Australian Journal of Corporate Law Volume 32 Part 3

Articles

Similar insider trading laws, different enforcement reality: An evaluation of Australian and Singaporean enforcement approaches — (2017) 32 Aust Jnl of Corp Law 283
Lev Bromberg, George Gilligan and Ian Ramsay

Singapore’s insider trading laws were originally adopted from Australian legislation. However, as we illustrate in this article, the enforcement of these laws has taken very different forms in recent years. Our empirical study identifies that the vast majority of insider trading sanctions imposed in Australia were criminal, while in Singapore the dominant sanctions were civil pecuniary penalties. Based on our empirical findings and interviews conducted with senior staff employed by the respective financial regulators, we outline a number of practical and policy objectives to explain their respective enforcement approaches, and discuss the implications for general deterrence.

Reforming Australian insider trading laws: A new model of corporate criminal liability — Part I — (2017) 32 Aust Jnl of Corp Law 314
Juliette Overland

The regulation of insider trading is a controversial and complex area of corporate law. Increasing numbers of individual offenders have been convicted of insider trading in recent years, but there has never been a successful criminal prosecution of a corporation in Australia. The absence of any successful prosecution, and the dearth of cases concerning corporate defendants, means the law is untested on many relevant issues, complicated by conflicting views as to the manner in which insider trading laws are to be applied to corporations. If difficulties in applying insider trading laws to corporations were to be appropriately resolved, greater insider trading enforcement action might be brought against corporations, increasing the general deterrent effect for all potential offenders. Additionally, corporations would have greater certainty as to their potential liability.

This two-part article focuses on corporate criminal liability for insider trading. Part I sets out the nature of the insider trading offence, discusses the criminal liability of corporations, and identifies the many difficulties and inconsistencies which exist when seeking to apply elements of the insider trading offence to corporations. Part II analyses the Chinese Wall defence to insider trading and identifies problems in its application to corporations. It concludes with a proposal for a new model of corporate criminal liability for insider trading, aimed at addressing the various problems identified in both Parts I and II of this article, based on the need for legislative certainty and the market integrity rationale which underpins Australia’s insider trading laws.

The evolution of the law of competing directorships in the United Kingdom, Australia and Hong Kong — (2017) 32 Aust Jnl of Corp Law 333
Dr Sharon Korman and Dr Rosemary Teele Langford

For many years an anomalous exception to the traditionally strict fiduciary duty to avoid unauthorised conflicts has existed in corporate law jurisprudence in a number of common law jurisdictions. That exception — the ‘Mashonaland principle’ — has provided that a director of a company may become a director of a competing company even in the absence of the first company’s consent. The article critically analyses the principle from a legal and a policy perspective. It traces the evolution of the principle and its subsequent erosion in England, Scotland, Australia and Hong Kong, highlighting the different routes to an approach to competing directorships that is now both uniform and more closely aligned with traditional fiduciary principles.

How do we assess the risk of personal liability for directors arising out of tortious acts? — (2017) 32 Aust Jnl of Corp Law 351
Mark Byrne

This is well-recognised as a confusing area of the law. This question is still unsettled today even though the first test which attempted to resolve the matter was introduced in 1924. Further tests have developed and a great deal of scrutiny has been given to them all as alternatives to a solution. This article attempts to summarise the origins of the law and then follow its progress in order to propose a way forward that may provide the certainty and predictability that directors must crave to properly assess their personal risk. It will be argued that all tests should not have to stand alone but contribute to a scale of analysis that will find a director either a primary or joint tortfeasor.

The impact of unliquidated claims when assessing solvency: A director’s dilemma — 32 Aust Jnl of Corp Law 368
Lindsay Powers

Are claims for unliquidated damages ‘debts’ which a company must have the ability to pay when testing its solvency? In 2006 the NSW Court of Appeal unanimously held that they are not. In 2008, a first instance judge of the same court concluded that the Court of Appeal’s decision was inconsistent with earlier High Court authority, but nevertheless concluded that he was bound to follow the Court of Appeal’s decision. In 2009 a differently constituted NSW Court of Appeal comprising five judges heard argument on the issue of whether there was inconsistency between the two decisions. But that court did not ultimately decide the issue. Given the potential for personal liability under the insolvent trading provisions of the Corporations Act 2001 (Cth), in this state of affairs what should responsible directors do when faced with large claims for unliquidated damages, the successful prosecution of which might render their company insolvent?

Regulatory Issues and Developments
Current issues concerning unconscionable conduct — (2017) 32 Aust Jnl of Corp Law 382
Andrew Eastwood

The Australian Competition and Consumer Commission (‘ACCC’) and the Australian Securities and Investments Commission (‘ASIC’) are increasingly bringing claims of unconscionable conduct.1 While not as ubiquitous as claims of misleading or deceptive conduct, causes of action based on the unconscionable conduct provisions are also popular among private plaintiffs. Often, unconscionability is alleged in tandem with other allegations; for instance, in the civil penalty proceedings brought by ASIC against three major banks concerning the bank bill swap rate (‘BBSW’), ASIC alleges market manipulation in addition to (among other things) unconscionable conduct. Another example, in the private context, is the bank fees class action, where it was contended that the relevant fees constituted a penalty, and also that the banks had engaged in unconscionable conduct.

One reason for the increased reliance on the unconscionability provisions by regulators and plaintiffs is, in my view, the uncertain application of the provisions and their potential to extend to a wide range of conduct. In that context, it is useful to briefly discuss three of the current issues that arise in relation to the interpretation and application of the relevant provisions.

Corporate Insolvency Update
The path that makes sense: Using holding DOCAs — (2017) 32 Aust Jnl of Corp Law 386
Christopher Symes

Sometimes when walking through a national park, council parklands or a government reserve there is the proper developed path and then there is the informal path made by regular use. Often this new informal path is a ‘shortcut’ but occasionally this shortcut just seems to go where the path should, it just makes sense. From time to time new paths are created by practitioners to move off the pathways presented by the law. One example of this is the holding deed of company arrangement (hereafter ‘holding DOCA’). A holding DOCA is implemented for the purpose of avoiding the need for an application to the court to extend the convening period under Corporations Act 2001 (Cth) s 439A. The holding DOCA is presented and adopted by a s 439A meeting of creditors and entered into by the administrator and the company. It is drafted to provide more time for a voluntary administrator (or the directors or third parties) to develop proposals for restructuring or otherwise resuscitating the company.