Phoenix activity and the liability of the advisor

This article explores the liability of professional advisors such as lawyers, accountants and insolvency practitioners in giving advice to company directors in relation to fraudulent phoenix activity. It looks at the losses caused by such activity, and the nature and deficiencies of the current regulatory response. The Supreme Court of New South Wales decision in ASIC v Somerville is examined in detail, with questions asked about the utility of this decision in terms of both general deterrence and in providing clear guidance to the legal profession as to what constitutes acceptable advice in the business rescue context. Recommendations are made about ways to improve this situation.