One of the major bugbears for investors in listed equities is what can happen when the company gets it wrong – when the reaction on the share market can be a very severe fall. “Haircuts” of 20%-plus – even in the 40% range – can easily happen when companies surprise the share market with bad news, or reveal negligence or incompetence. Such falls can wipe out years of patient investment appreciation.
In recent years, aggrieved shareholders who have suffered loss from painful capital losses when there are grounds to believe that the company’s actions (or inactions) caused or contributed to the falls, have sought redress in shareholder class actions, which are lawsuits that allow one or more shareholders to bring an action as the representative of a larger group of persons known as the class.
As law firm Allens puts it, the claims typically made in Australian shareholder class actions relate to the circumstances in which shares (or other equity securities) are bought and/or sold. The most common claim is that, because of alleged illegal conduct by the company (and/or other defendants), claimants either: