Related party transactions under Pt 2E of the corporations act: time for reconsideration

The related party provisions under Pt 2E of the Corporations Act 2001 were introduced in 1992 to protect the resources of companies and shareholder interests by requiring that directors disclose financial benefits given to 'related parties' -- those capable of exercising significant influence over the giving of such benefits. The contention of the authors in this article is that Pt 2E has been unsuccessful in achieving its intended purpose, and should be repealed in its entirety. The authors argue that the various provisions of Pt 2E are so confusing and convoluted that they potentially violate the rule of law virtue that laws must be promulgated in a manner that is clear, so that it is apparent from reading the laws what one must do. Further, [*2] the manner in which Pt 2E is presently drafted, especially the definition of related party, fails to reflect the purpose behind the provisions, making the overall operation of Pt 2E ineffective. It is also argued that Pt 2E is superfluous since the fiduciary duty of directors to disclose a conflict of interest, and to a lesser extent the requirement for disclosure of material personal interests under s 191 of the Corporations Act, adequately deal with the transactions presently attracting the attention of Pt 2E. In light of all this, it is contended that the law would be demonstrably improved by repealing Pt 2E.

Statutory injunction - call for amendment to s 1324 of the Corporations Act

It is well documented that s 1324 is a useful tool for restraining a person from engaging in conduct that contravenes the Corporations Act 2001 (Cth). Without examining the provision, one tends to agree with that statement. In practice, however, the provision does not often provide the outcome that is expected. The author argues that the lack of use of s 1324 is due to the uncertainty and ambiguity in the application of the provision. Unlike with ASIC, the test that a person must satisfy when applying for an injunction is not clear cut. Whether damages could be claimed under s 1324 in place of an injunction is also unclear. The article sets out to argue that some integration with the equitable principles is vital for the survival of s 1324, as injunctions are traditionally a remedy conferred in equity and the Parliament has adopted the concept.

Socioeconomic position and children's physical activity and sedentary behaviors : longitudinal findings from the CLAN study

Background: This study aimed to examine cross-sectional and longitudinal associations between socioeconomic position (SEP) and physical activity and sedentary behaviors amongst children and adolescents.

Methods: Maternal education was reported by parents of 184 5-6 year-old and 358 10-12 year-old children in 2001. In 2001 and 2004, physical activity was assessed by accelerometry. Older children self-reported and parents of younger children proxy-reported physical activity and television (TV) viewing behaviors. Linear regression was used to predict physical activity and sedentary behaviors, and changes in these behaviors, from maternal education.

Results: Among all children, accelerometer-determined and self/parent-reported moderate and vigorous physical activity declined over three years. Girls of higher SEP demonstrated greater decreases in TV viewing behaviours than those of low SEP. In general, no prospective associations were evident between SEP and objectively-assessed physical activity. A small number of prospective associations were noted between SEP and self-reported physical activity, but these were generally weak and inconsistent in direction.

Conclusions: This study did not find strong evidence that maternal education was cross-sectionally or longitudinally predictive of children’s physical activity or sedentary behaviors. Given the well-documented inverse relationship of SEP with physical activity levels in adult samples, findings suggest that such disparities may emerge after adolescence.

Has the Financial Services Reform Act fixed the problems with the regulation of securities and derivatives?

The Financial Services Reform Act 2001 (Cth) introduced new definitions of“derivative” and “financial product” into the Corporations Act 2001 (Cth), andreplaced the separate regulatory regimes governing futures contracts andsecurities with a single financial markets authorisation regime and a singleintermediary licensing regime. This article examines the reforms to evaluatewhether they have been successful. It is argued that there are definiteimprovements resulting from the reforms, and the scope for regulatoryarbitrage has been greatly reduced. However, numerous problems remain.There are significant differences in the regulation of securities and deriva-tives. The distinction between securities and derivatives is still based on legalcharacteristics, not economic function. There is uncertainty as to the exactscope and interaction of the definitions, particularly with respect to equityderivatives, warrants and options. The current law has thus not fullyaddressed many of the problems that existed prior to the reforms.

An introduction to CLERP 9

An Introduction to CLERP 9, as its title suggests, is aimed at providing legal practitioners and students with an overview of Australia’s corporate governance reforms, but more than that, it also analyses the events that led to the reforms and provides practical examples of how the amendments will change corporate practices.

The book begins by defining what is generally meant by good corporate governance. It then outlines the relevant recent events that led to introduction and commencement of the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (CLERP 9) on 1 July this year. The corporate failures of Enron and HIH – and subsequent Royal Commission – in 2001, and the failure of private auditing firms to warn of their client’s problems are well summarised.

As well as the Sarbanes Oxley Act of 2002, the US equivalent to CLERP 9, the establishment of the ASX Corporate Governance Council and the release of its Principles of Good Corporate Governance and Best Practice Recommendations are examined in detail.

The book covers all the chief changes, including the new rules for audit independence, financial disclosure, whistleblowing, remuneration for directors and executives and continuous disclosure.

Throughout, the book provides a comprehensive and easy to understand commentary on how the CLERP 9 Act alters the Corporations Act 2001 and the ASIC Act 2001, as well as highlighting important changes that affect present practice. For example, the author notes that under the auditor independence rules, when an audit firm contravenes an independence requirement, liability is placed on all members and directors of the audit firm, not just the lead auditor responsible for a particular audit. This, he says, is aimed at introducing a “culture of compliance”.

As well as providing a quick reference guide to how the CLERP 9 Act amends the Corporations and ASIC Acts at the beginning of the book, the table at the end of the book comparing the corporate governance reforms in the US, UK and Australia will be very useful for practitioners trying to make sense of how multinational clients might be liable across different jurisdictions.

"Sexually transmitted debts":the scope of defences to directors' liability for insolvent trading

The recent demise of prominent Australian corporations, such as GIO Australia Holdings Ltd, One.Tel Ltd, HIH Insurance Ltd and Ansett Australia Ltd, have highlighted the relevance of, inter alia, the Australian insolvent trading provisions embodied in the Corporations Act 2001 (Cth) (formerly Corporations Law). What may not be appreciated, however, is that insolvent trading is not only concerned with large public companies. Many of the insolvent trading cases that come before the courts involve small proprietary companies. Moreover, in many cases these are small “family” companies where there may only be one active director. This gives rise to a difficult issue as to the appropriateness of imposing liability for insolvent trading on a spouse who is, factually, merely a dormant director. This article explores the issue of spousal liability for insolvent trading, particularly focusing on the scope of the current defences to insolvent
trading under s 588H.

Directors' duties to creditors in Australia after spies v the Queen

In August 2000, the High Court handed down its decision in Spies v The Queen . According to most commentators, the decision ended a "quiet revolution" which had been underway since Walker v Wimborne by rejecting the suggestion that directors owe an independent duty to creditors. In this article, the writer responds to this commentary in two ways. First, by contending that the High Court's comments in Spies concerning directors' duties to creditors were merely obiter, thereby leaving open the possibility that an independent duty to creditors will be confirmed in a subsequent case. Secondly, by suggesting that if the commentary to date is correct, then the Spies decision has minimal impact in terms of creditor protection as directors' duties under the Corporations Act 2001 already provide sufficient protection for creditors.

Removal of company directors in a climate of corporate collapses

The string of high-profile corporate collapses recently has provided a fresh insight into many important topics and issues in Australian corporations law. Notwithstanding this, one topic that continues to receive inadequate attention both in Australia and in foreign jurisdictions is the statutory removal of  directors. In an earlier article published in this journal, one of the present authors contributed towards addressing this lack of commentary on the topic by highlighting a number of peculiarities with the provisions under the then Corporations Law regulating the removal of directors in public and proprietary companies. Since that time, the CLERP amendments to the Corporations Law (now Corporations Act 2001) in 2000 introduced some interesting changes to the provisions dealing with the removal of directors in public and proprietary companies. In this article, the authors provide an explanation and critical analysis of these changes, and consider the recent Western Australian Supreme Court decision of Allied & Mining Process Ltd v Boldbow Pty Ltd [2002] WASC 195, which deals with some of the issues raised by the authors in relation to the CLERP amendments. According to the authors, whilst some of the peculiarities raised in the earlier article no longer exist post-CLERP, the current removal provisions still raise some important questions of interpretation.

Directors' personal liability-is the proposed amendment to Section 197 acceptable when compared with Hanel v O'Neill?

On 2 June 2005, the Australian Government announced a proposal to amend s. 197 of the Corporations Act. This is to overturn the decision in Hanel v. O'Neill ("Hanel") where the South Australian Supreme Court has expanded the circumstances in which directors of trustee companies can be held personally liable for the debts under the current section 197(1) of the Corporations Act 2001 (Cth). The multiple interpretations presented in Hanel highlighted the uncertainty of s. 197 and this uncertainty is heightened in at least two subsequent cases. The article provides a detailed analysis of how the decision in Hanel is affecting the directors' freedom of management and suggests some precautionary measures that the directors could take as protection against creditor's actions under s. 197. The author welcomes the proposed amendment because the new section will create certainty for directors as to. the scope of their potential personal liability, but contends that the substance of the proposed s. 197 is not acceptable as there is potential for abuse by directors of certain trustee companies.

Directors' duties to stakeholders : a reform proposal based on three false assumptions

The Corporations and Markets Advisory Committee has been asked to consider whether the duties of directors under the Corporations Act 2001 (Cth) should be broadened to require directors to take into account the interests of stakeholder groups other than shareholders when making corporate decisions. In this article, the author argues that the existing statutory duties of directors in Australia should remain unchanged. The existing duties of directors, in particular the overriding duty of directors to act in the best interests of the company, already accommodates consideration of stakeholder interests by directors if the decision is justifiable as being in the company's best interests. Furthermore, corporate culture and norms are moving towards embracing stakeholder engagement, again with the implicit recognition that integrating stakeholder considerations within the decision-making processes of companies is integral to achieving long-term sustainable growth.

Recent amendment to section 197- is it acceptable?

The majority decided in Hanel v O’Neill that directors of trustee companies
could be held personally liable to discharge the debts incurred by a
company pursuant to s 197(1) of the Corporations Act 2001 (Cth). On
18 November 2005, legislation was passed to amend s 197(1); this was to
overturn the decision. This article evaluates other relevant cases and
argues that the recent amendment to s 197 is unsatisfactory as it leaves
potential for abuse by directors of certain trustee companies. The article
suggests further reform to the section and to this end, suggests ways for
s 197 to reconcile with other parts of corporate law, such as insolvent
trading and directors’ duties.

The effects of an area-based intervention on the uptake of maternal and child health assessments in Australia : a community trial

Background
Recognition of the importance of the early years in determining health and educational attainment and promotion of the World Health Organization Health for All (HFA) principles has led to an international trend towards community-based initiatives to improve developmental outcomes among socio-economically disadvantaged children. In this study we examine whether, Best Start, an Australian area-based initiative to improve child health was effective in improving access to Maternal and Child Health (MCH) services.

Methods
The study compares access to information, parental confidence and annual 3.5 year Ages and Stages visiting rates before (2001/02) and after (2004/05) the introduction of Best Start. Access to information and parental confidence were measured in surveys of parents with 3 year old children. There were 1666 surveys in the first wave and 1838 surveys in the second wave. The analysis of visiting rates for the 3.5 year Ages and Stages visit included all eligible Victorian children. Best Start sites included 1,739 eligible children in 2001/02 and 1437 eligible children in 2004/05. The comparable figures in the rest of the state were and 45, 497 and 45, 953 respectively.

Results
There was a significant increase in attendance at the 3.5 year Ages and Stages visit in 2004/05 compared to 2001/02 in all areas. However the increase in attendance was significantly greater at Best Start sites than the rest of the state. Access to information and parental confidence improved over the course of the intervention in Best Start sites with MCH projects compared to other Best Start sites.

Conclusion
These results suggest that community-based initiatives in disadvantaged areas may improve parents' access to child health information, improve their confidence and increase MCH service use. These outcomes suggest such programmes could potentially contribute to strategies to reduce child health inequalities.

Models for reform : the directors’ duty of care in a modern commercial world

The Australian responses to corporate collapses in the modern commercial world have been
implemented at both judicial and legislative levels over a period of decades. South Africa has lagged behind the reform process, only recently reviewing its company laws with a view to legislatively incorporating, inter alia, its directors’ duties. The consequence of such review of the duty of care is found in subsection 76(3)(c) of the Companies Act 71 of 2008. This article critically evaluates the existing South African common law and the new legislative directors’ duty of care in light of the equivalent duties in Australia and the United States. The analysis ultimately aims at determining whether the approach taken in any of these jurisdictions provides useful guidance in regard to reform options for the duty of care. While the Companies Act contains features that are preferable to the Australian Corporations Act 2001, the impact of the Companies Act on crucial features, such as the objectivity of the duty of care, is unclear and will have to await judicial review. It is concluded that while the South African measures at times echo Australian law in a positive manner, the Australian legislative regime is not without legitimate criticism as it can be unnecessarily complicated. Ultimately it is the United States and Australian common law duty of care that provides the best model for legislative reform.

Sui generis protection for plant varieties and traditional agricultural knowledge : the example of India

Explores the sui generis protection of intellectual property, particularly patents, in biotechnology and traditional agricultural knowledge under Indian law. Focuses on the impact of amendments to the Patents Act 1970 and of the Plant Variety Protection and Farmers' Rights Act 2001 and Biological Diversity Act 2002.

Rural and regional Australian public accounting firm services : service provision, concerns and tensions

Public accounting firms provide a necessary and important service for rural and regional areas. However, the provision of high-quality services is hindered by a number of factors. This paper reports the findings from a large-scale survey of professional accounting firm practitioners located in rural and regional Australia, identifying factors causing concerns and tensions and quantifying their scope and importance. Prominent concerns and tensions identified include adverse effects arising from the employment market, communications technology developments and legislation such as the Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 and the Financial Services Reform Act 2001.