The Bottom Line:

Two recent opinions from separate federal courts of appeal upheld the dismissal of lawsuits by sophisticated investors that suffered losses in the auction rate securities ("ARS") market against the securities broker-dealers that allegedly fraudulently induced the purchase of the ARS.1

This hot-topic comes as a timely reminder as we approach January 2019 – a milestone date for the Personal Property Securities (PPS) Act, as it has now been seven years since the PPS Register went “live”.

Every business that made seven year registrations will now see them start to expire from 30 January 2019 onwards. Businesses that selected seven year registrations early on when the PPS Register was introduced must take note as their registrations approach expiry. There can be grave consequences for lapsed registrations.

The Western Australian Court of Appeal has today delivered its judgment in the appeal of Westpac Banking Corporation v The Bell Group Ltd (in Liq) [2012] WASCA 157 ( The Bell Appeal ).  The Court substantially rejected the appeal.  The decision has important implications for directors, financiers and bondholder investors. It is a salutary reminder for financiers of the consequences of "knowingly receiving" a benefit from a breach of directors' duties. 

Background

On 5 October 2011 Justice Barrett of the Supreme Court of NSW handed down a decision in Centro Retail Limited and Centro MCS Manager Limited in its capacity as Responsible Entity of the Centro Retail Trust [2011] NSWSC 1175 (“Centro”) where he found that the responsible entity of Centro Retail Trust would be justified in modifying the constitution of the trust without unitholder approval to a insert a provision permitting the issue of units at a price different to that provided for by the pre-existing provisions.

Background: the Timbercorp Group

In brief

A recent decision by the New South Wales Court of Appeal in Buzzle Operations Pty Ltd (in liq) –v- Apple Computer Australia Pty Ltd [2011] NSWCA 109 provides useful guidance on the key aspects of shadow directorships and to what extent advices can be given by an interested party such as a financial accountant or a lender to a debtor without that interested party falling within the definition of "shadow director".

Background

Every director of an Australian company is under a legal duty to prevent the company incurring a debt when the company is insolvent (or where that debt will cause the company to become insolvent).

The Australian Securities and Investments Commission's (ASIC) new Regulatory Guide sets out four key principles which directors should follow to meet their obligation to prevent insolvent trading.

The Regulatory Guide also sets out ASIC's approach to assessing whether a director has breached their duty.

Background

Section 588G of the Corporations Act 2001 (Cth) imposes a positive duty on directors of a company to prevent insolvent trading. Due to the economic downturn, the Australian Securities and Investments Commission (ASIC) believed the market, which includes directors and professional advisors, would benefit from clarification as to what factors ASIC considers prior to commencing an investigation into insolvent trading.

On 14 September 2010, the Senate Economics References Committee (Committee) released a report recommending reforms to Australia’s current insolvency regime (Report) in the following key areas:

•  the regulation of the insolvency regime
•  the registration of insolvency practitioners, and
•  the remuneration of insolvency practitioners.

Implications

If the recommendations contained in the Report are enacted in legislation, stakeholders may be affected in the following ways: