Opting Out of Shareholder Governance Rights: A New Perspective on Contractual Freedom in Australian Corporate Law

One of the classic debates in corporate law relates to whether the rules of corporate law are or should be 'mandatory', in that companies must comply, or 'enabling'-meaning a set of default rules which companies have the choice of adopting or 'opting out' of through alternative contractual arrangements.The so-called 'mandatory/enabling' debate has been especially prominent in the United States for numerous reasons, yet has also received some attention in Australia.That said, the extent to which companies can 'opt out' of corporate law has rarely been considered as a practical issue in Australiaparticularly whether Australian companies can 'opt out' of provisions under the Corporations Act ("the Act").However, just recently, two high-profile events in Australia have made 'opting out' of corporate law a relevant issue, especially the question of whether companies are free to 'opt out' of provisions of the Corporations Act which provide express governance rights to shareholders.These events were Boral's constitutional amendment in 2003 to restrict the ability of shareholders to propose amendments to the company's constitution, and the contemplation and introduction of so-called 'pre-nuptial' agreements-designed to bypass the right of shareholders to vote on removing directors in public companies.In light of these two recent events, in this article the authors revisit the mandatory/enabling debate.However, rather than going over old ground as to whether a mandatory or enabling approach to corporate regulation is desirable, the authors approach the issue from a fresh perspective: that Australian Securites and Investments Commission's ("ASIC") existing relief powers under the Act should be extended to provide a means for companies to opt out of provisions containing shareholder governance rights.