Solicitor banned for six years for 'phoenix' deals
Sydney Morning Herald
Saturday September 26, 2009
A North Sydney solicitor who helped clients strip assets from their companies before liquidating them has been banned from company directorship for six years. Timothy Somerville was found liable earlier this month for involvement in breaches of the Corporations Act by eight clients whom he advised on "phoenix activity" for 15 companies.Mr Somerville had devised a scheme for transferring assets of near-insolvent companies to new vehicles, acting justice William Windeyer said. This resulted in employees and trade suppliers continuing to be paid by the business and other creditors including insurers and tax authorities being left out of pocket.When the judge handed down penalties on Thursday, he said the conduct that disadvantaged creditors was "made worse by dressing it in misleading garments".This was a reference to the issue of near-worthless "V" class shares to the insolvent companies in return for their assets."I have the greatest difficulty in accepting that Mr Somerville considered that his actions in these cases was proper and in accordance with the law," the judge said."This is because he must have known the consideration for the sale of assets was not full consideration and was really a fiction and he must have known the transactions were uncommercial."The judge noted that the ban sought by the Australian Securities and Investments Commission would affect Mr Somerville because he was a director of an incorporated legal practice, Somerville & Co Pty Ltd.But it would not prevent Mr Somerville, a member of a NSW Law Society advisory committee on business law, from practising as a sole practitioner or in a legal partnership, he said.Somerville & Co, which employs 49 people, specialises in business, taxation, personal injury and family law.Acting justice Windeyer also banned Mr Somerville's clients from company directorship for two years each, rejecting their submissions that they were "just following advice".
© 2009 Sydney Morning Herald
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