Academic journal article Melbourne University Law Review

Unlovely and Unloved: Corporate Law Reform's Progeny

Academic journal article Melbourne University Law Review

Unlovely and Unloved: Corporate Law Reform's Progeny

Article excerpt

[Despite massive efforts at law reform in the last 15 years and continuous tweaking, the Corporations Act 2001 (Cth) remains, as Sir Anthony Mason found it, 'indigestible and incomprehensible'. The state of the legislation is at odds with the dynamism of the Australian economy over this same period and raises some intriguing questions. Is corporations law not just 'trivial', as Bernard Black provocatively suggested a few years ago, but completely irrelevant? In this case, does law not matter, not a whit? Is corporate law reform not worth the economic candle? Why is consistency and coherency in business law not valued in Australia? Is this an atavistie response of an old common law system, a deep-rooted aversion to 'codification'? This piece looks at some of the consequences of this state of affairs, arguing that a better corporations law would be of benefit to Australia. The piece identifies some points of departure: a separate business corporations statute, elimination of the bifurcation of directors' duties (as between the statute and the general law), substitution of a comprehensive personal property security regime for the troublesome insolvent trading provisions and reconceptualisation of the complexities of capital maintenance rules.]

CONTENTS

I   Introduction
II  Two Decades of Reforms
III Are Continued Reforms Worth the Economic Candle?
IV  Form and Structure
V   Substance
       A Officers' and Directors' Duties
       B Insolvent Trading
       C Share Capital Rules
VI  Conclusions

   Oscar Wilde ... would have regarded our modern Corporations Law not
   only as uneatable but also as indigestible and incomprehensible.
   (1) [E]very significant amendment to the corporations legislation
   since [1998] ... has added substantially to complexity and, it has
   to be said, has created obfuscation. (2)

I INTRODUCTION

There is no dispute. The Corporations Act 2001 (Cth) ('Corporations Act') is unlovely and unloved. (3) Complex, ungainly, badly drafted, internally inconsistent and conceptually troubled; it is a mishmash of old law, ad hoc amendments, provisions pulled willy-nilly from different legal systems, statements which are not law at all, ideological posturing, and drafting styles that swing wildly from the colloquial to the technical. As one of my compatriots once quipped in a different context, the Corporations Act resembles no less than a rider galloping 'madly off in all directions.' (4) Despite massive efforts at law reform in the last 15 years, (5) and continuous tweaking, (6) the Corporations Act remains, as Sir Anthony Mason found it, 'indigestible and incomprehensible.' (7)

II TWO DECADES OF REFORMS

What is there to like about the Corporations Act? It seems that its main virtue, in the eyes of the business community, is the 'one stop shopping' it provides, (8) obviating the necessity of multi-state filings. Constitutionally, this was a hard won advantage, and one which arguably would not necessarily have had to be such a costly, time-consuming battle had the courts demonstrated a greater inclination to reconsider questionable precedent. (9) Administrative convenience, though, may have come at a high price.

Secondly, the hard work of the Corporations Law Simplification Task Force ('Simplification Task Force') over the period of 1993-96, although perhaps now taken for granted, should not be underestimated. According to one consultant working for the Simplification Task Force,

   the First Corporate Law Simplification Act [1995 (Cth)] ... rewrote
   company law, drastically simplified the text and substance of the
   law of proprietary companies (incidentally killing off the
   unnecessary complication of a separate Close Corporations Act, by
   meeting all of its objectives within company law), and materially
   simplified the law of public companies, with surprisingly little
   litigation going to the superior courts to resolve the meaning of
   the new provisions. … 
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