Enterprise Liability for Corporate Groups: A More Efficient Outcome for Creditors

Australian Journal of Corporate Law, Vol. 25, No. 3, pp. 242-273, 2011

5 Pages Posted: 29 Apr 2013

Date Written: 2011

Abstract

In May, 2000, the Companies and Securities Advisory committee published its Corporate Groups Final Report. One of the report's objectives was to determine whether further safeguards were needed for those dealing with corporate groups, namely, minority shareholders and outsiders, including creditors. Of the Final Report's 24 recommendations, to date, only two recommendations, permitting the pooling of assets and liabilities in a liquidation of group companies have led to changes in Australian corporate law. Of the remaining 22 recommendations, 11 involved no change to the current law, while the remaining 11 recommendations have not been implemented. Unsecured creditors transacting with corporate group members may make inefficient investments due to: corporate group members misrepresenting the availability and value of group assets, when such assets are insulated from creditors' claims; the increased opportunity for debtor opportunism to arise within corporate groups. This article considers, whether the adoption of enterprise liability, within controlled and integrated corporate groups, would efficiently enable creditors to identify and to price the risk of transacting with such a corporate group member, thereby providing creditors with a more efficient outcome.

Keywords: Companies and Securities Advisory Committee, Corporate Groups Final Report, Corporate governance, Secured transactions, Laws, regulations and rules, Limited liability, Enterprise liability

JEL Classification: G38, K22, L32

Suggested Citation

Dickfos, Jennifer, Enterprise Liability for Corporate Groups: A More Efficient Outcome for Creditors (2011). Australian Journal of Corporate Law, Vol. 25, No. 3, pp. 242-273, 2011. Available at SSRN: https://ssrn.com/abstract=2257465

Jennifer Dickfos (Contact Author)

Griffith University ( email )

Gold Coast Campus
Parklands Drive
Southport, 4217
Australia

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