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Chris Bowen

Minister for Financial Services, Superannuation and Corporate Law

9 June 2009 - 14 September 2010

Media Release of 23/04/2010

NO.035

Draft Legislation to Reverse Sons of Gwalia Released

The Minister for Financial Services, Superannuation and Corporate Law, Chris Bowen MP, has today released an exposure draft of legislation giving effect to the Government's decision to reverse the High Court decision in Sons of Gwalia v Margaretic.

"This Bill is designed to restore the position of the law as it was commonly understood to apply before the Sons of Gwalia decision," Mr Bowen said.

"It is inequitable for shareholder claimants to rank as creditors alongside ordinary unsecured creditors, like small businesses, in corporate insolvencies."

The Sons of Gwalia decision determined that, in a corporate winding up, certain compensation claims by shareholders against the company ranked equally with the claims of other creditors.

"The Government has been concerned about the effects of the Sons of Gwalia decision on access to, and the cost of, debt finance and the potential uncertainty it created," Mr Bowen said.

"I welcome stakeholder comments on the final wording of the legislation ahead of its introduction in the winter parliamentary session."

The Bill also introduces reforms relating to notices to creditors, shareholder voting and clarifies the position of shareholders bringing claims for damages against companies.

Consultation process

Interested parties are invited to make written submissions.

Submissions may be lodged electronically, by post or facsimile. Please direct submissions to:

Corporations Amendment (No.2) Bill 2010
Corporations and Financial Services Division
The Treasury
Langton Crescent
PARKES ACT 2600
Fax: 02 6263 2770
Email: insolvency@treasury.gov.au

Telephone inquiries may be made by calling (02) 6263 3927.

The closing date for submissions is 18 May 2010. Further information on these reforms is available at www.treasury.gov.au.