Cor Law Essay

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Sons of Gwalia v. Margaretic [2007] HCA 1 (“Gwalia”) In Gwalia’s case, the court overturned traditional arrangements with failed companies where shareholders had been ranked lower than secured creditors for damage, and decided that a person who bought shares in a company counting on the misleading or deceptive information from that firm or was misled as to the company’s worth by its failure to make disclosures – may share the same ranking at claiming for damages against the company with other creditors. The government advisory body, Corporation and Markets Advisory Committee (CAMAC), had backed a High Court decision about the equal ranks in failed companies if they had had relied on false or misleading information. Later on, CAMAC also made a recommendation to support the idea that the shareholder should be entitled to rank equally with all other unsecured creditors of the failed company. However, the Chartered Secretaries Australia (CSA), the peak body for corporate governance professionals, argued that the recommendation made by CAMAC deviated from the traditional arrangements. And at the same time, the Australian Bankers Association (ABA) disappointed with CAMAC’s recommendation without overturning the High Court decision and also believed that urgent law reform is necessary to restore certainty to insolvency processes. What’s more, the Australian Financial Market Association also voiced its deep concern about the decision of Gwalia 1. In consideration of Gwalia’s rarity, the Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen, has ignored both the decisions of High Court and the recommendation of CAMAC. After the controversial High Court decision, the dividends to unsecured creditors are considered likely to fall, and the overall cost of company administrations will rise as shareholder claims have to be verified.2Additionally, the

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