Both the Australian Securities and Investments Commission (ASIC) and the Law Council of Australia have supported struggling companies being able to access professional advice to get them back on track.
Both organisations have used submissions to the Senate Economics Committee inquiry into proposed new legislation around corporate insolvency to acknowledge that companies should be able to access professional advice to help them dig themselves out of trouble.
According to the Law Council of Australia, instead of being stigmatised, the law should encourage and support directors of companies to seek out appropriate professional advice and assistance to address potential financial difficulties before the company becomes insolvent.
However, on the question of advice, ASIC pointed out that it was not clear whether an adviser “required any particular qualifications or experience or needs to maintain adequate insurance”.
“An appropriately qualified and experienced advisor play a key ‘gatekeeper’ role to safeguard against the potential risks of misconduct such as illegal phoenix activity (including giving independent advice as to whether the proposed course of action is reasonably likely to lead to a better outcome for the company),” the ASIC submission said.
The regulator said greater certainty in this area might militate against the unintended consequence of potentially supporting growth in the unregulated and problematic part of the pre-insolvency advice market”.
“In ASIC’s experience, this segment of the market is involved in illegal phoenix activity and ASIC has taken significant steps to disrupt such activities to date,” the ASIC submission said.
