Corporate, ASIC and financial services law research projects
Below you will find examples of current and completed research projects in Corporate, ASIC and financial services law, including:
- Corporate law, regulation and ASIC law
- Corporate law enforcement
- Corporate accountability
- Comparative corporate law
- Financial services regulation
2022 View details
The way in which companies disclose and manage climate-related financial risks is a matter of increasing interest and concern for market stakeholders, particularly institutional investors. Building on prior studies which have analysed emerging disclosure practices in Australia, this research analyses the tone of climate risk disclosures by ASX200 companies. Drawing on disclosures from 2015-2019, the study explores the most common tones of language used, whether and how they differ across economic sectors, how disclosure tone is influenced by corporate governance and other company characteristics, as well as whether approaches are changing over time. It is well established that disclosure tone, along with other factors such as its location and length, can influence the judgements and decision-making of market stakeholders. In the emerging, fast developing field of climate risk disclosure, textual analysis therefore presents an alternative analytical tool to help market stakeholders explore and assess a company’s perceptions and managerial judgement about climate-related risks to feed into their broader analysis about the preparedness of a company to manage these risks and seize associated opportunities. It also offers insights for regulators as they develop guidance to scaffold existing legal obligations and oversee compliance in this area.
This project, which has received $40,762.50 in funding, investigates the preparedness of Bangladesh's apparel industry for increased AI and Big Data from a socio-political perspective.
Bangladesh's apparel industry is the leading globally-connected industry that deals with Big Data across the supply chain, ranging from collecting data of millions of workers to generating data needed for global brands. In addition, as part of the export requirement, the industry has to comply with several international regulations, including the General Data Protection Regulation (GDPR).
Stakeholder ideas of the late 20th century challenged the doctrine that corporate managers work exclusively for the interests of equity owners. Yet markets have long been delivering alternative models where workers, customers or suppliers own the firm and run it in their interests. Stakeholder ownership in the form of customer, supplier or worker-owned cooperatives and mutuals also incidentally addresses possible managerial conflict of interest in duties to multiple constituencies by establishing obligations to a single species of stakeholder. The research examines the development of such forms locating them within the stakeholder paradigm and within the modern economy. It provides theoretical insights into the persistence of stakeholder owned enterprises with transaction cost, capital and market analyses, noting additional behavioural factors working both for and against their persistence. The research finds that comparative organisational advantages of cooperative and mutual forms appear to exist in particular niche service and product lines involving longer term contracts and weaker market governance due to asymmetric information or where there is excessive market power of other entities in the supply chain. It also examines the trend to demutualisation postulating the operation of a market for organisational forms and imperfections in such market.
- Michael Duffy
- Chenxia Shi
- Duffy M and Shi C, ‘The curious case of stakeholder ownership: theoretical insights into the niche persistence of the cooperative and mutual form across advanced economies’ (2022) 38(1) Australian Journal of Corporate Law 94
Prompted by class action litigation reform in New Zealand, this research examines private civil class actions as a means of enforcing securities disclosure laws that regulate the New Zealand securities market. It looks at the nature of the private securities class action generally and the normative, regulatory and procedural aspects including views from Australian and American practice before examining the importance of market disclosure and current legal regulation of securities disclosure in New Zealand. Recent public enforcement of securities disclosure in that country (particularly of continuous disclosure laws) including notable actions is reviewed, opening the discussion as to the role for private enforcement where the question is posed as to whether securities class actions can or do improve corporate disclosure including the effects of private securities class actions as remedial as well as preventative. The research also notes recent changes in continuous disclosure laws in Australia and references the New Zealand Law Commission’s enquiry into class actions and litigation funding noting particularly their relevance to securities class actions in New Zealand
- Michael Duffy
- Larelle Chapple
- Duffy M and Chapple L, ‘The rise of the securities nondisclosure class action in New Zealand and views from Australian and global practice’ (2022) 41(4) Civil Justice Quarterly 408
This research examines crowd funding in Malaysia in the context of the setting up of the National Hope Fund (Tabung Harapan Malaysia) by Hope Coalition (‘Pakatan Harapan’) after the defeat of the National Front (‘Barisan Nasional’) party after 61 years in power at the election of May 9th 2018. With the national debt hitting RM1 trillion, Pakatan Harapan set up an account to facilitate the receiving of donations from the public with the aspiration of dealing with the national debt crisis. The research looks at legal issues in relation to such crowdfunding noting that as of 14th January 2020, the amount in the fund was RM205,491,219 with calls to civil servants, the airline industry and many corporate organisations to contribute as part of their corporate social responsibility.ress the above issues in order to derive valid conclusions on the legality of the crowdfunding.
- Krishnan, L. (2022). Crowdfunding in Malaysia: Revisiting National Hope Fund. Malayan Law Journal 3, 126 - 135.
This research analyzes the impact of COVID-19 on corporations in Malaysia, discussing the challenges and the corporations’ responses to them. The relevant provisions in the Companies Act 2016 are examined, and where necessary, reforms are proposed in light of the new business environment brought on as a result of the pandemic. The research also discusses interim measures initiated by regulators to mitigate the impact of COVID-19 and analyzes the adequacy of these by comparison with countries such as the UK, Australia, and Singapore.
The research also examines the Malaysian Companies Act 2016 which replaced the Companies Act 1965 and its adequacy in helping companies withstand the impact of Covid 19. The old act had been amended over 35 times, but amendments were not holistic nor in tandem with developments in developed countries such as the United Kingdom, Australia and Singapore. The new CA 2016 aims to keep Malaysian companies relevant and competitive, to reflect the developments taking place elsewhere and preserve Malaysia as an attractive business hub locally, regionally and globally. The enactment of the CA 2016 is a result of the proposals made by the Corporate Law Reform Committee set up by the Companies Commission of Malaysia. However, it took 13 years before the proposals came into effect in the form of the CA 2016.
- Krishnan, L. (2021). Implications of the COVID-19 Pandemic for the Malaysian Companies Act 2016. In Trakic, A (eds). Covid-19 and Business Law. De Gruyters: Oldenbourg
- Krishnan, L & Chan, W. M. (2022). The Impact of COVID-19 on Corporations and Companies Act 2016, Springer: New York
2021 View details
On 25 May 2020 the operation of the continuous disclosure provisions in Chapter 6CA of the Corporations Act were temporarily modified by a Determination of the Federal Treasurer made pursuant to a package of measures intended to deal with the Coronavirus pandemic. The changes imported a requirement of knowledge, recklessness or negligence into s674, s675 and s677. The research considers the effect of the changes compared to the earlier provisions in relation to requirements of proof of awareness of material information and other elements of intent, knowledge, recklessness and negligence. It also examines the form of the changes and how effective same may be.
- Michael Duffy, ‘Modifications to continuous disclosure requirements and the role of corporate knowledge, intent, recklessness and negligence in breaches: A discussion’ (2021) 38(2) Company and Securities Law Journal 138.
This research explores the political, economic and social forces that combine to create barriers to entry to corporate board positions for talented women in China and India. The importance of power relations and the forces shaping power relationships is explored, and a variety of strategies aimed at facilitating women's entry to corporate boards are examined.
- Alice De Jonge, Women on Boards in China and India: a story of regulation and empowerment, Routledge, Taylor & Francis publishing (forthcoming).
The research examines reforms that promote gender diversity on Malaysian corporate boards. It adopts a law and social movements perspective to analyse the practical workings of the reforms which have emerged amidst fraught interactions between the state and women’s rights activists. The research draws on empirical data to ascertain the perspectives of insiders and examines the composition of boards in 30 of the largest listed companies.
- Dr Vivien Chen (Monash Business School)
- Professor Michelle Welsh (Monash Business School)
- Dr May Fong Cheong (Australian Catholic University)
- Vivien Chen, Michelle Welsh and May Fong Cheong, 'Gender Diversity on Malaysian Corporate Boards: A Law and Social Movements Perspective' (2022) Journal of Law and Society (forthcoming)
Climate change is now widely recognised as a source of financial risk for institutional investors like superannuation funds, which may manifest as reduced asset values and investment returns. Investors are also facing increasing pressure to play a constructive role in society’s response to climate change by aligning portfolios to the 2015 Paris Agreement on Climate Change. This article presents an empirical study of current and emerging climate-related investment practices in Australia, underpinned by an analysis of the legal, regulatory and theoretical frameworks in which investment decision-making takes place. While the study confirms that approaches to climate risk assessment and management are rapidly evolving, it also suggests that integrating climate considerations into investment decision-making and adopting responsible investment practices to manage climate-related risks is not encouraged by existing legal frameworks and dominant, mainstream approaches to investment. There remain considerable legal and practical barriers to aligning investment decision-making with the Paris Agreement
- Anita Foerster
- Kym Sheehan
- Daniel Parris
- Anita Foerster, Kym Sheehan and Daniel Parris, Investing for a safe climate? (2021) 44(4) University of New South Wales Law Journal 1409-1457
This research examines the law which governs the role of auditors under the Malaysian legal framework. Against the backdrop of financial irregularities which occurred in Malaysia in the period 1998 to 2018, the research suggests that the current corporate law governing auditors, is in need of a revamp. This would include the adoption of a principled approach to the auditor’s role as well as a redefinition beyond mere ‘watchdog’, and a move toward a greater ‘bloodhound’ role.
The research also looks at auditors’ duties and obligations in light of COVID-19 pandemic, including effects of movement control orders in Malaysia that either prohibited or restricted auditors from physically travelling to their client companies to carry out audits. The effects on client companies ability to provide necessary documents and information as required by the auditors, especially in cases where documents are at the physical premises of the company is also noted. The issues of digitalising documents, cloud storage and employees’ ability to answer relevant questions if hampered by movement control orders are also noted. Ultimately the question is asked whether audits were compromised during COVID though the efforts of the audit profession and regulators to prevent this are noted. These included guidelines issued by professional bodies and regulators to ensure that client companies did not take advantage of the pandemic in the audit process.
- Krishnan, L. "Are Auditors Watchdogs or Bloodhounds - Evidences from Malaysia, (2021), International and Comparative Corporate Law Journal, 15(1), 28 - 50, (2021).
- Krishnan, L. (2022). Auditors’ Duties and Obligations in Light of COVID-19 Pandemic. In L. Krishnan, & W.M. Chan. (2022). The Impact of COVID-19 on Corporations and Companies Act 2016, Springer: New York.
2020 View details
Many studies of the early evolution of company law in ‘origin’ jurisdictions such as England and France have alerted us to the politically contested nature of this area of law, particularly during the period when the principle of the freedom of incorporation without overt interference from the state was being established. Only relatively recently has there been a growth in studies which have analysed the ‘transplant’ and subsequent development of company law in colonial settings with such sensitivity to politics. Some of this scholarship has been framed as a corrective to the general assumption that colonial company law transplants were merely uninteresting copies of the law of the metropolis. Meanwhile, other papers have been written in critical response to the ‘legal origins’ thesis of the late 1990s which assumed that transplants of company law had occurred in a straightforward and uncontested manner during the colonial era such that it was possible to causally link levels of shareholder protection in the present to the legal family of a country’s former coloniser. Such raise a number of interrelated questions: To what extent did colonial company law function as a tool of imperialism to facilitate both state and private exploitation of resources? To what extent was the initial transplant a direct copy of the law of the metropolis, and then to what extent did any subsequent changes continue to follow the pattern of the domestic law of the colonial power? To what extent was the law contested by local populations and/or adapted for their use? And further, was the law actually used in the colony and, if so, by which population groups?
- Petra Mahy ‘Company Law Transplants and Change in Colonial Southeast Asia’ Ch n: Colonial Adventures: Commercial Law and Practice in the Making pp 202-220
Since the conclusion of the Paris Agreement in 2015, there has been a very significant shift in the way climate change is framed and understood by business and investors. No longer merely an ethical or corporate social responsibility issue, climate change is now widely recognised as posing financially material risks. Equally, business and investors are increasingly cast as critical actors in society's response to climate change. If sustainability is integral to investor decision-making on how to construct portfolios and allocate capital, as well as to investor stewardship activities, such as engagement with companies, investors can potentially play a significant role in helping to align capital, resources and economic activity to clean energy outcomes. Drawing on an analysis of the legal context, prevailing investment theory and practice, as well as the emerging sustainable finance agenda, this project explores decision-making by a group of Australian institutional investors (superannuation funds and fund managers) on climate change. The project seeks to evaluate whether and how this decision-making is changing as a result of the consideration and integration of climate risks; and in turn, whether this is contributing to a shift of capital and resources in ways which support the transition away from a carbon intensive to a clean energy economy.
- Dr Anita Foerster (Department of Business Law and Taxation, Monash University)
- Dr Kym Sheehan (Sydney Law School, University of Sydney)
- Anita Foerster, Kym Sheehan, Daniel Parris, 'Investing for a safe climate?' (2021) 44(4) UNSW Law Journal (forthcoming)
- Anita Foerster, 'An Australian man successfully sued his super fund over climate risk. Here's what that means for your nest egg' The Conversation (12 Nov, 2020)
- Anita Foerster, 'Climate Justice and Corporations' (2019) 30(2) King's Law Journal, https://doi.org/10.1080/09615768.2019.1645447
The research is part of a larger Monash University Network of Excellence project on Enhancing Corporate Accountability. The comparative study of regulatory and corporate governance examines mechanisms that are available to hold directors accountable for breaches of duty in Singapore, Hong Kong, Malaysia, India, Australia, the US and the UK.
- Professor Michelle Welsh
- Professor Jennifer Hill (Monash University Law School)
- Dr Vivien Chen
- Dr Tim Bowley (Monash University Law School)
- Dr Olivia Dixon (University of Sydney Law School)
- Associate Professor Luh Luh Lan (NUS Law Faculty and Business School)
- Associate Professor Dan Puchniak (NUS Law Faculty)
- Associate Professor Umakanth Varottil (NUS Law Faculty)
- Professor Wai Yee Wan (City University of Hong Kong Law School)
- Tim Bowley and Jennifer Hill, 'Stewardship and Collective Action: The Australian Experience', in Global Shareholder Stewardship: Complexities, Challenges and Possibilities (forthcoming, 2020, Cambridge University Press, UK).
- Vivien Chen, 'Enforcement of Directors' Duties in Malaysia and Australia: The Implications of Context' (2019) 19(1) Oxford University Commonwealth Law Journal 91.
- Wai Yee Wan, Christopher Chen and Say H. Goo, 'Public and Private Enforcement of Corporate and Securities Laws: An Empirical Comparison of Hong Kong and Singapore' (2019) 20 European Business Organization Law Review 319.
- Olivia Dixon and Jennifer Hill, 'Australia: The Protection of Investors and the Compensation for their Losses', in Global Securities Litigation and Enforcement, 1063-1100 (Cambridge University Press, UK: Pierre-Henri Conac and Martin Gelter, eds., 2019).
- Jennifer Hill and Matthew Conaglen, 'Directors’ Duties and Legal Safe Harbours: A Comparative Analysis' (with Matthew Conaglen), in Research Handbook on Fiduciary Law, 305-330(Edward Elgar Publishing Ltd, UK: D. Gordon Smith and Andrew S. Gold, eds., 2018).
- Luh Luh Lan, 'Directors' Duties' in Essentials of Corporate Law & Governance in Singapore (2018) Sweet & Maxwell.
- Jennifer Hill, ‘Good Activist/Bad Activist: The Rise of International Stewardship Codes’, 41 Seattle University Law Review 497-524 (2018).
- Andrew Keay and Michelle Welsh, 'Enforcing Breaches of Directors' Duties by a Public Body and Antipodean Experiences' (2015) 2 Journal of Corporate Law Studies 255 - 284.
- Michelle Welsh, 'Realising the Public Potential of Corporate Law: Twenty Years of Civil Penalty Enforcement in Australia' (2014) 42 (1) Federal Law Review 217 - 240.
- Michelle Welsh and Vince Morabito, 'Public vs. Private Enforcement of Securities Laws: An Australian Empirical Study' (2014) 14 (1) Journal of Corporate Law Studies 39 - 78.
- Umakanth Varottil 'Directors' Duties and Liabilities in the New Era', NSE Quarterly Briefing (No. 5, April 2014).
- Renee Jones and Michelle Welsh, 'Toward a Public Enforcement Model for Directors' Duty of Oversight' (2012) 45 (2) Vanderbilt Journal of Transnational Law 343 - 403.
- Jennifer Hill, 'Centro and the Monitoring Board – Legal Duties Versus Aspirational Ideals in Corporate Governance', 35 University of New South Wales Law Journal 341- 359 (2012).
The project investigates the regulation of debt management firms in Australia and internationally. The financial impact of Covid-19 has led to increasing debt and vulnerability to predatory conduct by businesses seeking to profit from consumers in financial difficulty. Consumer advocates have raised significant concerns regarding harm to vulnerable consumers caused by debt management firms (DMFs). Likewise, ASIC’s report in 2016 reveals that fees and costs of DMFs’ services are often opaque, and consumers in financial difficulty are commonly channelled towards high-cost services provided by DMFs which are unsuited to their needs when there are cheaper and more suitable options for managing debt.
The research is aimed at facilitating a more nuanced understanding of:
- the international regulation of DMFs;
- challenges faced by Australian consumers who have engaged the services of DMFs; and
- potential reforms to the Australian regulatory framework aimed at strengthening safeguards for vulnerable consumers from harm.
- Vivien Chen and Candice Lemaitre, 'Regulating a Quick Fix for Debt Problems' Australian Business Law Review (forthcoming)
- Vivien Chen, ‘Online Payday Lenders: Trusted Friends or Debt Traps’ (2020) 43(2) University of New South Wales Law Journal 674
- Vivien Chen, Lucinda O’Brien and Ian Ramsay, ‘An Evaluation of Debt Agreements in Australia’ (2018) 44(1) Monash University Law Review 151
- Vivien Chen and Michelle Welsh, 'Things you need to know before using a debt management company', Monash Impact, 2 February 2021.
Regulating cryptocurrency is a difficult task for regulators. At present, there is no clear and authoritative definition of cryptocurrency, making it difficult for regulators to determine which aspects require regulation and, if so, how to control and monitor activities. Defining the legal nature of cryptocurrencies is important. At its most fundamental level the answer to these matters will determine the regulatory framework within which trading in cryptocurrencies may or may not occur. The government may simply prohibit trading in cryptocurrencies, even making such transactions illegal. Alternatively, trading may not only be legal, but facilitated by government concessions. A government may recognise cryptocurrencies as 'currency'. It may be determined that transactions involving cryptocurrencies merely involve the sale of property, possibly akin to a financial product. This research discusses the different approaches to regulating cryptocurrency and the taxation implications in four Asian countries which account for a large proportion of cryptocurrency transactions.
- Julie Cassidy
- Man Hung Alvin Cheng
- Toan Le
- Eva Huang
- Cassidy, J., Cheng, M. H. A., Le, T., & Huang, E. (2020). A toss of a (bit)coin: the uncertain nature of the legal status of cryptocurrencies. eJournal of Tax Research, 17(2), 168-192. https://www.business.unsw.edu.au/research-site/publications-site/ejournaloftaxresearch-site/Documents/The-uncertain-nature-of-the-legal-status-of-cryptocurrencies.pdf
- Cassidy, J., Cheng, M. H. A., & Le, T. (2020). It's a bird! It's a plane! It's a cryptocurrency! What's that? in search of a regulatory framework for cryptocurrencies. New Zealand Journal of Taxation Law and Policy, 26(3), 331-357
- Paul Latimer
- Michael Duffy
- Latimer, P., & Duffy, M. (2019). Deconstructing digital currency and its risks: why ASIC must rise to the regulatory challenge. Federal Law Review, 47(1), 121-150. https://doi.org/10.1177/0067205X18816237
Following the Future of Financial Advice reforms, the ‘suitability’ and ‘appropriateness’ focus for financial advice has been relocated and supplemented by a ‘best interests’ focus in s 961B of the Corporations Act 2001 (Cth). Yet, as the Australian Government’s Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has pointed out, structural issues may often work against best interests being paramount. Further, moves to make the statutory obligation replicate a fiduciary obligation have been resisted in the consultative process that developed s 961B and related obligation sections and any replication is far from clear. Another key issue is the extent to which aspects of the best interests duty are satisfied by a ‘tick a box’ approach. This aspect of s 961B is said to provide ‘safe harbour’ for advisers, yet has been criticised by the Royal Commission as more procedural rather than substantive. However, removing the safe harbour altogether may create more problems than it solves. The researchers argue that a catch-all provision in s 961B(2)(g) preserves substantive flexibility, and caution against any reform that leaves no procedural guidance for financial advisers to anchor their behaviour in fulfilling the best interests duty.
The research has also looked at the situation in the United Kingdom where trust in financial advisers is said to be greater than in Australia.
- Liu, H-W., Le, T., He, W., & Duffy, M. (2020). In whose best interests? Regulating financial advisers, the royal commission and the dilemma of reform. The Sydney Law Review, 42(1), 37-68.
- He, W., & Liu, H-W. (2021). Rebuilding trust: regulation of financial advisers in the UK. Capital Markets Law Journal, 16(4), 393-413.
- He, W., & Liu, H-W. (2021). Regulating financial advisers in the UK: lessons for Australia. University of New South Wales Law Journal, 44(1), 424-452.
2019 View details
Strategic climate change litigation can take a number of different legal forms, involve a range of public and private actors and pursue various objectives. While it is generally framed as a tool to achieve policy or social change, it can also be thought of as a tool to help address and remedy the injustices associated with climate change. Climate injustices involve highly contested questions of distributive justice(eg who should take responsibility for reducing emissions and financing adaptation considering wealth and capacity?),compensatory justice (eg how should historical contributions to climate change impacts be taken into account and who should compensate victims?) and intergenerational justice (eg to what extent should future generations bear the brunt and cost of managing climate change impacts caused by the actions and decisions of past and present generations?). Strategic climate change litigation can help to establish, recognise or clarify legal responsibilities of public and private actors, shift social norms and public discourse and thereby the decision-making of both private and public actors, including by pressuring governments to introduce new laws and policies to address climate justice and responsibility.
- Dr Anita Foerster
- Anita Foerster, Climate Justice and Corporations (2019) 30(2) Kings Law Journal 305
The correct analysis of proof of causation of loss in securities market nondisclosure class actions (referred to as "shareholder class actions") is hotly disputed. As well as being a matter of doctrinal significance, it has substantial relevance to the practicalities and costs of prosecuting these actions and to the related issue of court efficiency and case management. Traditionally, reliance-based causation is required but market-based causation was considered arguable at an interlocutory stage by the Full Federal Court in a class action. It has also been accepted by the NSW Supreme Court in a non-class action. It is suggested that final judicial acceptance of market-based causation in a class action at trial could be balanced by safeguards that would allow rebuttal of causation in some situations and some limiting of the class. This may allay somewhat the fears of those who see market-Truth based causation as contrary to policy and principle.
- Dr Michael Duffy
- Michael Duffy, 'Causation in Australian securities class actions: searching for an efficient but balanced approach' (2019) 93910) Australian Law Journal 833 (this article was cited by Beach J in the landmark Federal Court decision of TPT Patrol Pty Ltd as Trustee for Amies Superannuation Fund v Myer Holdings Limited  FCA 1747 (24 October 2019)
Following the Future of Financial Advice (‘FoFA’) reforms, the ‘suitability’ and ‘appropriateness’ focus for financial advice has been relocated and supplemented by a ‘best interests’ focus in s961B of the Corporations Act 2001 (Cth). Yet, as the Royal Commission into Banking and Financial Services has pointed out, structural issues may often work against best interests being paramount. Further, moves to make the statutory obligation replicate a fiduciary obligation have been resisted in the consultative process that developed the sections and any replication is far from clear. Another key issue is the extent to which aspects of the obligation are satisfied by a ‘box ticking’ approach. This aspect of the section is said to provide ‘safe harbour’ for advisers yet has been criticised by the Royal Commission as overly procedural rather than substantive. Yet removing the safe harbour altogether may create more problems than it solves. It may be that a catch all provision in s961B(2)(g) preserves substantive flexibility, and caution is needed in relation to any reform that leaves no procedural guidance for financial advisers to anchor their behaviour in fulfilling the best interests duty.
- Han-Wei Liu
- Toan Le
- Weiping He
- Michael Duffy
- Han-Wei Liu, Toan Le, Weiping He, and Michael Duffy, ‘In whose best interests? Regulating financial advisers, the royal commission and the dilemma of reform’ (2020) Sydney Law Review (forthcoming)
Thousands of years ago, Roman businessmen often ran joint businesses through commonly-owned, highly intelligent slaves. Roman slaves did not have full legal capacity and were considered property of their co-owners. Analogously, now business corporations are looking to delegate decision-making to uber-intelligent machines through the use of artificial intelligence in boardrooms. Artificial intelligence in boardrooms could assist, integrate, or even replace human directors. However, the concept of using artificial intelligence in boardrooms is largely unexplored new and raises several issues. This Article sheds light on legal and policy challenges concerning artificial agents in boardrooms. The arguments revolve around two fundamental questions: (1) what role can artificial intelligence play in boardrooms?and (2) what ramifications would the deployment of artificial agents in boardrooms entail?
- Dr Sergio Gramitto
- Sergio Gramitto: “Artificial Agents in Corporate Boardrooms” 105 Cornell Law Review (forthcoming 2020)
Archaeology of corporate law excavates ancient laws and language in order to illuminate salient issues in contemporary and future corporate debates. This research employs an archaeological approach to corporate law by analysing three intertwining legal and organizational technologies. First, it sheds light on the origins and nature of the corporate form. Second, it reckons with the extension of personal rights, such as free exercise of religion, to business corporations. Third, it discusses separation of ownership and control as the feature that characterizes the essential formula of the business corporation model
- Dr Sergio Gramitto
- Sergio Gramitto, ‘The Technology and Archaeology of Corporate Law’, 89 Missouri Law Journal. (forthcoming 2019)
Company's right versus auditor's right
The Malaysian Companies Act 2016 (CA 2016) provides that an auditor of a company may be removed from office by an ordinary resolution at a general meeting of which special notice has been given, but not otherwise. Thus, the power to remove auditors can only be exercised by the members of the company and not the directors. Nonetheless, directors who have majority voting power may misuse the power to the disadvantage of minority members for their self-benefit. This may occur in cases where auditors are removed if the auditors have detected fraud by the directors or in cases where the directors are not in agreement with the auditors’ findings. Cases have sparked of the need to carry out a study which examines removal of auditors and how the power can be misused by the management of the company. Thus, if the office of auditors is strengthened i.e. a company is not easily empowered to remove auditors, auditors will carry out their role effectively without fear or favour.
- Dr Loganathan Krishnan
Provisions that allow for the disqualification of directors who are involved in multiple corporate failures have been adopted by legislatures in many jurisdictions. Imposing restrictions on directors is more easily justified where the director has broken the law. However, it is arguable that creditors need to be protected not only from fraudulent or dishonest directors but also from incompetent directors. It makes little difference to creditors whether their bills are not paid because of illegality or ineptitude. A way needs to be found to reconcile the need to protect future creditors, on the one hand, and the rights of persons to manage companies in the absence of wrongdoing, on the other. The research proposes the introduction of a new regulatory tool – "restricted directorships" – which has the potential to limit the harm that persons who are involved in multiple corporate failures can cause.
- Michelle Welsh
- Helen Anderson
- Welsh, M., & Anderson, H. (2019). Director restriction: an alternative to disqualification for corporate insolvency. Company and Securities Law Journal, 37(1), 23-41
2018 View details
Fraudulent phoenix activity is of great concern to Australian policymakers. It occurs where there is the deliberate liquidation of a company to avoid paying debts but the business continues through another company, and in corporate groups through the liquidation of under-capitalised subsidiaries and transfer of business to other companies in the group.
This behaviour causes huge losses in taxation revenue and large financial losses for employees and unsecured creditors. To strengthen Australia's economic fabric, this project aims to determine the optimal method of dealing with fraudulent phoenix activity through a thorough examination of all of its aspects in Australia and by a comparative analysis of international responses.
Since the launch of the Phoenix Project, the Phoenix Research Team has been collaborating with key stakeholders and have been making submission to Government and appearing before enquiries. For example, in 2015 Professor Michelle Welsh gave evidence before the Senate Economics References Committee (SERC) inquiry into insolvency in the Australian construction industry.
Several of the Phoenix Research Team’s key recommendations made in submissions have been supported in whole or in part by the Productivity Commission and the SERC. These recommendations include the introduction of a Director Identity Number and the need for increased identity checks for directors at the time of incorporation.
The five categories of phoenix identified by the Phoenix Research Team in its first major report Defining and Profiling Phoenix Activity have been positively received. The ATO referred to the report in its submission to the SERC and it was the subject of questions by the committee to Professor Welsh. The report has also been relied upon by the Australian Restructuring Insolvency and Turnaround Association (ARITA). The categories assist the understanding of legal and illegal phoenix activity and of the need to differentiate the treatment of phoenix activity depending on the circumstances of its occurrence. The team’s second report, Quantifying Phoenix Activity: Incidence, Cost, Enforcement has highlighted the current difficulties in obtaining accurate or meaningful statistics about phoenix activity.
The team’s third and final report ‘Phoenix Activity: Recommendations on Detection, Disruption and Enforcement (February 2017)’ was released on 24 February 2017 and has been the subject of much publicity.
- Professor Michelle Welsh (Monash Business School)
- Professors Helen Anderson
- Ian Ramsay
- Ann O'Connell (Melbourne Law School)
- Anderson, H, Ramsay, I, Welsh, M, and Hedges, J, Phoenix Activity: Recommendations on Detection, Disruption and Enforcement (February 2017)
- Anderson, H, O'Connell, A, Ramsay, I, Welsh, M, and Withers, H, Quantifying Phoenix Activity: Incidence, Cost, Enforcement (October 2015)
- Helen Anderson, Ian Ramsay, Ann O'Connell, Michelle Welsh and Hannah Withers (December 2014), Defining and Profiling Phoenix Activity
- Anderson H, Hedges J, Ramsay I, Welsh M and Anderson H, ‘The Potential Economic Gains from Increasing Public Law Enforcement Against Illegal Phoenix Activity’ (2018) 44 Monash University Law Review (forthcoming)
- Anderson, H, Hedges, J, Ramsay, I, and Welsh, M, ‘Illegal Phoenix Activity: Is a “Phoenix Prohibition” the Solution?’ (2017) Company and Securities Law Journal (forthcoming)
- Anderson, H, Hedges, J, Ramsay, I, and Welsh, M, 'Illegal Phoenix Activity from the Insolvency Practitioner's Perspective' (2016) 28(4) ARITA Journal 23-25
- Anderson, H, Hedges, J, Ramsay, I, and Welsh, M, ‘At the Coalface of Corporate Insolvency and Phoenix Activity: A Survey of ARITA and AICM Members’ (2016) 24 Insolvency Law Journal 209
- Anderson, H, Ramsay, I, and Welsh, M, ‘ASIC, Phoenix Activity and the View from the Outside’ (2016) 34 Company and Securities Law Journal 625
- Anderson, H, Hedges, J, Ramsay, I, and Welsh, M, ‘Illegal Phoenix Activity – What Do AICM Members Think About It’ (2016) 24(1) Credit Management in Australia 18-19
- Welsh, M, and Anderson, H, ‘The Public Enforcement of Sanctions Against Illegal Phoenix Activity: Scope, Rationale and Reform’ (2016) 44 Federal Law Review 201
- Anderson, H, Ramsay, I, and Welsh, M, ‘Illegal Phoenix Activity – Quantifying Its Incidence and Cost’ (2016) 24 Insolvency Law Journal 95
- Anderson, H, O'Connell, A, Ramsay, I, Welsh, M, and Withers, H, ‘The Productivity Commission, Corporate Insolvency and Phoenix Companies’ (2015) 33 Company and Securities Law Journal 425
- Anderson, H, O'Connell, A, Ramsay, I, Welsh, M, and Withers, H, ‘Profiling Phoenix activity: A new taxonomy’ (2015) 33 Company and Securities Law Journal 133
- Welsh, M., & Anderson, H. (2019). Phoenix companies as an abuse of companies. In H. S. Birkmose, M. Neville, & K. E. Sorensen (Eds.), Abuse of companies (1st ed., pp. 59-77). Kluwer Law International
Relevant prior research:
- Anderson, H, Welsh, M, Ramsay, I and Gahan, P, 'The Evolution of Shareholder and Creditor Protection in Australia: an International Comparison' (2012) 61 International and Comparative Law Quarterly 171
This project is funded by a three-year Australian Research Council Discovery Grant of $403,000.
This research examines the introduction of limited liability into the English and Australian companies legislation in the mid-nineteenth century and compares how this legal change was adopted in two different societies. This historical development illustrates that the interaction of legal change and socio-economic developments is complex, unpredictable and the result of a number of historical contingencies and so offers an alternative perspective to functionalist, and in particular, the predominant law and economics explanations of the rationale for limited liability. It is a conclusion of this research that recognising the complexity of legal change better enables us to question why the law developed as it did and whether it should be reformed. The concept of limited liability has given rise to particular problems such as corporate group tort liabilities and ‘phoenix’ companies that should be reconsidered in the light of its historical development.
- Dr Phillip Lipton
- ‘The Introduction of Limited Liability into the English and Australian Colonial Companies Acts: Inevitable Progression or Chaotic History?’ (2018) 41 Melbourne University Law Review 1278-1323
Debt agreements are the fastest-growing form of personal insolvency in Australia. Consumer advocates have raised concerns over vulnerable debtors entering into debt agreements that are unsuited to their needs, exacerbating their financial stress. Our research examines questions concerning the adequacy of legal frameworks in protecting consumers in financial hardship. We evaluate the debt agreements framework, drawing on a large data set from the Australian Financial Security Authority, interviews with stakeholders and surveys of debtors. The empirical study is part of the Personal Insolvency Project funded by an Australian Research Council Linkage Grant received by Professor Ian Ramsay and Associate Professor Paul Ali (Melbourne Law School). The project examines the impact of personal insolvency laws on debtors and considers the extent to which the regulatory frameworks are achieving their objectives. Partners for the projects include community organisations such as Consumer Action Law Centre, Financial Counselling Australia and Good Shepherd Australia New Zealand. The team’s article on debt agreements was cited in the Report of the Senate’s Legal and Constitutional Affairs Legislation Committee on the Bankruptcy Amendment (Debt Agreement Reform) Bill 2018.
In recent times, investigations such as the banking royal commission have highlighted the potential harm to vulnerable consumers flowing from some financial products. Our research continues to examine the effectiveness of regulatory frameworks for disadvantaged financial consumers. The Harmful Financial Products Project is funded by an Australian Research Council Linkage Grant (Melbourne Law School).
- Dr Vivien Chen (Monash Business School)
- Professor Ian Ramsay
- Lucinda O’Brien (Melbourne Law School).
- Vivien Chen, Lucinda O’Brien and Ian Ramsay, ‘An Evaluation of Debt Agreements in Australia’ (2018) 44(1) Monash University Law Review (forthcoming)
- Vivien Chen, Lucinda O’Brien and Ian Ramsay, ‘Debt agreements and how to avoid unnecessary debt traps’ The Conversation, 20 October 2017
Previous publications relating to financial regulation and financial consumers:
- Vivien Chen, Andrew Godwin and Ian Ramsay, ‘An ASEAN Framework for Cross-border Cooperation in Financial Consumer Dispute Resolution’ (2017) 12 Asian Journal of Comparative Law 167-196
- Vivien Chen, Andrew Godwin and Ian Ramsay, ‘Cross-border Cooperation in Bank Resolution: A Framework for Asia’  Singapore Journal of Legal Studies 1-28
Digital currency is a ‘disrupter’ of financial services and currency markets and as such presents new regulatory challenges. International regulatory responses to digital currency range from it being largely ignored in a few jurisdictions to outright banning in others with most jurisdictions charting a middle course of ‘wait and see’ while attempting to deal with pressing issues (such as taxation liability and potential money laundering and terrorism financing issues). The research seeks to explain digital currency, its benefits, its problems and its risks and the regulatory response so far. It analyses the extent to which the Australian Securities and Investments Commission (ASIC, the national securities regulator) may or may not have regulatory power and jurisdiction under existing Australian law and the role of other relevant regulators and institutions.
- Prof Paul Latimer
- Dr Michael Duffy
- Paul Latimer and Michael Duffy, “Deconstructing digital currency and its risks: Why ASIC must rise to the regulatory challenge” (2019) Federal Law Review (forthcoming)
In June 2014 the New Zealand market operator used its enforcement power to discipline a major corporate player with a penalty (NZ$150,000) for its breach of the disclosure rules. The market disclosure rules have been in operation since 2002 but until then there had been no instances where compliance has been enforced so overtly and to such a magnitude. Australia operates a similar system of disclosure regulation to New Zealand, but its enforcement record stands in stark contrast, where around the same time, a major Australia company agreed to a penalty of AU$1.2 million for two contraventions of similar laws. This research reviews the New Zealand regulatory landscape in mandatory disclosure and compliance and reflects on the relevant market operators’ and regulators’ power and appetite for enforcement. These contrasting examples raise interesting questions in corporate law as to the effectiveness at enforcing market discipline in relation to disclosure, and whether quantum matters
- Larelle (Ellie) Chapple
- Thu Phuong Truong
- Michelle Welsh
- Chapple, L., Truong, T. P., & Welsh, M. (2018). The penalty quantum for non-compliance with corporate disclosure: solace for the market. Company and Securities Law Journal, 36(4), 292-306.
2017 View details
Private securities class actions now appear to be a part of Australia’s legal landscape but opinions about their value are not unanimous. The research reviews the ‘private attorney-general’ argument for the utility of private securities class actions as ‘vindicating the public interest’ and supplementing public enforcement of securities laws. It then analyses the rationales for public enforcement of securities laws and assessing the extent to which private securities class actions seek to, can or do achieve these objectives. Data on the nineteen largest successful securities class actions or claims in Australia are examined by reference to various attributes which derive from these rationales and public interest scores allocated accordingly.
- Dr Michael Duffy
- Michael Duffy ‘Australian private securities class actions and public interest: assessing the 'private Attorney-General' by reference to the rationales of public enforcement’ (2017) 32(2) Aust Jnl of Corp Law 162-193.
This project was originally funded by the Australian Research Council Discovery project titled ‘Legal Origins: The Impact of Different Legal Systems on the Regulation of the Business Enterprise in the Asia-Pacific Region’ (ARC Project ID: DP1095060). The project was concerned with investigating the impact of colonial legal systems on the continuing evolution of corporate law.
The project has continued to develop in new directions since the completion of the initial funding, and has involved additional researchers. Using a variety of empirical research methods, the project comparatively investigates the origins, evolution, nature and effects of corporate law across the Asia-Pacific region. Empirical research has been conducted on Australia, New Zealand, Malaysia, China, Indonesia, and the Philippines.
- Professors Richard Mitchell
- Michelle Welsh
- Drs Petra Mahy
- Vivien Chen and other colleagues from the University of Melbourne and La Trobe University.
- Vivien Chen, ‘Law and Society in the Evolution of Malaysia’s Islamic Capital Market Regulation,’ Asian Journal of Law and Society 4(1)(2017): 133-156.
- Vivien Chen, Ian Ramsay and Michelle Welsh, ‘Corporate Law Reform in Australia: An Analysis of the Influence of Ownership Structures and Corporate Failure,’ Australian Business Law Review 44 (2016): 18-34.
- Peter Gahan, Ian Ramsay and Michelle Welsh, ‘Worker and Shareholder Protection in Six Countries: A Longitudinal Analysis’ (2014) 27 Australian Journal of Labour Law 216-232
- Richard Mitchell, Anthony O’Donnell, Ian Ramsay and Michelle Welsh, ‘Shareholder Protection in Australia: Institutional Configurations and Regulatory Evolution,’ Melbourne University Law Review 38(2014): 68-118.
- Petra Mahy and Ian Ramsay, ‘Legal Transplants and Adaptation in a Colonial Setting: Company Law in British Malaya’, Singapore Journal of Legal Studies : 123-150.
- Vivien Chen, ‘The Evolution of Malaysian Shareholder Protection: A Legal Origins Analysis’, Singapore Journal of Legal Studies : 100-124.
- Petra Mahy, ‘The Evolution of Company Law in Indonesia: An Exploration of Legal Innovation and Stagnation’, American Journal of Comparative Law 61(2)(2013): 377-431.
- Helen Anderson, Michelle Welsh, Ian Ramsay and Peter Gahan, ‘The Evolution of Shareholder and Creditor Protection in Australia: An International Comparison,’ International and Comparative Law Quarterly 61(2012):171-207.
- Helen Anderson, Michelle Welsh, Ian Ramsay and Peter Gahan, ‘Shareholder and Creditor Protection in Australia: A Leximetric Analysis,’ Company and Securities Law Journal 30(2012): 366-390.
- Helen Anderson, Peter Gahan, Richard Mitchell, Ian Ramsay and Michelle Welsh. 'Investor and Worker Protection in Australia: A Longitudinal Analysis,' Sydney Law Review 34(2012): 573-585.
Performance enhancing or 'supplements' usage in sport presents a challenge for sporting clubs and leagues internationally and is, in large part, a legal and governance issue. The authors argue that the increasing commercialisation of sport points to the conclusion that it is better corporate governance that has a significant role to play in modern sporting clubs in avoiding such problems. The recent experience of the Essendon Australian Rules Football Club is examined at some length as are the corporate governance practices of other Australian Football League (‘AFL’) clubs. The research concludes with recommendations for improvements to corporate governance practice in sporting clubs including increased use of independent directors and board sub-committees.
- Matt Nicholl
- Michael Duffy
- Matt Nichol and Mike Duffy, ‘Performance Enhancing Drugs, Sport and Corporate Governance – Lessons from an Australian Football Club’ (2017) Common Law World Review 46(2) 83.
2016 View details
1. Examining the Effectiveness of the Laws Which Govern Auditors’ Eligibility to Ensure Auditors are Effective Watchdogs
2. Examining the Threats to Auditors’ Independence: Malaysian, Australian and European Union Law Perspective
Corporate governance reform in Malaysia is mainly focussed on boards' role and accountability with minimal discussion on shareholders' role. Research on shareholders has been conducted mostly on protection of shareholders' rights and remedies via provisions enabling shareholders to sue directors. While the right to sue directors is an important corporate governance mechanism, an often neglected area is the preventive action that can be taken by shareholders to minimize or prevent boardroom complacency which depends on the recognition of shareholder's participatory right but there is minimal discussion on shareholders' participatory rights, that is, by considering the extent of shareholders' control power in Malaysia to determine membership of (board selection, nomination process and procedures) and incentives for the board (remuneration) and ascertain whether there is legal and/or commercial recognition of shareholders' participatory rights and improvements that can be achieved. An important component in this research is exploring the role of institutional shareholders In terms of the use of their voting power.
As part of the Malaysian Government's Economic Transformation Programme (ETP), one of the main agenda is the revitalisation of the capital market with the government announcing a paring down of their stake in listed companies. The transfer of this block of shares will probably see an increase in institutional shareholders taking over the share. It is timely for a model for insitutional shareholders' involvement to be considered and implemented for Malaysian capital market In considering the above, the research will assess the suitability of proposals that intend to empower shareholders (some examples are proxy reform proposals for directors' election and nomination, the witholding of votes, non-binding shareholdders' resolution); the suitability of proxy advisory services as a mechanism to deal with information assymetry faced by unsophisticated shareholders and the necessary legal and regulatory framewrok if these are implemented in Malaysia.
This research addresses the above stated issues with a view to ascertaining the appropriate mix of regulatory approaches, that is legal and/or extra legal solutions-via codes or best pratice guidelines.
The research will adopt doctrinal analysis to identify the possible inconsistencies in the legal and regulatory framework and structured interviews to ascertain industry views. The expected outcome would include policy recommendation relating to mechanisms and incentives that can be put in place to encourage and facilite shareholders' responsiblity in corporate governance.
- Associate Professor Shanthy Rachagan, Monash University Malaysia
- Professor Aiman Nariman, International Islamic University.
Auditors must be independent in conducting audit on a company's financial affairs. The independence is imperative as members of a company place utmost reliance on auditors' report. The report is a tool for members to evaluate the company's management. Additionally, there are persons other than members who rely and use the report. There is utmost reliance on the report since auditors are external parties. Nevertheless, if auditors are not independent, the report may not reflect a true and fair view of the company's affairs. Hence, financial irregularities of a company will not be reported to its members. This will be damaging to the company and its members.
This study critically examines the current legal framework which govern independence of auditors from a Malaysian, Australian and EU perspective. Case law across the three jurisdictions will also be examined to determine the approach taken by the courts in establishing the requirements of auditors' independence. The study will unearth the shortcomings of the legal framework in relation to auditors' independence. In light of the shortcomings, the study discusses the factors which affect auditors' independence. Scandals due to non-independence of auditors which transpired in Malaysia, Australia and EU are explored to show how threats to independence can be damaging.
Interviews were conducted with audit practitioners, regulators and academics to obtain a holistic picture on the issue of auditors' independence. The results of the interviews show that there are loop-holes in the current legal framework. Results also show that the Malaysian legal position is far behind the approach taken in Australia and EU. Nevertheless, the results do not show that the legal position in Australia and EU are absolutely fault-proof. Thus, further amendments should be made to the Malaysian, Australian and EU laws to restore integrity to the audit profession which has declined in recent years.
- Dr Loganathan Krishnan (BLT)
- Prof. Dr. Choong Yeow Choy (University of Malaya)
In 2012 the Future of Financial Advice (FOFA) laws were enacted to protect consumers of financial advisory services. The FOFA laws aim to remove certain incentives for financial advisers to place their own interests ahead of the interests of their clients – specifically, by prohibiting the payment of ‘conflicted remuneration’. Further, the FOFA laws sought to raise the required standard of conduct applying to individual financial advisers who provide personal advice to retail clients by requiring those advisers to act in the best interests of their clients. The FOFA reforms also sought to enable consumers to better monitor the value of the ongoing services they receive from their financial advisers by permitting ongoing fees to be charged only if the consumer is provided with annual information about the fees he or she is paying. This project examines the impediments to effective enforcement of the FOFA laws. A key issue in this regard is whether the current penalties are sufficient to deter misconduct. . Another key issue which this project explores is whether ASIC’s administrative powers are sufficient to protect consumers.
- Andrew Serpell
- Andrew Serpell, ‘The Future of Financial Advice (FOFA) laws: an enforcement perspective’ (2016) 31 Australian Journal of Corporate Law 265.
- Andrew Serpell, 'Small Amount Loans and the Consumer Credit Legislation Amendment (Enhancements) Act 2012' (2014) 32 Company and Securities Law Journal 7.
2015 View details
Consumers of payday loans are extremely vulnerable, typically using the money borrowed to pay for essential items, such as food, rent or utility bills. In recent years there has been a protracted debate in Australia and in several overseas jurisdictions about how to regulate payday lending. Amendments to the National Consumer Credit Protection Act 2009 - which commenced in 2013 - provide for stricter regulation of the payday lending industry and introduce nationwide caps on the maximum amount which credit providers are permitted to charge consumers. This project examines the content, operation and policy objectives of the payday lending reforms, and considers whether further changes to the law should be made to further enhance consumer protection in this area.
- Andrew Serpell
- Andrew Serpell, 'Small Amount Loans and the Consumer Credit Legislation Amendment (Enhancements) Act 2012' (2014) 32 Company and Securities Law Journal 7.
- Andrew Serpell, 'Protecting the Desperate: The Regulation of Payday Lending' (2015) 43 Federal Law Review 147.
A number of commentators, as well as government reports, have argued that the UK s reliance on private enforcement mechanisms for breaches of directors’ duties has generally been ineffective. Some argue that provision should be made in statute for public enforcement. Assuming that there is strength in this argument this article asks what form this public enforcement should take. The article considers the way that Australia has proceeded in the past 20 years or so in permitting the public enforcement of breaches of directors’ duties, via both criminal sanctions and civil penalties. The argument advanced in this article is that despite the possible advantages that may flow from the introduction of a criminal enforcement regime, such a regime is unlikely to be adopted in the UK. Following an examination of the use that the Australian corporate regulator has made of the civil penalty regime the argument advanced in the article is that the introduction in the UK of a similar regime providing for the making of the same kind of orders would be beneficial.
- Andrew Keay and Michelle Welsh, ‘Enforcing Breaches of Directors’ Duties by a Public Body and Antipodean Experiences’ (2015) Journal of Corporate Law Studies 255
2014 View details
Traditionally, corporate law has been viewed as having characteristics that are commonly associated with private law. Largely, this view developed as a result of the 'law and economics' scholarship which dominated the corporate law debate, especially in the United States, in the last quarter of last century. While the traditional law and economics approach supports the view that corporate law should be treated as a branch of private law and that the state should have no role in its enforcement, other scholars, particularly those that adopt a progressive approach, argue that corporate law has and should be recognised as having characteristics that are usually associated with public law. In addition, some progressive scholars argue that corporate law and regulation have a wider ethical purpose than the narrow advancement of shareholder interests.
This research is concerned with how corporate regulation can be enforceable where the actions of corporations have global societal impacts; when creditors, citizens and other stakeholders are disadvantaged by the misuse of the corporate form; or where the governance arrangements of transnational corporations fail to prevent their agents engaging in bribery and corruption.
- Michelle Welsh
- Michelle Welsh, ''Realising the Public Potential of Corporate Law: Twenty Years of Civil Penalty Enforcement in Australia' (2014) 42 (1) Federal Law Review 217.
Class actions on behalf of aggrieved shareholders and other investors have become the most common form of group litigation filed in the Federal Court of Australia. This increasing importance of investor class actions has raised a number of important practical and conceptual issues. One such issue is how this private enforcement of the laws that are intended to protect investors interacts with the operation of the public enforcement model and their respective abilities to deter illegal conduct and secure compensation for the losses suffered by investors. The aim of this project is to explore this issue by comparing and contrasting the enforcement actions that have been undertaken by the Australian Securities and Investments Commission, the public regulator, with the federal class actions that have been filed on behalf of investors with respect to the same conduct or legal disputes over a 17 year period. This empirical study focuses on the nature of the relief that was sought, the persons and entities against whom this relief was sought and/or secured, the outcomes of these actions and the problems that may be encountered when the same conduct prompts public and private enforcement activity.
- Professor Vince Morabito
- Associate Professor Michelle Welsh.
- Michelle Welsh and Vince Morabito, 'Public vs. Private Enforcement of Securities Laws: An Australian Empirical Study' (2014) 14 (1) Journal of Corporate Law Studies 39 - 78.
Disclosure is a primary form of investor protection and is fundamental to market efficiency. Knowledge of the risks facing them is integral to the successful operation of business enterprises and is also of benefit to their investors. Whilst continuous disclosure is a policy that should provide a good basis for risk disclosure, periodic disclosure of risk has received significantly less attention. This is because periodic disclosure is more traditionally an area for disclosure in financial accounts than for management discussion and analysis. However, this may be changing, particularly due to the enactment of s 299A of the Corporations Act 2001 (Cth) in 2004 and ASIC’s more recent interpretations of that section.
- Michael Duffy
Salomon’s Case has for a long time been widely seen as a landmark case that is the keystone of modern company law. A mythology has developed around the case that has resulted in the Salomon principle exercising an iron grip on company law. The rigid application of the principle in Salomon’s Case to corporate groups has enabled corporate groups to structure themselves in ways that limit the tort liabilities of the group as a whole and so raises important social, economic and ethical questions regarding the allocation of risk that are not addressed by the application of the Salomon principle. The research suggests that given the importance of the social, economic and ethical issues raised in cases of mass torts that invariably involve corporate groups, it is preferable that these issues are resolved by tort law, which is concerned with the allocation of risk, thereby circumventing the dead hand of Salomon.
- Dr Phillip Lipton
- "The Mythology of Salomon's Case and the Law Dealing with the Tort Liabilities of Corporate Groups: An Historical Perspective" (2014) 40(2) Monash University Law Review 452
Securities market operators’ use of the "please explain" price query and its impact on compliance
Market operators in New Zealand and Australia, such as the New Zealand Exchange (NZX) and the Australian Securities Exchange (ASX), have the regulatory power in their listing rules to issue queries to their market participants to explain unusual fluctuations in trading price and/or volume in the market. The operator will issue a price query where it believes that the market has not been fully informed as to price relevant information. Responsive regulation theory has informed much of the regulatory debate in securities laws in the region. Price queries map on to the lower level of the enforcement pyramid envisaged by responsive regulation and are one strategy that a market operator can use in communicating its compliance expectations to its stakeholders. The issue of a price query may be a precursor to more severe enforcement activities. The aim of this study is to investigate whether increased use of price queries by the securities market operator in New Zealand corresponded with an increase in disclosure frequency by all participating companies. The study finds that an increased use of price queries did correspond with an increase in disclosure frequency. A possible explanation for this finding is that price queries are an effective means of appealing to the factors that motivate corporations, and the individuals who control them, to comply with the law and regulatory requirements. This finding will have implications for both the NZX and the ASX as well as for regulators and policy makers generally.
- Larelle Chapple, Thu Phuong Tran and Michelle Welsh, ‘A Securities Market Operator’s Use of the “Please Explain” Price Query and Its Impact on Compliance’ (2014) 32 Companies and Securities Law Journal 173
2013 View details
Dark side private ordering dominated the market for corporate disclosure in Japan for much of the last century. But from the 1990s, 20 years of corporate and securities law reform has resulted in the gradual transformation of Japanese corporate governance, shifting towards a shareholder model of governance and a growing level of external monitoring of the traditional insider Japanese company. Due to restraints in the public enforcement of disclosure rules, sokaiya face growing competition from the proliferation in shareholder derivative actions and private ordering by the Kabunuishi Onbuzman (Shareholder Ombudsman) and activist media groups like Facta. Independent directors and auditors were added to the market for corporate information in 2010 but their effectiveness is restricted by formal and informal constraints. This article examines the increasingly competitive market for corporate information and disclosure in Japan.
- Matt Nicholl
- Publication: Matt Nichol, ‘Japanese Corporate Governance and the Regulation of Information Disclosure: What is the Role of Private Rights Enforcement?’ (2013) 27(3) Australian Journal of Corporate Law 262.
2012 View details
The reasonable investor test has developed in Australia both in the law of misleading and deceptive conduct in relation to securities and in the enquiry into the materiality of information in the stock market context. The former involves the question of whether a reasonable investor would have been influenced by misleading conduct, whereas the latter involves the question of whether a reasonable investor or person would expect that information would have caused investors to trade or otherwise act (the two issues can clearly be related). The test raises various issues including how it applies to a diverse class and whether it is interchangeable with a market test (the writer argues it is not). The test also exists in the United States and has been raised, but then specifically rejected, by the courts in Ireland. The development of behavioural law and economics leads to the question of whether the test can, or should, be modified in view of the allegedly non-rational attributes of investors or does the test have sufficient flexibility to accommodate such attributes in appropriate cases.
- Michael Duffy
This research investigates the key factors shaping corporate governance in China and presents a sophisticated study of corporate governance in China from a comparative and historical perspective. Drawing on extensive corporate governance literature, the research articulates why path dependence theory is the most effective framework for interpreting the development path of Chinese corporate governance. The researcher reviews the historical role of government in commercial development and regulation in dynastic China and in early corporate law-making, followed by an account of China’s legal and economic development over the last three decades. This historical inquiry identifies government control as the key feature of economic and market regulation in China. In particular, this research canvasses the evolution of governance of State-Owned Enterprises and listed companies, major corporate governance problems, regulatory challenges posed by China’s increasing participation in economic globalization, and enforcement difficulties particularly in relation to investor protection, directors’ duties and accountability.
- Chenxia Shi
- Chenxia Shi, Political Determinants of Corporate Governance in China (2012) First ed. London UK: Routledge. 221 p.
Agricultural managed investment schemes, ran into difficulty in the early 2000s as changes in tax deductibility, the Global Financial Crisis and other factors saw a number of prominent collapses (such as Timbercorp Limited and Great Southern Limited) and the drying up of new investment. The collapses inevitably raised issues about financial disclosure to investors who include shareholders of responsible entities and unit or interest holders in the schemes themselves. They have also highlighted complexities in the insolvencies of such schemes and particularly the conflicting demands placed on responsible entities and their liquidators. They also give pause for an analysis of the responsible entity concept which is a merger of the formerly separate roles of manager and trustee set out under the old “prescribed interests” law. After fourteen years of operation it is questionable whether the merger has been a significant improvement on the former position, at least from the point of view of interest holders in such schemes.
- Michael Duffy
- Michael J Duffy, “Barely managing? Troubles with agricultural managed investment schemes” (2012) 27(1) Australian Journal of Corporate Law 91 (B)
This research is concerned with calculated motivations for compliance and in particular the deterrent effect of the introduction of new sanctions and/or the use of those sanctions by a regulator. It is concerned with normative and social motivations for compliance and examines the impact of the introduction and use of new sanctions on the perceptions and behaviour of corporate compliance officers. These questions are addressed in the context of the continuous disclosure requirements imposed on Australian listed corporations.
- Michelle Welsh, 'New Sanctions and Increased Enforcement Activity in Australian Corporate Law: Impact and Implications' (2012) 41(2) Common Law World Review 134
This research proposes a public enforcement model for the fiduciary duties of corporate directors. Under the dominant model of corporate governance, the principal function of the board of directors is to oversee the conduct of senior corporate officials. When directors fail to provide proper oversight, the consequences can be severe for shareholders, creditors, employees, and society at large. The research explores several possibilities for incorporating public enforcement into the U.S. corporate governance system. It considers SEC enforcement of fiduciary duties and enforcement by states’ attorneys general. It also considers empowering state judges to impose bars on future service, as an alternative to tort-based damages awards. Regardless of the exact model of public enforcement, the reforms advanced here would help provide for greater director accountability and thus better motivate directors to perform their duties responsibly.
- Renee Jones and Michelle Welsh, ‘Toward a Public Enforcement Model for Directors’ Duty of Oversight’ (2012) 45 Vanderbilt Journal of Transnational Law 343
2011 View details
Instability in the global financial markets has highlighted the need for companies to remain vigilant in detecting fraud and other forms of misconduct. Encouraging whistleblowing by persons who have knowledge of corporate misconduct or fraud is important. Legislative provisions protecting whistleblowers and the integration of whistleblower programmes within a company’s corporate governance framework are two strategies that may encourage whistleblowing. Legislative provisions protecting whistleblowers were introduced into the Australian Corporations Act 2001 (Cth) in 2004. In 2007 the revised Australian Stock Exchange Principles recommended that listed corporations establish a code of conduct, and suggested that the code imbed within it reference to the way in which whistleblower disclosures are handled. While there have been various studies investigating whistleblowing programmes in the public sector, prior to this study there was virtually no empirical research into corporate sector whistleblowing in Australia. This paper examines the findings of an empirical study into the use of the whistleblowing protection provisions contained in the Australian Corporations Act 2001 (Cth) and the adoption of whistleblowing programmes as recommended by the Australian Stock Exchange Principles by Australia’s leading 200 listed companies.
- Janine Pascoe and Michelle Welsh, ‘Whistleblowing, Ethics and Corporate Culture: Theory and Practice in Australia’ (2011) 40 Common Law World Review 144>
2009 View details
The choice between overlapping criminal sanctions and civil penalties for contraventions of the directors' duty provisions
Since 1993 the Australian Securities and Investments Commission (ASIC) has had at its disposal overlapping criminal sanctions and civil penalties for the enforcement of the directors' duty provisions. This article examines ASIC's enforcement of alleged contraventions of the directors' duty provisions between 2001 and 2006. The examination reveals that criminal sanctions are utilised by ASIC in situations where the Commonwealth Director of Public Prosecutions believes there is sufficient evidence to sustain a criminal prosecution. The civil penalty regime is utilised by ASIC in situations where a criminal prosecution could not be sustained or is not available. Despite the perceived inadequacies of the criminal regime, the perceived advantages of the civil penalty regime and the predictions of some commentators, the provision of overlapping criminal sanctions and civil penalty provisions has not resulted in a reduction of criminal prosecutions in favour of civil penalty applications.
- Michelle Welsh, ‘The Regulatory Dilemma: The Choice between Overlapping Criminal Sanctions and Civil Penalties for Contraventions of the Directors’ Duty Provisions’ (2009) 27 Company and Securities Law Journal 370
Testing the correspondence between state enforcement and compliance with continuous disclosure
The literature on regulation theory asserts that regulators are best able to encourage compliance when they are armed with a wide range of sanctions. The enactment and use of sanctions by regulators should deter future contraventions of the law and lead to greater compliance. The Corporations Act 2001 (Cth) requires disclosing entities to disclose price sensitive information to the market continuously. The continuous disclosure provisions are enforced by criminal, civil penalty and administrative penalty regimes. These regimes were introduced in 1994, 2002 and 2004 respectively. The first enforcement activity by the regulator did not occur until 2003. There has been increased enforcement activity between 2005 and 2007. This research seeks to determine whether or not there is a correspondence between the introduction of the criminal, civil penalty and/or administrative penalty regimes and an increase in the level of compliance by disclosing entities with their obligation to disclose price sensitive information continuously. In addition, the research tests for a correspondence between enforcement activity undertaken by ASIC and an increase in the level of compliance by disclosing entities with their obligation to disclose price sensitive information continuously.
- Michelle Welsh, 'Continuous Disclosure: Testing the Correspondence between State Enforcement and Compliance' (2009) 23(3) Australian Journal of Corporate Law 206
In theory it is possible to map the civil penalty provisions contained in Corporations Act 2001 (Cth) Part 9.4B on to an enforcement pyramid in a manner envisaged by responsive regulation. However, the data examined in this article reveals that there is a gap between theory and practice. If the regime were being utilised in a manner envisaged by responsive regulation, the Australian Securities and Investments Commission (‘ASIC’) would consider whether or not a civil penalty application was an adequate regulatory response prior to considering a criminal prosecution in the majority of cases. More civil penalty proceedings than criminal prosecutions would be issued in relation to the same types of contraventions. Neither of these is occurring. The examination of ASIC’s use of the civil penalty regime reveals that its decision-making process is different from that suggested by responsive regulation.
- Michelle Welsh, 'Civil Penalties and Responsive Regulation: The Gap between Theory and Practice' (2009) 33(3) Melbourne University Law Review 908
The application of class action procedural machinery to investor claims has caused a minor revolution for shareholder litigation in Australia. This has been added to by the decisions of the High Court in Sons of Gwalia Ltd v Margaretic to recognise defrauded or misled shareholders as creditors in a winding up and the decision in Campbells Cash & Carry Pty Ltd v Fostif Pty Ltd to tolerate litigation funding. Depending upon one’s perspective, this has greatly increased corporations and officers’ risk of facing large professionally organised claims from disgruntled investors and/or greatly increased the prospects of affordable redress for defrauded or misled investors through the courts. In either case, one of the battles yet to be fully to be played out in the area is the question of burden of proof in relation to causation of loss. The matter is significant as it goes partly to the viability of such mass claims. In the absence of a theory that explains how loss can occur though the effect of misleading conduct and non-disclosure on the market price, plaintiffs may be left with the logistical nightmare of adducing reliance evidence from thousands of investors. Such a problem for plaintiffs would ultimately also become a problem for court administration and would see increased costs for defendants too. While it is possible that the problem will be resolved through application of existing principles by the courts, there is also the possibility of legislative intervention as recently canvassed by the Companies and Markets Advisory Committee (‘CAMAC’).
- Michael J Duffy, “Investor loss from securities non disclosure: A statutory presumption of causation on the Canadian model?” (2009) 32(3) University of New South Wales Law Journal 965 (A*) (Group 1)
Despite the introduction of the option of civil penalty proceedings and a number of successful civil and criminal prosecutions by ASIC in recent years, insider trading continues to pose challenges for law enforcement. Proof of communication of material price sensitive information from tipper to trader remains elusive in many cases due to the absence of witnesses prepared to attest to such communications. This article looks at possible reforms that might be considered to encourage such witnesses to come forward and otherwise obtain evidence of such communications. These include consideration of rewards and bounties as well as the availability of leniency and immunity to witnesses or accomplices in both civil and criminal matters. In considering this the article also looks at the issue of relative culpability between tippers and tippees which involves consideration of the rationale for prohibition of insider trading. The implications of the abandonment of the fiduciary rationale for prohibition become particularly relevant to the relative culpability of tippers and tippees. The article also considers the question of telephone taps, the role of ASX and the encouragement of private civil proceedings on the basis that they may produce evidence that the regulator can also use.
- Michael J Duffy, "Insider Trading: Addressing the continuing problems of proof" (2009) 23(2) Australian Journal of Corporate Law 149. (A) Group 2)