Shareholders as creditors: a response to the CAMAC discussion paper on law reform

LexisNexis Butterworths
Publication Type:
Journal Article
Australian Journal of Corporate Law, 2008, 22 (2), pp. 135 - 160
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he CAMAC discussion paper regarding shareholder claims against insolvent companies has considered the issue of how best to address the implications of the High Courts decision in Sons of Gwalia. That decision recognised that shareholders may stand as creditors in a corporate insolvency by making a claim for damages based on statutory rights to compensation for defective disclosure.The decision has been highly controversial and has generated calls for law reform. The CAMAC discussion paper considers several options for reform, with various public submissions providing alternative options to address the tension between investor protection laws and corporate insolvency priorities. This article examines the range of suggested reforms and advocates a position of limited subordination, as well as other law reform measures, to address the practical, legal and policy issues raised by shareholder class actions against companies in financial difficulty.
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