On 8 September 2009, in the matter of ASIC v Somerville & Ors [2009] NSWSC 934, the Supreme Court of NSW found that eight non-related directors of separate companies had breached their duties under the Corporations Act 2001 (Cth) (Act) by engaging in 'phoenix' type asset stripping.

The directors had all received and acted on advice provided to them by the same solicitor. In the first time that ASIC has successfully taken action against a solicitor for their role in a phoenix scheme, a solicitor was found to have also breached the Act for his part in aiding and abetting the directors' actions.

Advisers, be warned

While this case was about a solicitor, there is nothing in the judgment, or the Act, that prevents a similar finding being made against other advisers, for example, insolvency practitioners advising near-insolvent companies. Advice or assistance to clients to carry out improper activities, even where that advice is nicely worded or the transactions are 'sugar coated' for the perception of legitimacy, may find the adviser in trouble with ASIC and the courts.

Further details are available at Mondaq.