ASIC has issued a warning to lawyers following a Supreme Court ruling.
THE Australian Securities and Investments Commission has issued a warning to legal advisers following the landmark prosecution of a legal adviser and eight company directors over illegal ‘phoenix’ activity.
The warning comes as the New South Wales Supreme Court declared Timothy Donald Somerville, of North Sydney firm Somerville & Co Solicitors, acted in breach of the Corporations Act by engaging in illegal phoenix activity.
Somerville advised eight separate directors, who each sought advice from Somerville in circumstances where their company was insolvent or nearing insolvency, to take assets out of their companies and out of the reach of creditors.
This is the first time ASIC has successfully taken action against an adviser for involvement in facilitating illegal phoenix activity.
The findings made by the Court against Somerville mark out the line across which legal and other professional advisers should not step. It was found that the transactions would not have taken place but for Somerville’s involvement.
By his advice and conduct, Somerville had facilitated his clients breaching their directors’ duties and as a consequence he was found to have aided and abetted their breaches.
ASIC is also seeking an order disqualifying the directors and Somerville from managing any companies in the future.