For some Australian business, 2016 has no doubt been a celebration of success. But for 9,465 Australian businesses, the last years has been a nightmare.
ASIC has published its Corporate Insolvency Year in Review based on reports from 9,465 Corporate Insolvencies.
Here is a snapshot of the most interesting points.
- 86% of Corporate Insolvencies involve companies with assets of $100,000 or less
- 79% of failed companies have 20 employees or less
- 46% had total liabilities of $250,000 or less
- 97% of Liquidations result in a return to creditors of between 0 – 11 cents in the dollar
Of the 9,465 reported cases:
- 60.6% involved insolvent trading
- 80.5% of those cases involved the incurence of debt after the date of insolvency of less than $1 million
- 1.44% involved more than $5 million of debts being incurred after the date of insolvency
The Top 3 causes of Corporate Insolvency are:
- Non-payment of Statutory Debts (PAYG, Super, GST)
- Shortage of Working Capital
- Inability to pay debt when they fell due
Of the 9,465 reported cases
- Liquidators reported misconduct in 82.4% of cases
- Only 10.7% of these reports resulted in ASIC seeking further details
- Of the 831 supplementary reports sought by ASIC, only 16% were referred for compliance, surveillance or enforcement action.
In selecting which companies should be considered for further action, ASIC is guided by:
- The nature of the possible misconduct
- Total liabilities (and number of creditors affected)
- The overall deficiency suffered
- The availability of evidence
- Prior misconduct/history of the directors
- The external administrators advice on the misconduct