 |
|
||
 |
|||
  |
TODAY'S LEGAL NEWS
|
|
| ARTICLES AND ALERTS |
SHAREHOLDERS BOLSTERED IN RECENT HIGH COURT DECISION
Author: Valentina Misevska
Publish Date: February 23, 2007
A recent High Court decision could see shareholders with compensation claims walk away with millions of dollars as they rank alongside creditors after the collapse of a company.
In this case [1] Luka Margaretic lost over $26,000 when he bought shares in the publicly listed gold mining company “Sons of Gwalia” only 11 days before it collapsed in 2004 under a $900 million debt. Luka claimed that he was the victim of misleading and deceptive conduct because the company failed to notify ASX that it had insufficient gold reserves to meet its sale contracts.
The claim was successful and the High Court found that although also a shareholder, Luka should rank as an unsecured creditor of the company in the winding up. This put Luka in a far better position than if his claim against the company was one in his capacity solely as a shareholder, as s563A of the Corporations Act 2001 provides that payment of a debt owed to a shareholder is postponed until all debts or claims of non-shareholder creditors have been satisfied.
This decision also means that there will be some unhappy creditors who must now share the asset pool, estimated to be $450 million, with a shareholder who otherwise would not have had his debt satisfied until the creditors had had theirs satisfied.
While the decision is good news for shareholders of public companies, it may encourage litigation against such companies and certainly has implications for those providing credit to public companies.
Public companies, creditors and shareholders alike are now holding tight to see whether Parliament will legislate against the decision.
[1]Sons of Gwalia Ltd v Margaretic; ING Investment Management LLC v Margaretic [2007] HCA 1 (
Back
