The Federation Press

Bondholders’ Rights


Australian companies are increasingly turning to corporate bonds for major capital raisings. This book, recognising that companies may sacrifice the interests of bondholders to achieve the best results for their shareholders, analyses the rights and remedies bondholders have against that occurring.

Jackson Taylor shows how bondholders are affected by ‘event risk’ and explains the major types of contractual covenants that are used to protect against it. The analysis notes the different practices often employed in the retail and institutional bond markets and the effect of conversion rights and the presence of senior bank lending. The effectiveness of these covenants in restraining prejudicial corporate conduct is considered in light of the remedies available under Australian law.

The book then provides a comprehensive survey of the protection available under the general law for the large numbers of bondholders who lack adequate, or any, covenant protection. This reviews both well established legal rules (for example capital maintenance requirements and directors’ duties) and considers more innovative applications of regulation and doctrine (such as just and equitable winding-up and other Corporations Act remedies). In each case the focus is on the special circumstances applicable to the corporate bond context, illustrated with reference to American bondholder litigation and suggestions for how Australian law might resolve things differently.


The central arguments are developed in a logical and persuasive manner. - Professor Geof Stapledon

This is an exceptional piece of legal scholarship. It is comprehensively researched, well structured and written with fluency and a deft touch. - Professor Ross Buckley

Table of Contents


Bondholders and shareholders
Contractual protection
The American ‘bondholder rip-off’
Australian bondholders


Restrictive covenants
Financial covenants
Other protective covenants

Covenants in Australian Corporate Bonds

The sample
Survey results

Non-Covenant Protection: Regulation and Doctrine

Capital maintenance
The statutory covenant
Contract law
Directors’ duties


Distributional fairness
Wealth transfers and ex ante compensation
Theories of enhanced bondholder protection

Conclusion - Bondholders’ Rights in Australian Law


A Retail Bonds
B Institutional Bonds

Of interest...