An inquiry into Australian corporate James Hardie, which cut itself from its asbestos liabilities by moving its headquarters offshore and placing subsidiaries into a foundation, has pointed to major failings in company law.

The inquiry into James Hardie has pointed to significant failings in company law with the company able to move its operations offshore to quarantine liabilities.

James Hardie cut itself off from its asbestos liabilities in 2001 by moving its headquarters offshore and placing the two subsidiary companies which manufactured asbestos products into a foundation.

The inquiry found the company misled the public when it claimed it had put aside enough money to meet its asbestos liabilities, which could now total $2.24 billion.

Mr Jackson said there was room to look at laws protecting parent companies from the actions of subsidiaries.

“The circumstances that have been considered by this inquiry suggest there are significant deficiencies in Australian corporate law,” the report said.

“The circumstances have raised in a pointed way the question whether existing laws concerning the operation of limited liability or the ‘corporate veil’ within corporate groups adequately reflect contemporary public expectations and standards.

“In the circumstances I have mentioned, I do not express any concluded view on these topics. However, it is appropriate to highlight the main matters raised by the submissions, given their importance.”

The report noted a call from the Australian Plaintiff Lawyers Association to make the controlling entity responsible for any liabilities down the track.

It said the suggestion would only impact on parent companies, not all shareholders – who also use limited liability as protection from debts if a company collapses.

Treasurer Peter Costello said the government had not had time to consider any need for corporate law reform.

“I haven’t read the report. But having said that, I will read it when I get the opportunity and, when I do read it, if there is a recommendation in relation to that, of course we will consider it very, very seriously,” he told reporters in Tasmania.

Opposition corporate governance spokesman Stephen Conroy said the report made it clear existing laws were inadequate and promised to look at restricting limited liability in some circumstances.

“Labor will consider all of the options for reform including Counsel Assisting’s recommendation for reform of the Corporations Act so as to restrict the application of the limited liability principle, in respect of claims for damages for personal injury or death, to members of the ultimate holding company,” he said.

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