Thursday 10 September 2009

Small investors' rights are better protected in countries such as Botswana, Romania, Ghana and Georgia than they are in Australia.

A World Bank study has ranked Australian laws and regulations on investor protection at 57th in the world. So low is Australia's ranking, it lags behind Botswana, Romania, Ghana and Georgia.

The top three nations are New Zealand, Singapore and Hong Kong.

The Sydney Morning Herald points out the Australian legal system is weak at holding directors liable for related-party transactions.

The report gave high marks to Australia's disclosure regime and shareholders' ability to sue a company, but it found laws on director liability were unusually weak. Overall, the Doing Business 2010 report ranked Australia the ninth-best place to conduct business of 183 economies, based on an assessment of 11 aspects of running a business here.

The report comes after several collapses have thrown the spotlight on related-party transactions. The failed finance company Octaviar (formerly MFS Limited) faces a potential litigation claim from IMF Australia, which has alleged MFS failed to disclose related-party transactions associated with its Premium Income Fund.

Administrators of the collapsed Allco Finance Group have also queried several related-party dealings, including a $50 million loan made to an investment vehicle owned by Allco directors and senior management.

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