find the latest legal job
Banking Associate - 1-6PQE - Allen & Overy
Category: Banking and Finance Law | Location: United Kingdom
· Banking Associate - 1-6 PQE - Allen & Overy
View details
Academic Dean and Head of School of the TC Beirne School of Law
Category: Other | Location: Brisbane QLD 4000
· An outstanding opportunity · Provide educational, research and organisational leadership
View details
Senior Property Lawyer I Commercial Litigator
Category: Property Law | Location: Arncliffe NSW 2205
· Rapidly growing law firm, working with a highly experienced team in a high growth industry across all areas of property and strata law
View details
Senior Property Lawyer I Commercial Litigator
Category: Property Law | Location: All Sydney NSW
· Rapidly growing law firm, working with a highly experienced team in a high growth industry across all areas of property and strata law
View details
Senior Property Lawyer I Commercial Litigator
Category: Property Law | Location: Sydney NSW 2000
· Rapidly growing law firm, working with a highly experienced team in a high growth industry across all areas of property and strata law
View details
Alleged phoenix traders face clipped wings

Alleged phoenix traders face clipped wings

A Sydney-based solicitor and eight company directors have been singled out by the Australian Securities and Investment Commission (ASIC) for alleged phoenix activities. It is alleged that…

A Sydney-based solicitor and eight company directors have been singled out by the Australian Securities and Investment Commission (ASIC) for alleged phoenix activities.

It is alleged that Timothy Donald Somerville, of North Sydney firm Somerville & Co Solicitors, recommended and prepared documents that assisted the directors to engage in phoenix trading, in contravention of the Corporations Act.

Phoenix trading effectively transfers the business or assets of a company in financial distress to another company controlled by the same directors for a negligible consideration.

It is alleged that in each instance the assets of the distressed vendor company were transferred through a sale agreement signed by the same person, as director of both the vendor and purchaser companies. The vendor company was then placed into liquidation after the sale of its assets.

ASIC has also alleged that there was no tangible consideration received from the sale of assets, there were unpaid tax debts and that the businesses continued to operate under the name of the new company.

“Everyone practicing in insolvency knows that phoenix company activity is relatively common,” commented Clayton Utz partner David Cowling.

Cowling pointed to an ASIC study of phoenix company activity in 1996, which found that annual losses to the Australian economy due to phoenix-type activities were estimated to be in the range of $670 million to $1.3 billion (at 1996 values), 45 per cent of phoenix activities appeared to be in the building and construction industry; 77 per cent of phoenix companies did not have adequate books and records; and 77 per cent transferred corporate assets to evade paying creditors.

The survey found that the average phoenix company group generated creditor losses of about $557,000 — which equated roughly to $90,000 per phoenix company group per annum over the average lifespan. The average number of creditors affected by a phoenix company group, again over its lifespan, appeared to be about 838 who lost on average $10,300.

Cowling expressed support for ASIC’s tougher stance on the apparently widespread problem,

“The fact that ASIC has begun this litigation and has announced it in the media is good news. Regardless of the merits (or otherwise) of this particular case, ASIC is sending a clear message to the commercial community and, more importantly, to those professionals who advise phoenix companies,” he said.

“ASIC’s current action appears to be sending a warning to professional advisers (lawyers and accountants) against becoming involved in the planning of phoenix company activities,” Cowling said.

“This represents a new direction — rather than trying to catch phoenix activities after the fact, ASIC is trying to cut off the professional services that support them,” he observed. His observation appears to be backed up by the statement of intent from ASIC which cited phoenix trading as a “significant issue”.

“ASIC has broadened its focus in relation to misconduct to include not only company directors but also others who are involved in, or help facilitate, such transactions”, said ASIC’s Executive Director of Enforcement, Jan Redfern.

ASIC is seeking declarations of contravention of the Corporations Act by the eight company directors and Somerville, injunctions and director-banning orders. Somerville could also face investigation for professional misconduct if a complaint is laid with the Law Society of New South Wales.

The pending civil proceedings will be held in the New South Wales Supreme Court.

Like this story? Read more:

Book commemorates diamond milestone for WA law society

QLS condemns actions of disgraced lawyer as ‘stain on the profession’

NSW proposes big justice reforms to target risk of reoffending

Alleged phoenix traders face clipped wings
lawyersweekly logo
Promoted content
Recommended by Spike Native Network
more from lawyers weekly
Gavel, legal book, criminal lawyers
Jan 19 2018
Three criminal lawyers named NSW magistrates
The NSW Attorney-General has announced the appointment of three new local court magistrates. ...
Warning
Jan 18 2018
Lawyer highlights ‘unintended consequences’ on SSM estate planning
A succession lawyer has warned that the right for same-sex couples to legally marry could have a sub...
drug rehabilitation services available in rural and remote communities
Jan 18 2018
ALS survey shines spotlight on insufficient rehabilitation services
A new survey posted by the Aboriginal Legal Service (NSW/ACT) has revealed an alarming insight into ...
APPOINTMENTS
Allens managing partner Richard Spurio, image courtesy Allens' website
Jun 21 2017
Promo season at Allens
A group of lawyers at Allens have received promotions across its PNG and Australian offices. ...
May 11 2017
Partner exits for in-house role
A Victorian lawyer has left the partnership of a national firm to start a new gig with state governm...
Esteban Gomez
May 11 2017
National firm recruits ‘major asset’
A national law firm has announced it has appointed a new corporate partner who brings over 15 years'...
opinion
Nicole Rich
May 16 2017
Access to justice for young transgender Australians
Reform is looming for the process that young transgender Australians and their families must current...
Geoff Roberson
May 11 2017
The lighter side of the law: when law and comedy collide
On the face of it, there doesn’t seem to be much that is amusing about the law, writes Geoff Rober...
Help
May 10 2017
Advocate’s immunity – without fear or without favour but not both
On 29 March 2017, the High Court handed down its decision in David Kendirjian v Eugene Lepore & ...