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Cambridge University Press 978-1-108-79695-8 — Contemporary Australian Corporate Law Stephen Bottomley , Kath Hall , Peta Spender , Beth Nosworhty Index More Information

INDEX

accounting standards, 116, 192, 193 associate, 582–3 acquiescence, 154–5 categories of, 582 Administrative Appeals Tribunal, 533 ASX Listing Rules, 62, 269, 510, 511, 512–13, 606 administrator administration of, 519 role in voluntary administration, 448 content of, 512 AFSL, 264 continuing requirements to maintain listing, conduct exempt from dealing definition, 529 513 dealing definition and, 528–9 controlling entry into the stock market and, 513 exemptions from AFSL requirements, 529 legal status of, 519–20 meaning of ‘representative’, 529–30 market bids and, 601 general licensee obligations under an AFSL, overview of listing requirements, 512 530–1 periodic disclosure and, 514 financial services provided ‘efficiently, regulating supply of information and, 513 honestly and fairly’, 531–2 share buy-backs and, 228 revocation or suspension of licence, 532–3 ASX Operating Rules, 509, 510, 511–12 meaning of ‘make a market for a financial breach of, Australian Securities Exchange product’, 529 powers with respect to, 511–12 who needs, 527–8 ASX Trading Platform, 535 agency auctioneering argument, 604 broker–client relationship and, 537–8 Australian position, 604–5 implied agency, 79 Auditing and Assurance Standards Board, separate legal entity doctrine and, 79–81 31, 33 agents auditor’s report, 192, 195–6 companies entering contracts via, 147 Australian Accounting Standards Board, 31, 33, aggregate theory, 48–50 194 Allen test, 133–4, 135 Australian Bureau of Statistics, 85, 108 alteration of corporate constitution, 132 Australian Company Number, 95, 96, 146 Gambotto’s case and, 134–9 Australian Competition and Consumer onus of proof, 139 Commission, 34, 85 reaction to Gambotto decision, 139–40 Australian corporate law reform of the compulsory acquisition amending corporations legislation, 41 provisions, 140 civil penalty regime, 35–8 restrictions on the majority’s alteration power, current scheme, 28–9 133–4 history of. See history of Australian corporate when Gambotto’s case tests do not apply, 140 law alternate directors, 178 jurisdiction of the courts, 34–5 amiable lunatic test, 332 jurisdiction of the legislation, 31 annual financial report, 193–4 referral of powers, 29–30 annual general meeting, 183 Australian Financial Complaints Authority, 530 apparent authority, 150–4, 156, 159 Australian Financial Services Licence. See AFSL acquiescence, 154–5 Australian Law Reform Commission corporate application of directors’ duties to takeovers, 610 criminal responsibility review, 88 bidder company directors’ duties, 610 Australian market licence, 507 target company directors’ duties. See target criteria for, 507 company directors’ duties adequate operating rules, 507 artificial transactions, 556–8 compensation arrangements, 508 assets fair, orderly and transparent market, 508 distribution of, ranking of creditors, 482–6 unacceptable control situation, 508 recovery of. See recovery of assets Australian Market Licensee, 508

© in this web service Cambridge University Press www.cambridge.org Cambridge University Press 978-1-108-79695-8 — Contemporary Australian Corporate Law Stephen Bottomley , Kath Hall , Peta Spender , Beth Nosworhty Index More Information

624 Index

Australian Prudential Regulation Authority, 34, Enforcement Review Taskforce, 88 248 equal and selective reductions of capital and, Australian Securities Exchange, 31, 106, 126, 168, 222 174, 189, 242, 249, 267, 440, 507, 520, financial assistance transactions and, 236 523, 525, 527, 601 financial products and, 498, 499 ASX Australian Investor Study, 497 financial services licensing and, 527, 530, bidder’s statement and, 596, 597 532–3 challenging decisions of, 523–5 first creditors’ meeting and, 449 continuous disclosure requirements, 549 guidance on shares in same class, 201 co-regulation of financial markets with ASIC, information provided to, 192 509 injunction remedy and, 419 Corporate Governance Council, 514 inspection of documents lodged with, 423 Corporate Governance Principles and interpretation of Corporations Act 2001 (Cth), Recommendations, 62–3, 176, 177, 269, 39–40 270–1, 274 liquidators and, 469 corporate governance statement, 62–3 lodgement of bidder’s statement with, 596 Enforcement and Appeals Rulebook, 511 lodgement of corporate constitution with, Operating Rules. See ASX Operating Rules 123 public announcement of takeover and, 588 Market Disciplinary Panel, 510, 511 trading contract between brokers, 535 Market Integrity Rules, 508, 509, 510, 525 Australian Securities and Investments minute books and, 190 Commission (ASIC), 27, 66, 85, 187, 193, not-for-profit entities and, 105 195, 204, 280, 296, 398, 413, 414, 523, 577 pecuniary penalty orders, 37–8, 288, 296, 306, amendment of public company constitution 346 and, 132 persons to act as receivers and, 433 application for remedial order and, 621 proceedings for insider trading by, 553 approach to enforcement of financial services profile statement and, 249 and markets, 561 prosecution of offences by, 34 ASX Listing Rules and, 520, 523 prospectuses and, 257 auditors and, 438 public announcement of takeover and, 586, authorised representatives and, 530 588 bidder’s statement and, 592, 596, 597, 600 receivers and, 436 changing proprietary/public status and, 104 register of disqualified persons, 289 civil proceedings brought by, 423–4 registered liquidators and, 447–8 class actions and, 560 registration of company by, 96 class orders, 31 regulation of securities markets, 502–3, 507 class rights and, 143 Regulatory Guide 111, 598–9 company change of status and, 104, 107, 169 Regulatory Guide 128, 583 company registers and, 191 regulatory guides, 39 company reinstatement and, 490 related party transaction and, 381–2 company secretary and, 149, 175 relief from application of Chapter 6D and, compensation orders, 288, 296, 306, 346, 424 262 continuous disclosure obligations and, 519 relinquishment orders, 38, 288 co-operative relationships, 34 reservation of company name and, 95 co-regulation of financial markets with role of, 32, 498 Australian Securities Exchange, 509 Royal Commission into Misconduct in the court proceedings in takeovers and, 620 Banking, Superannuation and Financial criticism of James Hardie litigation and, 312 Services Industry and, 37, 506, 561 declaration of contravention and, 288–9, 346 schemes of arrangement and, 442, 565 declaration of unacceptable circumstances share buy-backs and, 227, 228 and, 573 share division and, 201 deed of company arrangement and, 452, 453 shareholders’ agreements and, 131 deregistration of companies and, 489–90 small proprietary companies and, 102 disclosure documents and, 244, 245, 250–1 small proprietary companies financial records disclosure of company information and, 421 and, 192–3 disclosure of material interests and, 379 statutory derivative action and, 409–10, 418 disqualification of directors and, 289, 346 stop order power, 250 disqualification orders, 38, 288, 306 supervision of financial markets, 508, 511

Index 625

takeover bid financing and, 595 Board of Trade (UK) Takeovers Panel and, 572, 575 report on law of partnership, 11 third party names and, 158 bonus shares, 204 ‘truth in takeovers’ policy, 620 Bosch Report, 302 winding up and, 418, 461, 465, 466, 467, 468, break fee, 614–15 486, 487, 488 broker–client contract withdrawal of takeover offer and, 601 implied terms of, 537 Australian Stock Exchange, 502 terms of, 536 Australian Taxation Office, 34, 85 Bubble Act 1720, 8–9, 10 bubbles, 6 basic prohibition in takeovers, 576 South Sea Company, 7 acquisition resulting in an increase in voting business judgment rule, 285, 314–18, 323 power, 577–8 safe harbour, 285, 307 collective action by investors, 583 buyer–seller contract, 535 definition of ‘associate’, 582–3 exemptions from, 583 Cadbury Report, 302 creeping takeovers, 583–4 Campbell Committee, 545 takeovers by consent, 584–5 Campbell Report, 503 prohibited share acquisitions, 576–7 capital, 198 relevant interests. See relevant interests in distinction between share capital and debt voting shares capital, 198 substantial holdings, 578 regulating reductions of. See regulating voting power, 581–2 reductions of capital basic securities transaction, 535–9 cash flow test of solvency, 322, 427 agency basis of broker–client relationship, certificate of registration, 96 537–8 chairperson, 175–6 Australian Securities Exchange trading contract Chapter 6, framework of between brokers, 535 policy framework, 569–70 broker–client contract. See broker–client structure of Chapter 6, 568–9 contract Chief Executive Officer, 174 broker–client fiduciary relationship, 538–9 Chief Financial Officer, 174 buyer–seller contract, 535 Chief Operations Officer, 175 clearing and settlement of securities, 536 Chinese walls, 552 crossings, 535–6 Chi-X, 503 fiduciary duties, 538 chose in action, 205 special crossings, 536 civil and criminal wrongs Bell Group cases, 344–5, 378 company liability for, 84–5 Bentham, Jeremy, 15 class actions bid period, 570, 571, 601, 613, 619, 620 enforcement of financial services and markets difference between offer period, 588 by, 560 start date, 596 private enforcement of financial services and bidder’s statement, 588, 591–4 markets by, 423, 519, 561–2 copy to target company, 596 class orders, 31 lodgement with ASIC, 596 class rights notice that statement has been sent to target protection of, 141–3 shareholders, 597 reduction of share capital and, 223–4 to financial market operator, 596 classifying shares, 201–2 to target shareholders, 596–7 bonus shares, 204 blue sky statements, 251 employee shares, 204 board of directors, 173–4 ordinary shares, 202 delegation of powers, 166–7 preference shares, 202–3 directors’ declaration on the financial reports, redeemable preference shares, 203–4 194 cleansing notice, 249 directors’ report, 194–5 closely-held companies, 366–7 role of, 178–9 closely-held and widely-held companies, 117–18 types of directors. See types of directors Cohen Committee on Company Law where members disagree with a decision of, Amendment (UK), 21 179–82 commenda, 5, 6

626 Index

common law contexts in which separate legal contract of service and, 127 entity doctrine may not apply definition, 273–4 agency, 79–81 disqualification of, 289–90, 346 evasion of a legal obligation, 76–9 exoneration and relief for breach of duties. fraud, 79 See exoneration and relief for directors common seal, 146 public companies, 103–4 Commonwealth Courts Portal, 467 reasons for regulating behaviour of, 272–3 companies removal of, members’ powers and, 170 certificate of registration, 96 remuneration of. See remuneration of closely-held companies, 366–7 company directors closely-held and widely-held companies, single, implied authority of, 150 117–18 types of. See types of directors decision-making within. See decision-making company information deed of settlement companies, 8–9, 10, 11, 12, access to, 420–3 13, 15 Company Law Advisory Committee, 569 deregistration of, 489–90 Company Law Review Steering Group (UK), internal rules. See internal company rules 349–50 listed companies, 496 company liability lodgement and payment of registration, civil and criminal wrongs, 84–5 no liability company, 106 company liability in criminal law, 85–8 obtaining consent, 95 Criminal Code Act 1995 (Cth), 89 one director/shareholder companies, 123–5 vicarious liability, 89–90 one-person copmpanies, 118–19 company limited by guarantee other distinctions between public and liability of members to, 105 proprietary companies, 103–4 company limited by shares perpetual sucession of, 97 liability of members to, 104 preparation of internal management rules, 95 company members. See members proprietary companies. See proprietary company name companies change of, members’ powers and, 104 public companies. See public companies reservation of, 95 public/private divide, 100 company property, 97 quasi-partnership companies, 118 company registers, 191 registration of. See registration of companies company rules reinstatement of, 490 internal. See internal company rules reporting and disclosure. See reporting and company secretary, 96, 146, 175 disclosure implied authority of, 149 shelf companies, 96 role of, 149 single director/shareholder companies, 188 witnessing of documents by, 146 under the Corporations Act 2001 (Cth), 100 company type unlimited liability companies, 106 change of, members’ powers and, 104 Companies Auditors Disciplinary Board, 33 compensation orders, 288, 296, 306, 346, 424 Companies and Securities Advisory Committee, limitation period, 290 225 compulsory acquisitions, 615–16 advantages where target company becomes dissenting minorities and, 617 part of corporate group and, 615 fair value for securities, 617–18 Final Report on Corporate Groups, 92, 116–17 of minority shares in a takeover, 616–17 recommendations on corporate groups, compulsory buy-out of securities, 618 116–17 concession theory, 46–8, 386 company conflicts of interest, 286 change of status, 107–8 disclosure. See disclosure of personal interests constitution. See corporate constitution fiduciary obligation to avoid. See fiduciary as distinct legal person, 268 obligation to avoid conflicts of interests liability of members to. See liability of related party transactions. See related party members to the company transactions relationship to other companies, 108–9 consequences of breach of directors’ duties company directors civil penalties provisions, 288–90 appointment of, members’ powers and, 169 common law and equitable consequences, board of directors. See board of directors 287–8

Index 627

criminal consequences, 290–1 maintenance of capital, 210–13 election between regulatory proceedings, 291 sources and consequences of, 199 Constitutional Conventions, 19 corporate fundraising, 240 content of disclosure documents, 251–2 raising share capital under Corporations Act forward-looking statements, 252–4 2001 (Cth) Chapter 6D. See raising share general disclosure requirements, 252 capital under Chapter 6D illustrations of Corporations Act 2001 (Cth) corporate governance, 266–7 s 710(2). See illustrations of s 710(2) Australian, 267–71 specific disclosure requirements. See specific comparative corporate governance, 271–2 disclosure requirements definition, 267 continuous disclosure, 513, 514–18, 549 maintenance of accountability in, 386–7 remedies for breach of obligation, 519 corporate groups, 81–4, 110–17 contractual perspective of corporate law, 49, 386 advantages where target company belongs co-operatives, 99 to, 615 Co-operatives National Law, 99 Companies and Securities Advisory Committee corporate collapses, 283, 301 recommendations on, 116–17 HIH Group, 382–3, 429 definition, 112 National Safety Council Victorian Division, 105 duty to act in the best interests of the One.Tel, 307 company and, 335–6 Qintex Group, 113–14 entity model, 113 corporate constitution, 121, 122, 123 horizontal and vertical organisation of, 112 additional members’ rights under, 172–3 liability within, 92 adopting or amending, members’ powers and, processes of creation of, 112 168–9 remedy for oppression and unfairness and, alteration of. See alteration of corporate 400 constitution corporate law breaches of, 128 Australian. See Australian corporate law contractual relationships in, 127–8 global model of, 42 meeting procedures and, 183 global or local, 65–6 power of board and members under, 166 importance of context, 2 corporate contracting perennial questions, 2–3 actual and implied authority, 147–8 twenty-first century, parameters of, 28 apparent authority. See apparent authority Corporate Law Economic Reform Program, authority by ratification, 162 569 common seal and, 146 corporate law theory companies entering contracts directly, 145–6 aggregate theory and, 48–50 companies entering contracts via agents, 147 concession theory and, 46–8, 386 effect of non-compliance with internal contractual perspective, 49, 386 matters on validity of. See effect of non- corporate social responsibility. See corporate compliance with internal matters on social responsibility validity of a contract economic theories and, 50–3 implied authority of a company secretary, 149 feminist theory and, 57–9 implied authority of a managing director, importance of, 44–5 148–9 natural entity theory and, 54–6 implied authority of a single director, 150 organisational perspective and, 56–7 pre-registration contracts, 162–4 team production theory and, 53–4 corporate disclosure corporate liability in tort, 90 continuous disclosure, 513, 514–18 policy considerations, 90–2 periodic disclosure, 514 corporate social responsibility, 60–1 corporate enforcement pyramid, 36–7 enlightened shareholder value and, 61–3 corporate entities globalisation and, 64–5 co-operatives, 99 stakeholder theory and, 63–4 incorporated associations, 98–9 corporate veil, 76, 78, 273, 321 statutory corporations, 99 corporation sole, 95 corporate finance corporations concept of capital, 198 classifications of financial assistance transactions. See financial closely-held and widely-held companies, assistance transactions 117–18

628 Index

corporations (cont.) criminal law corporate groups, 110–17 company liability in. See company liability in one-person companies, 118–19 criminal law definition, 94–5 crossings, 535–6 statutory corporations, 99 crowd-sourced funding, 242, 263 types of, 98 equity crowd-sourced funding, 263–4 Corporations Act 2001 (Cth) intermediaries, 264 additional members’ rights under, 172–3 offer, 263, 264 administration and enforcement of, 31–4 crown jewels defence, 607 best interests duties under pt 7.7A, 542–3 crystallisation, 209 companies under, 100 consequences for contravention of s 260A, damages 237–8 breach of statutory contract, 130 constitutional basis of, 29 Datafin principle, 525 definition of derivatives under, 500 Davey Committee, 18, 241 duty of care, skill and diligence and. See duty de facto directors, 273, 274–5, 322, 361 of care, skill and diligence debentures duty to prevent trading whilst insolvent and, debenture trust deed, 207–8 321–7 definition, 207 fiduciary obligation to avoid conflicts of debt capital, 198 interest and, 374–5 distinction between share capital, 198 framework of Chapter 6. See Chapter 6, debt finance, 206 framework of charges, 207, 209 illustrations of s 710(2). See illustrations of context of, 206–7 s 710(2) debentures. See debentures Insolvency Practice Schedule (Corporations), instruments, 207 447 security interests. See security interests interpretation of sources of, 206 by ASIC, 39–40 decision-making, 166 complexity of the Act, 40 application of the division of powers, 166–7 impact of general law, 41 control of general meeting and, 166 interpretation provisions, 38–9 single director/shareholder companies, 188 issues and debates in, 39–41 declaration of contravention, 288–9, 346 judicial interpretation of s 793C, 520–3 limitation period, 290 listing relationship and s 1101B, 523 deed of company arrangement, 444, 445, 448, members’ powers to make decisions under. 451 See members’ powers to make decisions administration, 451–2 under the Corporations Act 2001 (Cth) setting aside, 452–6 proving an exemption under Part 6D.2, deed of settlement companies, 8–9, 10, 11, 12, 249 13, 15, 16 raising share capital under Chapter 6D. deregistration of companies, 489–90 See raising share capital under Chapter derivatives 6D definition under Corporations Act 2001 (Cth), regulations and delegated legislation under, 31 500 related body corporate, 109 functions or commercial nature of, 500 Small Business Guide, 40, 102 futures contract, 500 Corporations and Markets Advisory Committee, things that are derivatives, 501 349, 350 things that are not derivatives, 501 abolition of, 34 directors’ duties Corporate Social Responsibility, 62, 64 application of to takeovers. See application of court appointed receiver, 436–7 directors’ duties to takeovers court order to wind up the company, 464 common law and equitable foundations of COVID-19 pandemic, 462 current common law position, 304–6 creditors’ meetings early case law, 300–1 first creditors’ meeting, 449 modern development of the duty of care, second creditors’ meeting, 449–51 skill and diligence, 302–4 creeping takeovers, 583–4 conflicts of interest. See conflicts of interest

Index 629

consequences of breach of. See consequences meaning of best interests of the company, of breach of directors’ duties 333–4 delegation and reliance, 318–20 meaning of bona fide, 331–3 duties of loyalty and good faith, 306–14 meaning of for proper purposes, 339–43 duty not to fetter discretion, 351–2 statutory duty. See statutory duty to act in the duty of care, skill and diligence. See duty of best interests of the company care, skill and diligence summary of, 343–4 duty to act in the best interests of the duty to prevent trading whilst insolvent, 321 company. See duty to act in the best consequences for breach, 327 interests of the company Corporations Act 2001 (Cth) s 588G, 321–3 duty to prevent trading whilst insolvent. See Corporations Act 2001 (Cth) s 588GA, 323–5 duty to prevent trading whilst insolvent Corporations Act 2001 (Cth) s 588H, 325–7 historical development of. See historical safe harbour provisions, 284, 324 development of directors’ duties reliance, 320–1 economic theory, 63, 603 summary of, 284 corporate law and, 50–3 directors’ meetings, 188 effect of non-compliance with internal matters disclosure documents, 242, 244 on validity of a contract, 155–6 content of. See content of disclosure limitations on the application of the statutory documents assumptions, 162 lodgement of. See lodgement of disclosure statutory assumptions, 156–60 documents efficient capital market hypothesis, 495–6 offers requiring lodgement with ASIC, 245 Eggleston Principles, 569, 577 regulating secondary sources of information. employee share scheme buy-backs, 228 See regulating secondary sources of employee shares, 204 information employees supplementary and replacement disclosure excluded employees, 484 documents, 258 insolvent companies and, 484 use of, 243 winding up and, 469, 488 when to be issued, 243 enforcement of financial services and markets, disclosure of personal interests, 171–2 560 directors of public companies and, 379–80 ASIC’s approach to enforcement, 561 exceptions to disclosure of material interests, private enforcement by class actions, 561–2 378 English company law general law and, 379 Bubble Act 1720 and, 8–9 material personal interests, 376–8 Companies Act 1862, 14–15 disqualification orders, 38, 288, 306 early company legislation, 11 dissenting minorities, 617 Joint Stock Companies Act 1844, 11–13 dividends, 213–14, 494 Joint Stock Companies Act 1856, 13–14 payment of, 215–16 nineteenth century, 10–11 when a company may pay, 214–15 seventeenth and eighteenth centuries, 4–8 DOCA. See deed of company arrangement summary of developments in, 15 due diligence defence, 260–1 enlightened shareholder value, 61–3, 337, 349–51 lack of knowledge defence, 261 equal and selective reductions of capital, 219 reasonable reliance defence, 261 approval by shareholders, 221–2 withdrawal of consent defence, 261 fair and reasonable to shareholders, 219–21 dummying, 18, 19, 106 no material prejudice to creditors, 221 duty of care, skill and diligence, 284–5, 306 notice and lodgement with ASIC, 222 business judgment rule, 314–18 equity crowd-sourced funding, 263 duty of care and diligence, 306–14 regulation of, 263–4 modern development of, 302–4 exoneration and relief for directors, 291–2 duty to act in the best interests of the company, indemnification and insurance, 296–7 610 ratification by the members, 292–4 application to corporate groups, 335–6 relief by the court, 294–6 application to other stakeholders, 336–9 external administration, 427 development of the duty, 330–1 extract of particulars, 192 equitable or fiduciary duty, 344–6 extraordinary members’ meeting, 183–4

630 Index

Fair Entitlements Guarantee scheme, 484 licensing as a regulatory strategy, 506 Fair Work Commission, 85 licensing system for, 507 Fair Work Ombudsman, 85 listed companies, 496 feminist theory, 57–9 misconduct in. See market misconduct fiduciary duties over-the-counter markets, 503 intermediaries, 538 remedies for breach of continuous disclosure fiduciary obligation to avoid conflicts of interest, obligation, 519 355–6 role of ASIC in, 498 beneficiaries of, 362–3 supervision of. See supervision of financial closely-held companies, 366–7 markets company about to be wound up, 365–6 financial product advice director purchases shares from a member, definition, 527 364–5 general advice, 528 brief history of equity and the fiduciary types of, 527 obligation, 356–8 financial products commercial context, 367–8 definition, 498–9, 527 corporate opportunities for directors, 368–71 derivatives, 500–1 multiple directorships, 372–3 ‘Division 3 financial products’, 546 provision of fully informed consent, 371–2 obligations of advisers and dealer in. See Corporations Act 2001 (Cth) sections 182 and obligations of advisers and dealers in 183, 374–5 financial products nominate categories relationships, 360–2 securities, 499–500 origin of no conflict rule, 358–9 financial records, 190–1, 192–3 origin of no profit rule, 359–60 failure to comply with requirements for relationship between statute and fiduciary keeping of, 196 obligations, 373–4 financial reporting, 192 fiduciary relationship financial records, 192–3 broker–client, 538–9 Financial Reporting Council, 33 financial advisers financial reports, 193 evolving best interests fiduciary duty, 540–2 annual financial report, 193–4 statutory best interest test, 539–40 auditors’ report, 195–6 summary of best interests duties, 542–3 directors’ declaration on the financial reports, financial assistance transactions 194 problems and benefits of, 230 directors’ report, 194–5 regulation of. See regulation of financial financial services and markets, enforcement of. assistance transactions See enforcement of financial services and financial literacy, 497 markets financial markets, 494–6 Financial Services Authority (UK), 34 ASX Listing Rules and. See ASX Listing Rules Financial Services Guide, 533 Australian, background to regulation of, financial services licensing, 527 503–6 Australian Financial Services Licence. See certification of market operators, 506 AFSL challenging Australian Securities Exchange obligations of advisers and dealers in financial decisions, 523–5 products, 525–7 contents of operating rules, 511 Financial System Inquiries, 503 definition, 507 foreign company, 110 development of Australian stock markets, Foss v Harbottle rule, 394, 409 502–3 exceptions to, 390 enforcement of. See enforcement of financial fraud on the minority, 391–3 services and markets infringements of personal rights, 391 ex ante regulation, 506 interests of justice, 393 ex post regulation, 506 special majority, 391 Financial System Inquiries, 503 ultra vires actions, 391 intermediaries, 496 members’ rights and, 388–90 investors, 497–8 fraud, 101, 146 legal nature of the listing relationship. See separate legal entity doctrine and, 79 listing relationship fraud on the minority, 134, 283, 292, 391–3

Index 631

fraud on the power, 340 National Companies and Securities frustrating action, 609 Commission, 23–4 Future of Financial Advice, 526, 539 national scheme, 1991–2001, 26–8 futures contract, 500 Rae Committee, 22 Rae Report, 22, 24 Gambotto’s case, 134–9, 615–16 Senate Standing Committee on Constitutional expropriation of shares and, 394 and Legal Affairs Report 1987, 24 reaction to, 139–40 Senate Standing Committee on Constitutional when tests in do not apply, 140 and Legal Affairs Report 1989, 36, 288, general law remedies available to minority 337, 350 shareholders, 393 holding company, 109 Gambotto’s case and expropriation of shares, 394 illustrations of s 710(2) infringement of a member’s personal rights matters likely investors may reasonably be and, 394–6 expected to know, 254–6 general market misconduct, 553–4 nature of the securities, 254 general categories of prohibited activity, image advertising, 259 553–4 incorporated associations, 98–9 manipulations based on artificial transactions, incorporation 556–8 capacity to issue financial security, 119–20 price manipulation, 559 choosing the form of, 119–20 general meeting, 133 limited liability of members and, 119 control of and decision making, 166 taxation and, 120 members’ powers in, 168 independent directors, 174, 177 Gladstone Committee, 12 indoor management rule, 146, 155, 156 globalisation information-based market manipulation, 554–6 corporate social responsibility and, 64–5 false or misleading statements, 555–6 golden parachutes, 606 misleading or deceptive conduct in relation to Griffiths Committee, 545 a financial product or service, 554–5 information provided to ASIC Harmer Report, 322, 326, 436, 444, 472 extract of particulars, 192 Hayne Royal Commission. See Royal registered office, 192 Commission into Misconduct in the initial public offerings, 242, 243, 251, 500 Banking, Superannuation and Financial prospectuses, 252, 254, 261 Services Industry injunction remedy, 419–20 High Court of Australia access to company information and, 420–3 Corporations Act 1989 (Cth) in, 25–6 civil proceedings brought by ASIC, 423–4 HIH Group, 382–3, 429 takeovers, 620 historical development of directors’ duties inside information, 547–8 company law and directors’ duties from 1900s insider trading, 544–5 to present, 282–4 acts that breach the insider trading company law and directors’ duties to 1900, prohibition, 551–2 281–2 ‘procure’, 551 history of Australian corporate law, 15–16 tipping, 551–2 beginnings, 1788–1890s, 16 basic prohibition, 545 boom and depression, 1850s–1890s, 16–18 elements of, 285, 321 Companies and Securities Advisory exceptions and defences to the insider trading Committee, 34 prohibition, 552 co-operative scheme, 1980–1990, 23–5 Chinese walls, 552 Corporations Act 1989 (Cth) in the High general, 552 Court, 25–6 knowledge test, 550–1 early moves towards uniformity, 1890s–1930s, prerequisites to the insider trading prohibition, 18–20 545–50 first uniform legislation, 1950s–1980, 20–3 ‘Division 3 financial products’, 546 Interstate Corporate Affairs Commission, 22 information ‘generally available’, 548–9 Ministerial Council for Companies and ‘inside information’, 547–8 Securities, 23 ‘knowledge’, 546

632 Index

insider trading (cont.) civil liability to pay compensation, 260 material effect, 549–50 general liability, 259 ‘person’, 546 liability of members to the company, 104 ‘possesses’, 546 company limited by guarantee, 105 remedies for, 553 company limited by shares, 104–5 insolvency, 427–30 no liability company, 106 ability to pay and, 427–8 unlimited liability company, 106 compulsory winding up in. See winding up in licensing system for financial markets See insolvency Australian market licence definition, 427, 461 limited liability, 73–4, 101, 200 due and payable and, 428–9 application of, 2000 reforms to, 92 employees and, 484 Joint Stock Companies Act 1844 and, 12–13 proving insolvency, 461–2 nineteenth century, 11, 212 secured creditors in, 430–2 liquidation, 459 insolvency law objectives, 460 essential tenets of, 430 liquidators importance of, 429 difference between provisional liquidators, policy tenets of, 459–60 470 purposes of, 429–30 duties of, 470–2 Insolvency Practice Rules (Corporations), 469 notification of, 467 Insolvency Practice Schedule (Corporations), obtaining consent of, 466 447, 469 powers of, 470 insolvent trading registered company liquidators, 439, 447 safe harbour, 324 registration of, 469–70 institutional investors, 167, 498 responsibilities to the court, 471 intermediaries, 496 listed companies, 496 fiduciary duties, 538 listing relationship, 519–523 internal company rules Corporations Act 2001 (Cth) s 1101B and, corporate constitution, 123 523 Memorandum and Articles of Association, 122 judicial interpretation of Corporations Act objects clauses and ultra vires, 122–3 2001 (Cth) s 793C, 520–3 one director/shareholder companies, 123–5 lock-up devices, 614–15 overview, 122 lodgement of disclosure documents, 250 statutory contract. See statutory contract exposure period, 250–1 International Organization of Securities Commissions, 34 managing director, 174 investors, 497–8 implied authority of, 148–9 financial literacy of, 497 market bids, 601 institutional investors, 168, 498 offer in, 602 matters investors likely to know, 254–6 steps of, 601 professional investors, 248, 259, 534 variation and withdrawal of offer in, 602 retail investors, 264, 497–8 market misconduct, 543–4 sophisticated, 247–8, 259, 497 general. See general market misconduct insider trading. See insider trading James Hardie Industries, 90–1, 309–12, 516–17, 556 reasons for, 543 Jenkins Committee, 230, 397 remedies for, 560 joint stock company, 6, 7–8, 9, 10, 11, 100 Marx, Karl, 8, 11 unincorporated, 6, 10, 11 material interests, disclosure of. See disclosure of joint stock principle, 4–5, 6, 7, 8–9, 10 personal interests meetings, 182–3 knowledge test, insider trading, 550–1 directors’ meetings, 188 members’. See members’ meetings lack of knowledge defence, 261 procedures for, 183 Legislative and Governance Forum on members Corporations, 41 liability of to company. See liability of liability for defective disclosure under Chapter 6D members to the company civil liability, 260 statutory remedies available to, 396

Index 633

members’ meetings nominee directors, 177–8 annual general meeting, 183 non-excutive directors, 176–7 convening an extraordinary members’ not-for-profit entities, 105 meeting, 183–4 general meeting. See general meeting obligations of advisers and dealers in financial notice of a meeting, 184–5 products, 525–7 proposing a resolution, 184 definition of retail client, 534–5 proxy voting, 186–7 disclosures required by providers under quorum, 185 Corporations Act 2001 (Cth), 533–4 validation of incorrect procedure, 187–8 financial services licensing, 527–30 voting, 185–6 off-market bids, 585–6 members’ powers to make decisions under the bidder’s intentions, 594–5 Corporations Act 2001 (Cth) bidder’s statement, 591–4 adopting or amending the constitution, 168–9 bidder’s voting power, 596 appointing directors, 169 completion of steps in, 600 changing company name or type, 104 extensions of offer period in, 601 decisions related to share capital, 170–1 financing the bid, 595 disclosure and voting on directors’ lodging and serving the bidder’s statement, remuneration, 171–2 596–7 removing directors, 170 offer. See takeover offer varying the rights attached to shares, 170 offer document, 588 members’ rights, 167–8, 386–8 public announcement, 586–8 additional rights under the Corporations Act role of the independent expert, 598–600 2001 (Cth) and corporate constitution, target’s statement, 597–8 172–3 variation and withdrawal of offer in, 600–1 Foss v Harbottle rule and. See Foss v Harbottle offer information statement, 244–5, 249, 261 rule offer period, 585, 596, 602, 615 injunction remedy. See injunction remedy definition, 588 members’ powers in the general meeting, difference between bid period, 588 168 extensions of, 601 members’ powers to make decisions under start date, 596 the Corporations Act 2001 (Cth). See offers that do not need disclosure, 246 members’ powers to make decisions personal offers, 246–7 under the Corporations Act 2001 (Cth) professional investors, 248 members’ reserve powers, 173 proving an exemption under Part 6D.2, 249 personal rights. See personal rights rights issues, 248–9 Memorandum and Articles of Association, 122 small-scale offers, 246 mens rea, 55 sophisticated investors, 247–8 Mill, John Stuart, 7, 11, 47 twenty investors ceiling, 247 minority shareholders, 189 officers of a corporation, 277–80, 322 dissenting, 617 one director/shareholder companies, 123–5 exit option, 388 one-person companies, 118–19 general law remedies available to. See general One.Tel, 307, 316–17 law remedies available to minority Opes Prime Stockbroking Ltd, 440–1 shareholders oppression or unfairness voice option, 388 remedy for. See remedy for oppression or minute books, 189–90 unfairness Murray Report, 503 ordinary shares, 202 Organisation for Economic Co-operation and National Guarantee Fund, 508 Development National Safety Council Victorian Division, 105 Guidelines for Multinational Enterprises, 64 National Stock Exchange of Australia, 503 organisational perspective on corporate law natural entity theory, 54–6 theory, 56–7 no conflict rule, 355, 358–9 over-the-counter markets, 503 no liability company liability of members to, 106 parent company, 81 no profit rule, 355, 359–60 pari passu principle, 459, 483, 484

634 Index

Parliamentary Joint Committee on Corporations short-form, 245, 249, 257 and Financial Services, 33, 526 specific disclosure requirements, 256–7 Corporate Responsibility; Managing Risk and takeover offers and, 588, 592, 597 Creating Value, 348 transaction specific, 254 Inquiry into Financial Products and Services, public authority, 94 526 public companies, 103 pathfinders, 259 application of division of powers and, 166–7 pecuniary penalty orders, 37–8, 288, 296, 306, 346 directors, disclosure of material interests and, limitation period, 290 379–80 periodic disclosure, 514 directors of, 103–4 perpetual succession, 97 other differences to proprietary companies, personal interests 103–4 disclosure of. See disclosure of personal interests Qintex Group, 113–14 personal rights quasi-partnership companies, 118 infringement of, 391, 394–6 quasi-partnerships, 416 poison pills, 607 quorum, 185 PPS Register, 210 preference shares, 202–3 Rae Committee, 22, 554 redeemable preference shares, 203–4 Rae Report, 22, 24 price manipulation, 559 raising share capital under Chapter 6D, 241 private appointment, 432–3 ASIC relief from application of Chapter 6D, procedure for winding up by court order, 465–7 262 affidavit and, 466 basic framework of Chapter 6D, 244–5 consent of liquidator and, 466 crowd-sourced funding. See crowd-sourced filing and serving originating process, 465–6 funding hearing of the applicant, 466–7 defences, 260–1 making a statutory demand, 465 disclosure documents and. See disclosure making an application for a winding up order, documents 465–6 liability for defective disclosure. See liability nature of application, 465 for defective disclosure under Chapter 6D publishing notice of the application, 466 offer of securities, 245–6 steps to be taken after the hearing if winding offers that do not need disclosure. See offers up order made, 467 that do not need disclosure steps to be taken before the hearing, 466 overview of disclosure requirements, 244 process of approval of schemes of arrangement, preparation of prospectus or shorter 441–2 document, 249 creditors’ meeting, 442–3 regulation of further disclosure, 257 second creditors’ meeting, 443 securities hawking prohibition, 262 termination of a scheme, 443 terminology and context, 242–3 Product Disclosure Statement, 504, 533–4 reasonable reliance defence, 261 professional investors, 248, 534 receivership, 432 profile statement, 244, 245, 249, 257, 261 court appointed receiver, 436–7 promoters, 163–4 duties of receiver, 435–6 proper plaintiff principle, 97 effects of appointment of receiver, 438 proprietary companies, 100–3 liabilities and indemnities of receiver, 436 application of division of powers and, 100–3 order of payment, 437–8 large, criteria for, 102 powers of receiver, 433–5 other differences to public companies, 103–4 private appointment, 432–3 replaceable rules, 103 purpose of, 432–3 small. See small proprietary companies relationship with other external prospectuses, 243, 244, 249 administrations, 438–9 continuous disclosure prospectuses, 257 recovery of assets, 472–3 due diligence defence, 261 insolvent transactions, 477 due diligence for, 260–1 invalid circulating security interests, 479–80 initial public offerings, 252, 254, 261 uncommercial transactions, 476–7 maximum life of, 257 unfair loans, 477–8 raising share capital under Chapter 6D and, 249 unfair preferences, 474–6

Index 635

unreasonable director-related transactions, relation-back day, 467–8, 473, 480 478–9 relevant interests in voting shares, 578–9 rectification, 130 circumstances not giving rise to a relevant redeemable preference shares, 203–4 interest, 580–1 reduction of share capital, 217–18 deemed relevant interests, 579–80 class rights and, 223–4 relevant interests held through bodies registered company liquidators, 439, 447 corporate, 579 registered office, 192 relinquishment orders, 38, 288 registrable Australian bodies, 110 limitation period, 290 registration of companies remedial orders, 575, 620–1 consequences of registration, 97 remedies registration patterns, 108 available to minority shareholders. See general registration process, 95–7 law remedies available to minority regulating reductions of capital, 218 shareholders authorised reductions, 218–19 breach of continuous disclosure obligation, 519 equal and selective reductions. See equal and for insider trading, 553 selective reductions of capital for market misconduct, 560 protecting interests affected by a reduction, injunction remedy. See injunction remedy 222–3 statutory, available to members, 396 regulating secondary sources of information, remedies for breach of the statutory contract, 128 258 additional members’ remedies under a image advertising, 259 shareholders’ agreement, 131 pathfinders, 259 additional members’ remedies under statute, 131 regulation of broker–client relationship rectification and damages, 130 basic securities transaction. See basic securities seeking a declaration or injunction, 128–30 transaction remedy for oppression or unfairness, 397 evolving financial adviser best interests grounds for complaint, 400–6 fiduciary duty, 540–2 orders, 407–8 financial adviser statutory best interest test, standing, 398–9 539–40 statutory derivative action and, 414 summary of financial adviser best interests type of conduct, 399–400 duties, 542–3 remuneration of company directors regulation of financial assistance transactions, 230 disclosure and voting, members’ powers and, consequences for contravention of 171–2 Corporations Act 2001 (Cth) s 260A, replaceable rules, 95, 121, 122, 123, 148, 166, 237–8 168, 169, 170, 173, 174, 175, 178, 183, exempted transactions, 236–7 185, 186, 187, 188, 190, 214, 421 material prejudice, 234–6 breaches of, 128 permitted financial assistance transactions, 231 companies which cannot use, 126 what is financial assistance, 231–4 proprietary companies, 103 regulation of share buy-backs, 225–6 reporting and disclosure, 189 10/12 limit, 226–7, 228 auditor’s report, 192, 195–6 ASX Listing Rules and, 228 company registers, 191 employee share scheme buy-backs, 228 financial records, 190–1 equal access scheme, 226–7 financial reports, 191 on-market buy-back, 228 information provided to ASIC. See information protecting interests affected by a buy-back, provided to ASIC 228–9 minute books, 189–90 selective buy-back, 227–8 retail client, 499 reinstatement of companies, 490 definition, 534–5 related party transactions, 380 retail investors, 264, 497–8 application of the law in HIH collapse, 382–3 rights issues, 248–9 exceptions to member approval requirement, Ripoll Committee, 539 381 Ripoll Report, 526 procedure for obtaining member approval, Royal Commission into Misconduct in the 381–2 Banking, Superannuation and Financial related parties and giving a financial benefit, Services Industry, 88, 262, 266, 271, 280, 380–1 284, 355, 504–5, 561

636 Index

Royal Commission (cont.) problems and advantages of, 224–5 ASIC and, 37 regulation of. See regulation of share buy- recommendations, 505 backs terms of reference, 505 share capital Royal Commission on company law (Ghana), 21 alteration of, 216–17 decisions relating to, members’ powers and, Salomon’s case 170–1 adoption of, 74–6 distinction between debt capital, 198 importance of, separate legal entity doctrine, raising under Corporations Act 2001 (Cth) 72–4 Chapter 6D. See raising share capital schemes of arrangement, 439–40, 565–6 under Chapter 6D must involve an arrangement or compromise, reduction of. See reduction of share capital 440–1 share dividends. See dividends process of approval of. See process of share finance approval of schemes of arrangement classifying shares. See classifying shares secured creditors, 430–2, 479 legal nature of a share, 204–6 securities, 494 types of, 199–200 basic transaction of. See basic securities shareholder activism, 167, 181, 182 transaction shareholders bid class, 585–6, 590, 591, 597, 598, 602, 616, approval of equal and selective reductions of 617, 618 capital by, 221–2 clearing and settlement of, 536 dissenting minorities, 617 compulsory buy-out of, 618 equal and selective reductions of capital and. definition, 245, 499–500, 585 See equal and selective reductions of ED securities, 516 capital fair value for in compulsory acquisitions, minority. See minority shareholders 617–18 target, bidder’s statement and, 596–7 listed, content of disclosure documents for, 257 shareholders’ agreement offer of, 245–6 remedies for breach of statutory contract and, quotation of, 257 131 transfer of in equity markets, 509 shares Securities Commission of New Zealand, 34 bonus shares, 204 Securities Exchange Commission (USA), 34 classification of. See classifying shares securities hawking, 262 employee shares, 204 security interests, 208–9 legal nature of, 204–6 circulating security interests, 208, 209 preference shares, 202–3 definition, 208–9 redeemable preference shares, 203–4 invalid circulating security interests, 479–80 relevant interest in voting shares. See relevant non-circulating security interests, 209 interests in voting shares priority rules, 210 self-acquisition and control of, 217 registration of, 210 varying rights attached to, members’ powers separate legal entity doctrine, 70–2 and, 170 adoption of Salomon’s case, 74–6 shelf company, 97 arguments for limitation of operation of, 91 short-term target company defensive strategies, common law contexts in which doctrine may 605, 607 not apply. See common law contexts in ‘crown jewels’ defence, 607–8 which separate legal entity doctrine may litigation, 608–9 not apply revised profit forecast or dividend policy, 607 exceptions to, 76 white knight defence, 608 importance of Salomon’s case, 72–4 single director/shareholder companies statutory provisions avoiding, 81 decision-making in, 188 shadow directors, 273, 275–6, 277, 322, 361 small–medium enterprises, 246, 263 share acquisitions small proprietary companies, 102 prohibited, 576–7 appointment of auditor and, 195 resulting in an increase in voting power, financial records and reports and, 192–3 577–8 Smith, Adam, 5, 7, 8, 11, 47 share buy-backs, 224 societas, 5, 6

Index 637

solvency break fee, 614–15 cash flow test of, 322, 427 challenging defensive actions before the sophisticated investors, 497 Takeovers Panel, 613–14 South Sea Company, 7, 10 fiduciary argument, 604 special crossings, 536 frustrating action, 609 specific disclosure requirements, 256 lock-up devices, 614–15 content of disclosure documents for listed passivity argument, 603 securities, 257 types of target activity by target. See target disclosure of interests, 256 company defensive activity disclosure of persons, 256 takeover offer, 588 expiry date, 257 bid period. See bid period quotation of securities, 257 conditions in, 589 stakeholder theory, 61 consideration in, 588 corporate social responsibility and, 63–4 defeating conditions, 589, 590, 600, 601, 609, Statement of Advice, 533 613, 620 statutory contract, 125–6 maximum and minimum acceptance effect of, 126–8 conditions, 589–90 interpretation of provisions in, 131–2 offer period. See offer period remedies for breach of. See remedies for takeovers breach of the statutory contract alternatives to, 565–6 statutory corporations, 99 concept of ‘control’, 566 statutory derivative action, 409 creeping takeovers, 583–4 grounds for granting leave, 410–13 defences in relation to, 619–20 other court orders, 413 dispute resolution in, 570–5 remedy for oppression and, 414 framework of Corporations Act 2001 (Cth) who may apply for derivative action, 409–10 Chapter 6 and. See Chapter 6, framework statutory duty to act in the best interests of the of company injunctions, 620 brief history of, 347 liabilities in relation to, 618–19 coexistence of equity and statute, 346 market bids. See market bids Corporations Act 2001 (Cth) s 181, 347–8 options for, 564–5 international comparison, 349–51 reasons for regulation of, 567–8 statutory injunctions, 128 remedial orders by a court, 620–1 stock exchanges takeover activity in Australia, 567 definition, 495 takeovers by consent, 584–5 functions of, 495 Takeovers Panel, 33, 564, 570–2, 608, 613, 620 supervision of financial markets, 508–11 applications to, 572 co-regulation between ASIC and Australian ASIC and, 572 Securities Exchange, 509 bid period and, 588 enforcement of listing, operating and market challenge of defensive actions and, 613–14 integrity rules, 510–11 challenges to, 575–6 legal effect of listing, operating and market declaration of unacceptable circumstances, integrity rules, 510 573, 577, 587, 605 listing, operating and market integrity rules, directors’ recommendations and, 598 509–10 frustrating action and, 609, 612 market participants and, 509, 511, 544 Guidance Note 12, 613, 614 operation of the market by Australian lock-up devices and, 615 Securities Exchange, 509 misstatements and, 619 non-disclosure or misleading statements and, takeover bids, 585 594 definition, 585 proceedings, 571–2 off-market bids. See off-market bids ‘unacceptable circumstances’, 573–5 takeover defences, 602–3 target company defensive activity, 605–6 application of directors’ duties. See application consequences of, 605 of directors’ duties to takeovers long-term defensive strategies, 605, 606–7 auctioneering argument. See auctioneering short-term defensive strategies. See short-term argument target company defensive strategies

638 Index

target company directors’ duties, 611 exemplification of, 480–2 general power of management, 611–12 recovery of assets. See recovery of assets power over transfer of shares, 613 transactions not voidable against certain power to issue shares, 612 people, 480 target’s statement, 597–8 voluntary administration, 443–5 directors’ recommendation, 598 administrator’s role in, 448 notice that statement has been sent to bidder, commencement of, 446–8 600 creditors’ meetings. See creditor’s meetings sending the statement to target shareholders, criticism of, 445 600 deed of company arrangement. See deed of sending the statement to the bidder, 599 company arrangement team production theory, 53–4 effect of, 446–7 tipping, 551–2 main features of, 444 tombstone advertising, 258 voluntary winding up, 487 twenty investors ceiling, 246, 247, 259 creditors’ voluntary winding up, 487–8 types of directors, 174 effect of, 488–9 alternate directors, 178 members’ voluntary winding up, 487 chairperson, 175–6 voting, members’ meetings, 185–6 Chief Financial Officer, 174 proxy voting, 186–7 Chief Operating Officer, 175 company secretary, 175 Wallis Report, 497, 503, 504, 509, 526 de facto directors, 273, 274–5, 322, 361 whistleblowers, 271 director de jure, 361 white knight defence, 608, 612, 614 executive directors, 174 winding up, 414–16, 459, 460 independent directors, 174, 177 ASIC and, 418 managing director or Chief Executive Officer, breakdown of mutual trust and, 416 174 by court order, procedure for. See procedure nominee directors, 177–8 for winding up by court order non-executive directors, 176–7 compulsory winding up in insolvency. See shadow directors, 273, 275–6, 277, 322, 361 winding up in insolvency deadlocks, 417–18 ultra vires, 47, 122–3, 391 employees and, 469, 488 unacceptable circumstances failure of substratum, 417 definition, 573–5 public interest and, 418–19 uncommercial transactions, 476–7 relation-back day, 467–8, 473, 480 unfair loans, 477–8 under Corporations Act 2001 (Cth) s 461, United Nations Global Compact, 64–5 486–7 United Nations Guiding Principles on Business voluntary winding up. See voluntary and Human Rights, 65 winding up unlimited liability company winding up in insolvency, 460–1 liability of members to, 106 court order to wind up the company. See court order to wind up the company vicarious liability effect of, 467–9 company liability and, 89–90 proving insolvency, 461–2 voidable transactions, 216 statutory demands, 462–4, 465 consequences of, 480 withdrawal of consent defence, 261