The Corporations and Markets Advisory Committee (CAMAC) has recommended the maintaining of current law concerning shareholders' rights in insolvency proceedings as established in the High Court's controversial 2007 Sons of Gwalia decision, in a report released on Thursday.
The report responds to a request for advice from the previous Federal Government as to the effect of the High Court decision in Sons of Gwalia Ltd v Margaretic  HCA 1 (Sons of Gwalia), which polarised the business community at the time of the decision.
Sons of Gwalia changed the face of Australian insolvency law, ranking shareholders equally with the claims of other unsecured creditors in an external administration.
"The empowerment of shareholders to hold a company to account in damages reflects a significant shift in regulation. It has, in effect, turned shareholders into potential unsecured creditors as well," said the Convenor of CAMAC, Richard St John in a statement.
"The decision of the High Court - while it may have surprised some and given rise to legitimate concerns - has provided a useful measure of certainty about the legal position," St John said.
The Federal Government acknowledged CAMAC's recommendations, and Minister for Superannuation and Corporate Law Senator, Nick Sherry, said the Government would "closely examine CAMAC's recommendations".
- Laura MacIntyre
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