Unlovely and Unloved: Corporate Law Reform's Progeny

Abstract

"Oscar Wilde would have regarded our modern Corporations Law not only as uneatable, but also indigestible and incomprehensible" (Sir Anthony Mason, 1992).

There is no dispute; it is unlovely and unloved. Complex, ungainly, internally inconsistent, conceptually troubled; the Corporations Act 2001(CA 2001) 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. Despite massive efforts at law reform in the last fifteen years, and continuous tweaking, the CA 2001 remains, as Sir Anthony Mason found it, indigestible and incomprehensible.

The state of the legislation, at odds with the dynamism of the Australian economy over this same period, 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 atavistic response of an old common law system, a deep-rooted aversion to "codification"?

This paper looks at some of the consequences of this state of affairs, arguing that a better corporations law would be of benefit to Australia. The paper 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.

Keywords: corporate law, law reform, law matters, directors duties, insolvent trading, capital maintenance

JEL Classification: K22, K40