Investors Rights under Corporations Act 2001
It should be noted that one of the purposes of the capital markets in any country is to enable the companies to raise some capital in a much direct way from the potential investors1. The raising of funds in this manner by the companies in Australia is mainly guided by regimes of Corporations Act 2001 (CA, 2001). The CA contains mainly two separate disclosure regimes that are of great help when it comes to the financials for the company or the product. These are; • Chapter 6D for the debentures and securities • Part 7. 9 of other securities and financial products2. iii. Any named person(s) in the in the prospectus with their consent as a director of Austin Retail Ltd. iv. Dendy Securities since is the named underwriter to the securities offer.
v. 8 Underwrites Defense It should be noted that for the underwriters, they stand to face no criminal liabilities under the CA 2001. The main reason for this is that it is that the underwriters are not the offerors for the security in the disclosed document. However, despite all this, they stand to face some accessory liability for any instance of a criminal contravention. The prosecution of the underwriter is provided in section 729 of the Corporation Act, 2001. It should be noted that the liability of the underwriter is mainly necessary because they are the gatekeepers who take in the whole preparation processes for the prospectus. When faced with the potential liability that they could incur Dendy Securities has some defense to consider in the matter.
One of the reliance for the defense of the underwriters will come from Part 6D. 3 of the Corporation Acts 200110. In this matter, Dendy Securities never searched for further information regarding the offer and the company. Furthermore, the share offering was fully subscribed, and as such, there was no need in honoring the contractual promise that the company had made to Austin Retail. Such mainly results from placing misleading or wrong information in the prospectus. Although the primary blame might be put on the DB consultants, the company also faces the case due to the act they were adamant to take up the issue. Faced with the possible liabilities due to the loss incurred by the investors from purchasing the shares, the investor can take the approach that market forces were the ones responsible in making the values of the shares drop.
In this, as the board of directors noted, it could be majorly due to the entrants of new competitors in the market. The company can also rely on section 733 subsection 4, in which they can say that they were unaware of the entry of new competitors in the market as well as other market dynamics12. The sales manager, Bob Brown who received the financial information the DB consultants, is likely to be one of the people mentioned in the prospectus and thus stand to be in the action liabilities. However, Bob can undertake to protect himself from the potential liability that he can incur during the case. In this instance, the sales manager can turn to section 733(2), the subsection states that for the subsection, a person should be taken not to be the agent for the body or company simply because they provide a given expert work or some advisory service to the company.
As such, using this article, Bob can build a strong defense and only leave the company to pursue the issue or suffer the liabilities. Besides, Bob and other company directors could ask for a proof from the plaintiff that they solely relied on the prospectus document in making their decision. However, due to developments made in other jurisdictions and based on various past cases, it is difficult to pinpoint with accuracy that the defendant after being sued would be easily persuaded to take liabilities and make remedies by using section 728 and 728 only. The impact of “market-based causation” doctrine is at the heart of the case since it is difficult to substantiate whether market-based causations factors or persons and entities were to blame for the loss suffered by investors.
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