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Maurice Blackburn has lodged a class action in the Federal Court today against building materials supply company Boral (ASX: BLD).
The class action law firm alleges Boral breached its continuous disclosure requirements and/or engaged in misleading or deceptive conduct in relation to its US business.
In announcements on 5 December 2019 and 10 February 2020, the company said it had identified financial irregularities in its North American Windows business.
These announcements involved admissions of misreporting, including in relation to inventory levels and raw material and labour costs.
After Boral made these announcements the company's share price fell by six per cent on 6 December 2019, wiping more than $370 million off the company's market capitalisation, and a further 11 per cent on 10 February 2020.
Boral announced that finance personnel within the Windows business manipulated accounts and financial statements to artificially inflate the overall profitability and health of the Windows business.
Boral said these practices within its US business occurred over a 20-month period and that the irregularities would impact FY20 and prior year results.
The class action alleges Boral made misleading or deceptive statements about its North America Windows business and/or whether it knew or ought to have known about the irregularities from as early as 30 August 2017.
Maurice Blackburn Principal lawyer Julian Schimmel says this shareholder class action will hold Boral to the high standard its shareholders expect.
"Continuous disclosure laws are designed to ensure investors know what they are investing in. It is incumbent on companies to inform the market of all relevant information relating to the operation of the business as soon as they arise," Schimmel said.
"Boral shareholders would naturally have expected a high standard from the company. If misrepresentations were made or continuous disclosure laws were breached, we will be looking to take action to assist investors once again to obtain financial redress for their losses.
"A functioning class actions system is a deterrent to corporate malfeasance, and signals to both investors and consumers that wrongdoing comes at a price, bolstering confidence and ensuring the efficient allocation of capital in the market."
Boral is yet to comment on the class action.
Shareholders who purchased Boral shares between 30 August 2017 and 10 February 2020 are eligible to register with the class action with Maurice Blackburn.
Shares in Boral are up 1.45 per cent to $3.14 per share at 12:35pm AEST.
Class action laws in need of reform?
According to Professor Michael Legg, an expert in the regulation of funders and shareholder class actions from UNSW Law, while class action laws generally are in need of reform it is unsurprising that Maurice Blackburn decided to launch this lawsuit today.
The Boral class action comes just days after Treasurer Josh Frydenberg used emergency powers to change regulations to shield companies against such legal challenges.
"While reform is very much needed, the current piecemeal approach risks having unforeseen ramifications. For example, shareholder class actions may continue as negligent disclosure is still caught by the amended laws, the prohibitions on misleading conduct still apply and do not require any fault or intent, but the greater regulatory costs may see litigation funders charge more," says Legg.
"Shareholder class actions are a driving force behind government decisions to regulate litigation funders and amend the continuous disclosure regime. This is because of the increasing prevalence of this type of class action and the substantial payouts which frequently enrich the funders and lawyers to a greater extent that any shareholder.
"Of course lawyers and litigation funders only make money if there is litigation to run. Commencing cases for a law firm is about keeping their business functioning and their people employed. Delaying cases may not be possible."
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