Policy Issues Raised By the Subordination of Shareholder Claims

Abstract

This paper provides a discussion of some of the policy issues raised by the Federal Court of Australia's decision in Sons of Gwalia v Margaretic. That decision refused to subordinate the claim by a shareholder who alleged that they were induced to purchase shares on the secondary market by misrepresentations from the company's management. We compare the subordination of shareholder claims in Australia, England, Canada and the United States in an attempt to suggest future law reform in Australia.

Keywords: Subordination, shareholder claims, Gwalia, Australian securities fraud

JEL Classification: K22, K29