosure which induced the purchase of shares ranked alongside the claims of unsecured creditors. This proved controversial because it was widely believed that such a claim would rank below the unsecured creditors because it was a claim by the shareholder as a member of the company (in accordance with Section 563A of the Corporations Act 2001).

In December 2008 the Corporations and Markets Advisory Committee (CAMAC) published a report - available here (pdf) - in which it considered the implications of the Australian High Court decision and recommended that it should not be reversed. The Government has, however, taken a different view: in a consultation paper published last week - available here (pdf) - the Treasury announced that it would "amend the law so that it substantially corresponds to how it was generally perceived to be prior to the High Court's decision".

The Treasury has also published a consultation paper setting out a proposal to reform the law on insolvent trading: see here (pdf).