“U.S., European models don’t sufficiently adjust for market circumstances in India or Australia”

Countries around the world face common challenges in getting their corporate regulation frameworks right, balancing the objectives of fairness and efficiency, and in this, there is a lot that India and Australia can learn from each other, according to Australian legal expert Robert Austin.

A former Justice of the Supreme Court of New South Wales, distinguished academic, and leader in corporate law reform, Dr. Austin is on a visit to India to discuss ways in which the two countries could cooperate, share information and build stronger institutional linkages in corporate affairs.

In an interaction with The Hindu on Tuesday, Dr. Austin called for region-specific solutions to corporate governance issues. “The U.S. and European models don’t sufficiently adjust for market circumstances in India or Australia, or most other economies in the Asian region. It is time for us to share and adapt the best of each other’s regulatory experience so as to build on the Asian region’s existing economic success. Good regulation creates value.”

Dr. Austin’s visit comes at a time when corporate regulation in India is under the scanner: the pending Companies Bill, the new Corporate Social Responsibility and Corporate Governance Guidelines, and higher governance standards for listed companies being framed by SEBI would mean that his visit is timely for India’s regulatory and business community.

“It may be of interest to the Ministry of Corporate Affairs and others to observe how our regulator, Australian Securities and Investment Commission (ASIC), uses civil penalty proceedings to establish, very forcefully, corporate governance norms. Australia’s continuous disclosure regulatory regime for listed companies is onerous, but it means that the Australian securities market is one of the most transparent in the world, and one of the most efficient in terms of price discovery based on full information,” Dr. Austin said.

“Over the past 30 years, legislative reforms in Australia have strengthened the powers, and widened the responsibilities, of the ASIC. In the governance context, one of the most significant powers in recent years has been the power to take legal proceedings against directors for ‘civil penalties.’ Like the Indian company law, [the] Australian company law imposes statutory duties on company directors, requiring them to act in good faith in the best interests of the company, not to make improper use of their position or information, to prevent the company from trading while insolvent, and to act with due care and diligence.”

Citing the ‘Centro case,’ he said: “In that case, the directors of companies in the Centro group approved financial statements that misclassified about $2 billion of current liabilities as non-current liabilities, consequently representing a much healthier cash position than was in fact the case. The financial statements also failed to report material post-balance date events. The ASIC had succeeded in establishing the proposition that directors must take personal responsibility for the tasks they undertake and cannot simply rubberstamp recommendations they receive from others. That is a governance proposition of major importance.”

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