The Corporations and Markets Advisory Committee recommended the government not intervene to overturn the effect of the High Court's Sons of Gwalia ruling, which ranks shareholders beside unsecured creditors of a failed company.In a report yesterday CAMAC, a statutory body that provides the government with advice on securities law, provided its view on the long running debate over whether to have parliament overturn the effect of a 2007 High Court ruling."While recommending that the decision has significant implications, including for providers of corporate debt finance as well as the conduct of external administrations, CAMAC has not recommended action to overturn its effect," the committee wrote in its report. The finding came after a review of the effects of a 2007 High Court ruling, which ranked shareholders beside unsecured creditors in the event of market misrepresentation by an insolvent company.Shareholders were previously last in line to be reimbursed.CAMAC said responses to an earlier discussion paper were "polarised", but the committee as a whole was not persuaded of the need to change the legal position."Any move to curtail the rights of recourse of aggrieved shareholders where a company is financially distressed could be seen as undermining legislative initiatives to provide shareholders with direct rights of action in respect of corporate misconduct," CAMAC said.The precedent also encouraged shareholders to complement the role of regulators in relation to corporate disclosures, CAMAC said."Shareholders and creditors share an interest in the promotion of an efficient and informed market."Banks will continue to lobby for a change in the law. The Australian Bankers Association wrote in an emailed statement that it "still believes that urgent law reform is required to restore certainty to insolvency processes. We need to return to the legal position before the decision - namely that the claims of shareholders should rank behind debt in an insolvency."In Sons of Gwalia v Margaretic the High Court overturned the convention that shareholders rank behind creditors in an insolvency. The court ruled that a shareholder in a failed company had the same right as an unsecured creditor to pursue a claim against the company in cases where the shareholder had suffered loss as a result of misleading and deceptive conduct by the company.The decision was based on an interpretation of section 563A of the Corporations Act, which says: "Payment of a debt owed by a company to a person in the person's capacity as a member (shareholder) of the company, whether by way of dividends, profits or otherwise, is to be postponed until all debts owed to or claims made by persons otherwise than as members of the company have been satisfied."While Margaretic was a "member" of the company, the High Court said the key issue was whether the assumed liability of the company to Margaretic was a liability to him in his capacity as a member. The majority held that it was not.The impact of the decision is that section 563A of the Corporations Act no longer embodies a general principle that in an insolvency shareholders come last.