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.

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.

The stakeholder debate and directors' fiduciary duties

It is usually said that a company is a legal entity separate from its management and shareholders and that the business and affairs of a company must be managed by or under the direction of its board. This implies various duties and responsibilities for directors.<br>Directors' duties traditionally include onerous fiduciary duties and obligations of care, skill and diligence in terms of the common law, various statutory provisions in the Companies Act 61 of 1973 requiring certain things of directors or preventing them from doing certain things (see, eg, ss 221-227 and 234-246 of the Act), and possible duties imposed by the articles of association or even separate agreements between directors and their companies.

Do Chinese traditional values matter in regulating China’s company directors? Preliminary findings from surveys in Hong Kong

This article argues that Chinese traditional values do matter in Chinese corporate governance. The object is to report on the preliminary findings of a project supported by the General Research Fund in Hong Kong (HK). Thus far the survey results from HK respondents support the authors’ hypothesis. As such, traditional Chinese values should be on the agenda of the next round of company law reforms in China

Legislative proposals to codify directors' liability for insolvent trading in Hong Kong : a 10-year journey

Hong Kong is a modern global city with a reputation for well-regulated financial markets, but for years, the government had been trying to enact laws on corporate rescue procedures with relatively little success. It is under the pretext of the Global Financial Crisis, the threat of a future economic meltdown gave the Hong Kong government the impetus to revisit this issue. This third attempt to codify statutory obligations on directors’ liability for insolvent trading has been criticised for either setting the standards too high or low for directors trading whilst insolvent. There is also some reservation given the beliefs and values of directors in Chinese family-owned and controlled companies. These companies would most likely trade out the difficult times. Nevertheless, this does not negate from the fact that the enactment of corporate rescue procedures in Hong Kong in 2010 is a momentous achievement for the Hong Kong government.

Integrated reporting and directors’ concerns about personal liability exposure: Law reform options

Integrated reporting () holds significant promise as a new reporting paradigm that is holistic, strategic, responsive, material, and relevant across multiple time frames. However, its uptake in Australia is being hampered by directors’ concerns about personal liability exposure, particularly for forward-looking statements that subsequently prove to be unfounded. This article seeks to illuminate the bases for these liability concerns by outlining the similarities between and the operating and financial review requirements under the Corporations Act 2001 (Cth), and the relevant grounds for liability for misleading and deceptive disclosures, and breach of directors’ duties. In light of this discussion, this article proposes four possible reform options, ranging from minor adaptations to the Framework to far-reaching reforms of the Corporations Act. As assurance is desirable to ensure that reliance can be placed on integrated reports, the development of a legal safe harbour for auditors of forward-looking information is also canvassed.

Unpacking director financial literacy : a Delphi study from Australia

The ‘Centro case’ confirmed that each individual director is responsible for financial governance and must be able to ‘read and understand’ financial statements. Despite the centrality of director financial literacy to directors duties, practitioner and academic literature have failed to clearly define or provide evidence-based reliable measures of director financial literacy. This paper seeks to address this weakness by presenting the initial results of a Delphi study on unpacking the conceptualisation of director financial literacy. We have found that director financial literacy involves more than reading and understanding financial statements. Rather, it encompasses capabilities in applying accounting concepts to the analysis and evaluation of financial statements. As such director financial literacy may be more accurately described as ‘director accounting literacy’.

Unpacking director financial literacy

The social and economic effects of high profile governance scandals such as the National Safety Council, HIH and Centro have triggered much debate, reform and research into predicting and preventing future failures. While this has meant director financial literacy is now recognised as a core capability required of each individual director, there has been little guidance on what this capability involves other than the very general statement of being able to 'read and understand financial statements'. This thesis presents the results of a Delphi study aimed at identifying the core concepts a director needs to master to be financially literate. Thirty-five experts drawn from accounting, education and practice agreed that to be financially literate a director must have a conceptual understanding of 24 basic accounting concepts and be able to independently apply this understanding to a strategic evaluation of the finances of the organisation they serve.

The conundrum of phoenix activity: Is further reform necessary?

Phoenix activity presents a conundrum for the law and its regulators. While there is economic cost associated with all phoenix activity, the underlying behaviour is not always illegal. A transaction with indicators of phoenix activity may be an entirely innocent and well-intentioned display of entrepreneurial spirit, albeit one that has ended in failure. Restructuring post business failure is not illegal per se. Recent reforms targeting phoenix activity fail to grapple with the vast range of behaviour that can be described as phoenix activity since they do not differentiate between legal and illegal activity. This article explores the importance of the distinction between legal and illegal phoenix activity, the extent to which the existing law captures a range of behaviour that can be described as illegal phoenix activity and the response of key regulators and governmental bodies to the absence of single law that attempts to define illegal phoenix activity.

De la légitimité et de la légalité des régimes de droits de souscription d'action en réponse à une offre publique d'achat

Le présent mémoire dresse un portrait des règles entourant la mise en vigueur et l'entrée en application de régimes de droits de souscription d'actions. À cet effet, l'auteur résume les règles entourant les offres publiques d'achat, examine les principes touchés par la mise en place d'un régime de droits de souscription d'actions, ainsi que les effets d'un tel régime sur la valeur des actions. Dans un deuxième temps, l'auteur se penche sur la légalité des régimes de droits de souscription d'actions en effectuant une revue du principe de l'égalité des actionnaires et des droits et obligations des administrateurs en matière de défense à une offre publique d'achat. L'auteur termine en effectuant une revue des divers recours qui s'ouvrent aux divers intervenants.

L’affaire BCE et les devoirs des administrateurs lors d’une prise de contrôle

Depuis les dernières années, les marchés financiers ont été marqués par une volonté des investisseurs, dont les fonds d’investissement privés, de privatiser des sociétés publiques. Plusieurs fermetures de capital se sont matérialisées par des acquisitions par voie d’emprunt (aussi connues sous le nom « leverage buy-out »), en raison notamment des taux d’intérêt peu élevés, d’un crédit plus accessible et d’un certain resserrement de la réglementation applicable aux sociétés publiques. S’inscrivant dans ce contexte, le présent mémoire de maîtrise s’intéresse particulièrement à l’impact des jugements rendus dans le cadre du litige relatif à l’offre d’acquisition par voie d’emprunt de BCE inc. sur les conceptions traditionnelles des devoirs des administrateurs. Dans cette affaire, les détenteurs de débentures de la filiale à part entière de BCE inc., Bell Canada, se sont vigoureusement opposés à cette acquisition. Cette transaction, d’une envergure sans précédent dans l’histoire du Canada, a été scrutée jusqu’à la plus haute instance décisionnelle au pays quant à son caractère raisonnable et équitable et à son effet potentiellement oppressif envers les détenteurs de débentures. Cette étude abordera d’abord l’évolution de la jurisprudence du Delaware sur les devoirs des administrateurs, dans le contexte d’un changement de contrôle, juridiction phare en droit des sociétés aux États-Unis et source d’inspiration marquée en droit canadien. Ensuite, nous nous attarderons sur la position du droit canadien et sur un arrêt marquant rendu par la Cour suprême du Canada, dans l’affaire Peoples. Sur cette toile de fond, cette analyse sera complétée par un examen des motifs des décisions rendues par les trois instances judiciaires dans l’affaire BCE et une réflexion sur l’impact de ces décisions sur le droit des sociétés au Canada.

Le «recours en oppression» : quelles attentes raisonnables pour les créanciers ?

La gouvernance des sociétés par actions canadiennes accorde une place aux créanciers, qui contribuent considérablement à leur financement. Les créanciers fournissent une prestation en échange d’une promesse d’être payé plus tard, de sorte qu’ils sont en conflit d’agence avec d’autres parties prenantes de la société par actions, particulièrement les dirigeants. Principale voie procédurale des litiges en droit des sociétés, le recours en cas d’abus (ou « recours en oppression ») permet d’endiguer certains aspects de ce conflit d’agence en octroyant aux tribunaux de larges pouvoirs pour pallier les abus. Cette intervention judiciaire s’exprime par la théorie des attentes raisonnables, selon laquelle le tribunal doit protéger non seulement les droits des parties, mais également leurs attentes raisonnables. La jurisprudence permet de conclure à des attentes raisonnables relativement à l’information fournie par la société, au patrimoine social et au processus décisionnel des dirigeants. Elle laisse également entrevoir une attente raisonnable à l’égard des modifications du partage des risques découlant d’un événement imprévisible.

Regulatory and enabling approaches to corporate law enforcement : patterns of litigation 1986-2002 and the effect of recent reforms in New Zealand, Australia and the United Kingdom

Enforcement of corporate rights and duties may follow either a ‘regulatory’ or ‘enabling’ model. If a regulatory approach is taken, enforcement action will generally be undertaken by regulatory agencies such as, in New Zealand, the Registrar of Companies and Securities Commission, the Australian Securities and Investments Commission (ASIC) or the Department of Trade and Industry (DTI) in the United Kingdom. If an enabling approach is chosen, enforcement action will more often be by private parties such as company shareholders, directors or creditors. When New Zealand's company law was reformed in 1993, a primarily private enforcement regime was adopted, consisting of a list of statutory directors' duties and an enhanced collection of shareholder remedies, based in part upon North American models and including a statutory derivative action. Public enforcement was largely confined to administrative matters and the enforcement of the disclosure requirements of New Zealand's securities law. While the previous enforcement regime was similarly reliant on private action, the law on directors' duties was less accessible, and shareholder action was hindered by the majority rule principle and the rule in Foss v Harbottle. This approach is in contrast with that used in Australia and the United Kingdom, where public agencies have a much more prominent enforcement role despite recent and proposed reforms to directors' duties and shareholder remedies. These reforms are designed to improve the ability of private parties to enforce corporate rights and duties. A survey of enforcement litigation in New Zealand since 1986 indicates that the object of a primarily enabling enforcement regime seems to have been achieved, and may well have been achieved even without the 1993 reform package. Private enforcement has, in fact, been much more prevalent than public enforcement since well before the enactment of the new legislation. Most enforcement action both before and after the reform was commenced by shareholders and shareholder/directors, and most involved closely held companies. Public enforcement was largely undertaken in areas such as securities law, where the wider public interest was affected. Similar surveys of Australian and United Kingdom enforcement litigation reveal a proportionally much greater reliance on public bodies to enforce corporate rights and duties, indicating a more regulatory approach. The ASIC and DTI enforced a wider range of provisions, affecting both closely and widely held companies, than those subject to public enforcement in New Zealand. Publicly enforced provisions in Australia and the United Kingdom include directors' duties and provisions dealing with disqualification from managing companies, as well as securities law requirements.

Doveri e responsabilita' degli amministratori nella crisi dei gruppi di societa'

Il presente studio si propone di individuare i doveri e le responsabilità, di tipo risarcitorio, degli amministratori, in particolare degli amministratori della società che esercita attività di direzione e coordinamento, in una situazione di crisi o insolvenza nel gruppo, anche in un’ottica di “prevenzione”, e, più precisamente, il complesso di regole di corretta gestione societaria e imprenditoriale, con le quali il silenzio della legge fallimentare in tema di gruppi di società non può non confrontarsi. In particolare, si indagherà sulla possibilità di individuare nel nostro ordinamento giuridico, nel momento di emersione della crisi, doveri di comportamento in capo agli organi di governo della società o ente che esercita attività di direzione e coordinamento, al fine di fronteggiare la crisi, evitando il peggioramento della stessa, ovvero per un risanamento anticipato e, quindi, più suscettibile di esito positivo, nella prospettiva di tutela dei soci c.d. esterni e dei creditori delle società figlie e, nello stesso tempo, dei soci della capogruppo medesima e, quindi, in una prospettiva più ampia e articolata rispetto a una società individualmente considerata. L’oggetto dell’analisi viene introdotto mediante un inquadramento generale della disciplina in materia di gruppi di società presente nel nostro sistema normativo, con particolare riguardo alla disciplina dell’attività di direzione e coordinamento introdotta dal legislatore della riforma del diritto societario (d.lgs. 17 gennaio 2003, n. 6) con gli artt. 2497 ss. cod. civ.. Nella seconda parte verranno individuati e approfonditi i criteri e i principi dai quali ricavare le regole di governance nei gruppi di società e la relativa responsabilità degli amministratori nelle situazioni di crisi nel gruppo. Sulla scorta delle suddette argomentazioni, nell'ultima parte verranno individuate le regole di gestione nell'ambito del gruppo nel momento di “emersione” della crisi e, in particolare, i possibili “strumenti” che il nostro legislatore offre per fronteggiarla.